<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<CAPTION>
(MARK ONE)
<C> <S>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO____________
</TABLE>
COMMISSION FILE NUMBER 1-6196
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PIEDMONT NATURAL GAS COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NORTH CAROLINA
(State or other jurisdiction of 56-0556998
incorporation or organization) (I.R.S. Employer Identification No.)
1915 REXFORD ROAD, CHARLOTTE, NORTH CAROLINA 28211
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (704) 364-3120
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, no par value New York Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant as of January 13, 2000.
Common Stock, no par value -- $921,686,460
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JANUARY 13, 2000
----- -------------------------------
<S> <C>
Common Stock, no par value 31,372,216
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders on
February 25, 2000, are incorporated by reference into Part III.
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<PAGE> 2
Piedmont Natural Gas Company, Inc.
1999 FORM 10-K ANNUAL REPORT
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TABLE OF CONTENTS
Page
Part I. ----
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II.
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 7A. Quantitative and Qualitative Disclosure about
Market Risk 22
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 48
Part III.
Item 10. Directors and Executive Officers of the Registrant 49
Item 11. Executive Compensation 51
Item 12. Security Ownership of Certain Beneficial Owners
and Management 52
Item 13. Certain Relationships and Related Transactions 52
Part IV.
Item 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K 53
Signatures 62
<PAGE> 3
PART I
Item 1. Business
Piedmont Natural Gas Company, Inc., incorporated in 1950, is an energy
and services company primarily engaged in the distribution and sale of natural
gas and the sale of propane to over 710,000 residential, commercial and
industrial customers in North Carolina, South Carolina and Tennessee.
We are the second-largest natural gas utility in the Southeast, serving
over 660,000 customers. Along with our non-utility subsidiaries and divisions,
we are also engaged in acquiring, marketing, transporting and storing natural
gas for large-volume customers, in retailing residential and commercial gas
appliances and in the sale of propane to over 48,000 customers in our
three-state service area.
In the Carolinas, our service area is comprised of numerous cities,
towns and communities including Anderson, Greenville and Spartanburg in South
Carolina and Charlotte, Salisbury, Greensboro, Winston-Salem, High Point,
Burlington and Hickory in North Carolina. In Tennessee, our service area is the
metropolitan area of Nashville. Our propane market is in and adjacent to our
natural gas market in all three states.
We have one reportable business segment, domestic natural gas
distribution. This business is conducted by the parent company and two wholly
owned subsidiaries, Piedmont Intrastate Pipeline Company and Piedmont Interstate
Pipeline Company. Piedmont Intrastate is a member of Cardinal Pipeline Company,
L.L.C., which owns and operates a natural gas pipeline. Piedmont Interstate is a
member of Pine Needle LNG Company, L.L.C., which owns a liquified natural gas
storage facility.
All of our other activities are conducted by wholly owned subsidiaries,
Piedmont Propane Company and Piedmont Energy Company. Piedmont Propane markets
propane and propane appliances to residential, commercial and industrial
customers. Piedmont Energy has an equity interest in SouthStar Energy Services
LLC which offers a combination of unregulated energy products and services to
over 476,000 industrial, commercial and residential customers in the
southeastern United States.
Operating revenues shown in the consolidated financial statements
represent revenues from utility operations only. Such revenues totaled
$686,470,000 for the year ended October 31, 1999, of which 43% was from
residential customers, 24% from commercial customers, 21% from industrial
customers, 11% from secondary market activity and 1% from various sources.
Revenues from non-utility operations, less related costs and income taxes, are
shown in the consolidated financial statements in other income. For further
segment
1
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information, see "Note 8. Business Segments and Other Non-Utility Activities" in
Item 8 of this report on page 41.
Our utility operations are subject to regulation by the North Carolina
Utilities Commission (NCUC), the Public Service Commission of South Carolina
(PSCSC) and the Tennessee Regulatory Authority (TRA) as to rates, service area,
adequacy of service, safety standards, extensions and abandonment of facilities,
accounting and depreciation. We are also subject to regulation by the NCUC as to
the issuance of securities. We are also subject to or affected by various
federal regulations.
We hold non-exclusive franchises for natural gas service in all
communities where required, with expiration dates from 2000 to 2048. February
2000 is the earliest date at which a franchise for a major service area expires
and renewal is currently being arranged. The franchises are adequate for
operation of the gas distribution business and do not contain restrictions which
are of a materially burdensome nature. In most cases, the loss of a franchise
would not have a material effect on operations. We have never failed to obtain
the renewal of a franchise; however, this is not necessarily indicative of
future action.
Our utility business and non-utility propane activities are seasonal in
nature as variations in weather conditions generally result in greater earnings
during the winter months. We normally inject natural gas into storage during
summer months (principally April 1 through October 31) for withdrawal from
storage during winter months (principally November 1 through March 31) when
customer demand is higher. During 1999, the amount of natural gas in storage
varied from 9.8 million dekatherms (one dekatherm equals 1,000,000 BTUs) to 21.1
million dekatherms, and the aggregate commodity cost of this gas in storage
varied from $19,985,000 to $47,583,000.
The following is a five-year comparison of gas sales and other
statistics for the years ended October 31, 1995 through 1999:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES (in thousands):
Sales and Transportation:
Residential $ 295,108 $ 323,777 $ 319,722 $ 292,010 $ 229,546
Commercial 168,731 189,341 195,862 180,415 135,933
Industrial 143,129 162,336 191,565 184,118 133,205
For Resale 254 87 266 2,748 3,323
--------- --------- --------- --------- ---------
Total 607,222 675,541 707,415 659,291 502,007
Secondary Market Sales 75,734 86,333 64,411 22,152 --
Miscellaneous 3,514 3,403 3,691 3,612 3,216
--------- --------- --------- --------- ---------
Total $ 686,470 $ 765,277 $ 775,517 $ 685,055 $ 505,223
========= ========= ========= ========= =========
</TABLE>
2
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<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
GAS VOLUMES - DEKATHERMS (in thousands):
System Throughput:
Residential 38,111 41,142 38,339 43,357 33,513
Commercial 26,668 28,528 28,476 31,040 22,867
Industrial 64,171 64,165 65,000 62,434 65,904
For Power Generation 6,991 9,141 3,236 1,620 1,831
For Resale 29 17 27 581 1,478
--------- --------- --------- --------- ---------
Total 135,970 142,993 135,078 139,032 125,593
========= ========= ========= ========= =========
Secondary Market Sales 34,792 33,953 24,547 9,724 --
NUMBER OF RETAIL CUSTOMERS BILLED (12 month average):
Residential 549,294 522,451 495,739 468,803 446,118
Commercial 66,409 63,878 62,258 59,905 57,803
Industrial 3,080 3,201 2,697 2,687 2,711
--------- --------- --------- --------- ---------
Total 618,783 589,530 560,694 531,395 506,632
========= ========= ========= ========= =========
AVERAGE PER RESIDENTIAL CUSTOMER:
Gas Used - Dekatherms 69.38 78.75 77.34 92.48 75.12
Revenue $ 537.25 $ 619.73 $ 644.94 $ 622.88 $ 514.54
Revenue Per Dekatherm $ 7.74 $ 7.87 $ 8.34 $ 6.73 $ 6.85
COST OF GAS (in thousands):
Natural Gas Purchased $ 290,501 $ 337,400 $ 362,249 $ 327,968 $ 155,683
Liquefied Petroleum Gas (LPG) -- -- 77 160 60
Transportation Gas Received (Not
Delivered) (1,236) 339 (1,840) 1,024 (181)
Natural Gas Withdrawn from
(Injected into) Storage, net (3,111) (2,750) 2,597 (8,078) 6,094
Other Storage (4,937) 333 318 (40) 860
Other Adjustments 84,745 107,100 97,264 73,099 85,051
--------- --------- --------- --------- ---------
Total $ 365,962 $ 442,422 $ 460,665 $ 394,133 $ 247,567
========= ========= ========= ========= =========
COST OF GAS PER DEKATHERM OF GAS SOLD $ 3.05 $ 3.45 $ 3.81 $ 3.17 $ 2.76
SUPPLY AVAILABLE FOR DISTRIBUTION - DEKATHERMS (in thousands):
Natural Gas Purchased 130,633 138,870 129,797 127,799 86,372
LPG -- -- 10 121 13
Transportation Gas 44,322 42,091 32,026 24,550 41,589
Natural Gas Withdrawn from (Injected
into) Storage, net (373) (3,301) (3) (1,142) (750)
Other Storage (2,132) 27 16 16 (15)
Company Use (154) (110) (121) (152) (118)
--------- --------- --------- --------- ---------
Total 172,296 177,577 161,725 151,192 127,091
========= ========= ========= ========= =========
UTILITY CAPITAL EXPENDITURES (in thousands) $ 102,020 $ 93,513 $ 93,482 $ 98,258 $ 100,825
GAS MAINS - MILES OF 3" EQUIVALENT 18,400 18,200 17,800 16,900 16,700
DEGREE DAYS - SYSTEM AVERAGE:
Actual 3,124 3,339 3,471 3,993 3,144
Normal 3,597 3,612 3,611 3,606 3,617
Percentage of Actual to Normal 87% 92% 96% 111% 87%
PROPANE OPERATIONS:
Revenues (in thousands) $ 28,249 $ 30,789 $ 36,816 $ 44,046 $ 33,414
Volumes Sold (gallons in millions) 33.0 34.6 36.7 49.3 38.4
Customers (at year end) 48,000 48,000 48,100 48,100 48,500
</TABLE>
During 1999, we delivered 136 million dekatherms of natural gas to our
customers, of which 44.6 million dekatherms were transported for large
industrial customers. This compares with 143 million dekatherms delivered in
1998, of which 42 million
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<PAGE> 6
dekatherms were transported. In addition to this system throughput,
secondary-market sales volumes increased to 34.8 million dekatherms in 1999,
compared with 34 million dekatherms in 1998.
Sales to temperature-sensitive customers, whose consumption varies with
the weather, were 64.8 million dekatherms in 1999, compared with 69.7 million
dekatherms in 1998. Weather which was 13% warmer than normal was experienced in
1999, compared with 8% warmer-than-normal weather in 1998. We sold or
transported 7 million dekatherms to power generation customers in 1999, compared
with 9.1 million dekatherms in 1998. We sold or transported 64.2 million
dekatherms to industrial users in 1999 and 1998. Industrial sales are the most
price-sensitive of our markets and are largely a function of our ability to
obtain supplies of natural gas competitively priced with other industrial fuels.
Except as set forth below, all natural gas distributed is transported
to us by one or more of eight interstate pipelines, Transcontinental Gas Pipe
Line Corporation (Transco), Tennessee Gas Pipeline Company, Texas Eastern
Transmission Corporation, Columbia Gas Transmission Company, Columbia Gulf
Transmission Corporation, National Fuel Gas Supply Corporation, Texas Gas
Transmission Corporation and CNG Transmission Corporation.
As of November 1, 1999, we have contracted to purchase the following
pipeline long-term firm transportation capacity in dekatherms of daily
deliverability:
<TABLE>
<S> <C>
Transco (including certain upstream arrangements with CNG, Texas Gas and National Fuel) 487,800
Tennessee Pipeline 74,100
Texas Eastern 1,700
Columbia Gas (through arrangements with Transco and Columbia Gulf) 23,000
Columbia Gulf 5,000
-------
Total 591,600
=======
</TABLE>
We have the following additional long-term peaking capacity in
dekatherms of daily deliverability through local peaking facilities, storage
contracts and third-party city gate arrangements to meet the firm demands of our
markets. This availability varies from five days to one year.
<TABLE>
<S> <C>
Liquefied Natural Gas (LNG) 210,000
Liquefied Petroleum Gas 8,000
Transco Storage 86,000
Columbia Gas Storage 91,200
Tennessee Pipeline Storage 55,900
CNG Storage 7,000
Pine Needle LNG 207,000
Third-Party City Gate Arrangements 65,000
-------
Total 730,100
=======
</TABLE>
We utilize a "best cost" gas purchasing philosophy that seeks to
purchase gas on a short- or long-term basis by weighing cost against supply
security and reliability factors. In 1999,
4
<PAGE> 7
130.6 million dekatherms of natural gas were purchased.
We own or have under contract 24.7 million dekatherms of storage
capacity, either in the form of underground storage or LNG. This capability is
used to supplement regular pipeline supplies on colder winter days when demand
increases.
For further information on gas supply and regulation, see "Gas Supply
and Regulatory Proceedings" included in Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 of this report.
Approximately 32% of annual gas deliveries in 1999 were made to
industrial or large commercial customers who have the capability to burn a fuel
other than natural gas. The alternative fuels are primarily fuel oil and some
propane and, to a much lesser extent, coal or wood. The ability to maintain or
increase deliveries of gas to these customers depends on a number of factors,
including weather conditions, governmental regulations, the price of gas from
suppliers and the price of alternate fuels. Under existing regulations of the
Federal Energy Regulatory Commission (FERC), certain large commercial or
industrial customers located in proximity to the interstate pipelines delivering
gas to us could attempt to bypass us and take delivery of gas directly from the
pipeline or from a third party connecting with the pipeline. To date, only
minimal bypass activity has been experienced in part because of our ability to
negotiate competitive rates and service terms. The future level of bypass
activity cannot be predicted.
In the residential and small commercial markets, natural gas competes
primarily with electricity for such uses as cooking and water heating and with
electricity and fuel oil for space heating.
During 1999, our largest customer contributed $19,745,000, or 3%, to
total operating revenues.
We spend an immaterial amount for research and development costs. We
contribute to gas industry-sponsored research projects; however, the amounts
contributed to such projects are minimal.
Compliance with federal, state and local environmental protection laws
had no material effect on capital expenditures, earnings or competitive position
during 1999. For further information on environmental issues, see "Environmental
Matters" included in Management's Discussion and Analysis of Financial Condition
and Results of Operations in Item 7 of this report.
As of October 31, 1999, we had 1,821 employees, compared with 1,841
employees as of October 31, 1998.
5
<PAGE> 8
Item 2. Properties
Our properties consist primarily of distribution systems and related
facilities to serve our utility customers. We have constructed and own
approximately 526 miles of lateral pipelines up to 16 inches in diameter which
connect our distribution systems with the transmission systems of our pipeline
suppliers. Natural gas is distributed through approximately 18,400 miles
(three-inch equivalent) of distribution mains. The lateral pipelines and
distribution mains are located on or under public streets and highways, or
private property with the permission of the individual owners.
We either own or lease for varying periods district and regional
offices for our utility and non-utility operations.
Item 3. Legal Proceedings
There are a number of lawsuits pending against us in the ordinary
course of business for damages alleged to have been caused by our employees. We
have liability insurance which we believe is adequate to cover any material
judgments which may result from these lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
None.
6
<PAGE> 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Our Common Stock is traded on the New York Stock Exchange (NYSE).
The following table provides information with respect to the high and low sales
prices on the NYSE (symbol PNY) for each quarterly period for the years ended
October 31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 High Low 1998 High Low
- ---------- ---- --- ---------- ---- ---
<S> <C> <C> <C> <C> <C>
January 31 36.6250 30.0625 January 31 36.4375 27.0000
April 30 35.8750 28.6250 April 30 34.9375 30.3750
July 31 34.3750 30.6875 July 31 34.6875 28.8750
October 31 34.1875 30.2500 October 31 35.3125 27.8750
</TABLE>
(b) As of January 13, 2000, our Common Stock was owned by 18,302
shareholders of record.
(c) Information with respect to quarterly dividends paid on Common
Stock for the years ended October 31, 1999 and 1998, is as follows:
<TABLE>
<CAPTION>
Dividends Paid Dividends Paid
1999 Per Share 1998 Per Share
- ---------- ------------- ---------- --------------
<S> <C> <C> <C>
January 31 32.5(cent) January 31 30.5(cent)
April 30 34.5(cent) April 30 32.5(cent)
July 31 34.5(cent) July 31 32.5(cent)
October 31 34.5(cent) October 31 32.5(cent)
</TABLE>
The amount of cash dividends that may be paid on Common Stock is
restricted by provisions contained in our articles of incorporation and in note
agreements under which long-term debt was issued. At October 31, 1999, all
retained earnings were free of such restrictions.
7
<PAGE> 10
Item 6. Selected Financial Data
Selected financial data for the years ended October 31, 1995 through
1999, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Margin $ 320,508 $ 322,855 $ 314,852 $ 290,922 $ 257,656
Operating Revenues $ 686,470 $ 765,277 $ 775,517 $ 685,055 $ 505,223
Net Income $ 58,207 $ 60,313 $ 54,074 $ 48,562 $ 40,310
Earnings per Share of Common Stock:
Basic $ 1.88 $ 1.98 $ 1.81 $ 1.67 $ 1.45
Diluted $ 1.86 $ 1.96 $ 1.79 $ 1.66 $ 1.44
Cash Dividends Per Share of Common Stock $ 1.36 $ 1.28 $ 1.205 $ 1.145 $ 1.085
Average Shares of Common Stock:
Basic 31,013 30,472 29,883 29,161 27,890
Diluted 31,242 30,717 30,229 29,213 28,002
Total Assets $1,288,657 $1,162,844 $1,098,156 $1,067,086 $ 964,895
Long-Term Debt (less current maturities) $ 423,000 $ 371,000 $ 381,000 $ 391,000 $ 361,000
Rate of Return on Average Common Equity 12.25% 13.74% 13.42% 13.11% 12.27%
Long-Term Debt to Total Capitalization Ratio 46.24% 44.74% 47.58% 50.32% 50.42%
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The gas distribution business is highly weather sensitive and seasonal.
This weather sensitivity and seasonality cause short-term cash requirements to
vary significantly during the year. We finance current cash requirements through
operating cash flows, the issuance of new common stock through dividend
reinvestment and employee stock purchase plans and short-term borrowings.
Short-term debt may be used to finance construction pending the issuance of
long-term debt or equity. We sell common stock and long-term debt to cover cash
requirements when market or other conditions are favorable for such long-term
financing.
Various banks provide lines of credit totaling $75 million for these
direct short-term borrowings. Additional lines are also available on an as
needed, if available, basis. These short-term borrowings include bankers'
acceptances, transactional borrowings and overnight cost-plus loans based on the
lending bank's cost of money, with a maximum rate of the lending bank's
commercial prime interest rate. Outstanding short-term borrowings during 1999
ranged from zero to a high of $115 million and interest rates ranged from 4.88%
to 6.25% during the year. At October 31, 1999, $79.5 million of short-term debt
was outstanding at a weighted average interest rate of 5.63%.
8
<PAGE> 11
We had $425 million of long-term debt outstanding at October 31, 1999.
Annual sinking fund requirements and maturities of this debt are $2 million in
2000, $32 million in 2001, $2 million in 2002, $47 million in 2003 and $2
million in 2004. Long-term debt retired in 1999 totaled $46 million.
On September 15, 1999, we prepaid our 10.02% and 10.11% Senior Notes
due in 2003 and 2004, respectively, in the amount of $36 million plus accrued
interest and an early payment premium of $1.1 million. To fund this prepayment
and for other working capital and construction purposes, we issued two
medium-term notes under a shelf registration statement for $150 million of debt
securities that was filed with the Securities and Exchange Commission in 1997.
These two issues consist of $30 million of 7.35% notes due 2009 and $60 million
of 7.95% notes due 2029. Both notes are to be redeemed in a single payment at
maturity.
At October 31, 1999, our capitalization ratio consisted of 46%
long-term debt and 54% common equity. The embedded cost of long-term debt at
that date was 8.04%. The return on average common equity in 1999 was 12.25%.
Cash provided from operations, from financing and from the issuance of
Common Stock through dividend reinvestment and stock purchase plans was
sufficient to fund capital expenditures of $103.6 million, payments of debt
principal and interest of $78.7 million and dividend payments to shareholders of
$42.2 million.
We have a substantial capital expansion program for construction of
distribution facilities, purchase of equipment and other general improvements
funded through sources noted above. The capital expansion program supports our
5% current annual growth in customer base. Utility capital expenditures for 1999
were $102 million. Non-utility capital expenditures in 1999 were $1.6 million.
In addition, we made an equity contribution in 1999 of $18.7 million to cover
our portion of the permanent financing of a liquified natural gas peak-demand
facility in which we have an equity interest. Utility capital expenditures
totaling $116.7 million, primarily to serve customer growth, and $2.6 million
for non-utility activities are budgeted for 2000.
Competition and Accounting for Regulated Activities
The natural gas industry, including producers, pipelines and local gas
distribution companies (LDCs), has undergone significant changes in recent years
in moving toward a less-regulated marketplace. In response to the changing
competitive situation, we continue to assess the nature of our business and
9
<PAGE> 12
explore alternatives to the traditional utility role of purchase, sale and
transportation of natural gas. Non-traditional ratemaking initiatives and
market-based pricing of products and services provide additional challenges and
opportunities for us. We anticipate that opportunities for non-regulated sales
will increase as competition intensifies and further retail market unbundling
occurs.
We account for our regulated activities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation" (FAS 71). FAS 71 provides that rate-regulated
public utilities account for and report assets and liabilities consistent with
the economic effect of the manner in which independent third-party regulators
establish rates. In applying FAS 71, we have capitalized certain costs and
benefits as regulatory assets and liabilities, respectively, pursuant to orders
of state utility regulatory commissions, either in general rate proceedings or
expense deferral proceedings, in order to provide for recovery of or refunds to
utility customers in future periods. As competition increases and we are further
subjected to the impact of deregulation, we may not be able to continue to apply
FAS 71 to all or parts of our business. If this were to occur, we would be
required to apply accounting standards utilized by non-regulated enterprises. At
such time as we determine that the provisions of FAS 71 no longer apply, costs
previously deferred as regulatory assets in the consolidated balance sheet would
be eliminated, net of the elimination of any regulatory liabilities. The
composition and amount of regulatory assets and liabilities are shown in Note 1
to the consolidated financial statements.
While we believe the provisions of FAS 71 continue to apply to our
regulated operations, the changing nature of the business requires continual
assessment of the impact of those changes on our accounting policies.
Gas Supply and Regulatory Proceedings
To meet customer requirements, we must acquire sufficient gas supplies
and pipeline capacity to ensure delivery to our distribution system while also
ensuring that our supply and capacity contracts will allow us to remain
competitive. We have a diversified portfolio of local peaking facilities,
transportation and storage contracts with interstate pipelines and supply
contracts with major producers and marketers to satisfy the supply and
deliverability requirements of our customers.
In our opinion, present rules and regulations of our three
10
<PAGE> 13
state utility regulators, the North Carolina Utilities Commission (NCUC), the
Public Service Commission of South Carolina (PSCSC) and the Tennessee Regulatory
Authority (TRA), permit the pass through of interstate pipeline capacity and
storage service costs, as well as gas commodity costs from natural gas
suppliers, that may be incurred under orders or regulations of the Federal
Energy Regulatory Commission (FERC). The majority of our natural gas supply is
purchased from producers and marketers in non-regulated transactions. Our rate
schedules include provisions permitting the recovery of prudently incurred gas
costs. The NCUC and the PSCSC require annual prudence reviews covering a
historical twelve-month period; however, such review is not required in
Tennessee. For the most recent twelve-month period, the NCUC and the PSCSC found
us to be prudent in our gas purchasing practices and allowed 100% recovery of
our gas costs.
In 1996, the TRA approved a two-year experimental performance incentive
plan effective July 1, 1996, which eliminated annual prudence reviews and
established an incentive-sharing mechanism based on differences in the actual
cost of gas purchased and benchmark rates, together with income from marketing
transportation and storage capacity in the secondary market. The plan is subject
to an overall annual cap of $1.6 million on gains or losses by us. The benefits
of the incentive plan are the elimination of annual gas purchase prudence
reviews, reduction of gas costs for ratepayers and potential earnings to
shareholders by sharing in gas cost reductions. In 1998, the TRA renewed the
plan and in 1999 authorized the continuance of the plan each July 1 until we
notify the TRA of termination 90 days before the end of a plan year or until the
plan is modified, amended or terminated by the TRA.
Secondary market transactions permit us to market short-term gas
supplies and transportation services by contract with wholesale or off-system
customers. These sales contribute the smallest per-unit margin to earnings;
however, the program allows us to act as a wholesale marketer of natural gas and
transportation capacity in order to generate operating margin from sources not
restricted by the capacity of our retail distribution system. In North Carolina,
a sharing mechanism is in effect where 75% of any margin earned is refunded to
firm customers. Sales in Tennessee are included in the rate-sharing mechanism
under the performance incentive plan.
Approximately 32% of annual gas deliveries in 1999 were made to
industrial or large commercial customers who have the capability to burn a fuel
other than natural gas. The alternative fuels are primarily fuel oil and some
propane and, to a much lesser extent, coal or wood. The ability to maintain or
11
<PAGE> 14
increase deliveries of gas to these customers depends on a number of factors,
including weather conditions, governmental regulations, the price of gas from
suppliers and the price of alternate fuels. Under existing regulations of the
FERC, certain large commercial or industrial customers located in proximity to
the interstate pipelines delivering gas to us could attempt to bypass us and
take delivery of gas directly from the pipeline or from a third party connecting
with the pipeline. To date, only minimal bypass activity has been experienced in
part because of our ability to negotiate competitive rates and service terms.
The future level of bypass activity cannot be predicted.
The NCUC has established an expansion fund consisting of supplier
refunds due customers to be used to extend natural gas service into unserved
areas of the state. As of October 31, 1999, the North Carolina State Treasurer
held $30.5 million in our expansion fund account. This amount along with other
supplier refunds, including interest earned to date, is included in restricted
cash in the consolidated balance sheet. The NCUC decides the use of these funds
as we file individual project applications for unserved areas.
In November 1998, the NCUC issued an order approving our request for an
expansion project to extend natural gas service to the counties of Avery,
Mitchell and Yancey. We requested authority to use $26.3 million in expansion
fund money to pay a portion of the estimated cost of the project of $31.9
million. In January 1999, we proposed an alternate route to these counties and
in May the NCUC approved the transfer of an additional $1.5 million in supplier
refunds to our expansion fund. This provides funding of $27.8 million for the
project, now estimated to cost $33.4 million.
In December 1999, we filed with the TRA for a general rate increase of
$10.7 million annually. The case is expected to be set for hearing in early
2000.
Results of Operations
Net income for 1999 was $58.2 million, compared with $60.3 million in
1998 and $54.1 million in 1997.
Net income for 1999 decreased $2.1 million from 1998 primarily for the
reasons listed below.
- Sales decreased in all customer classes.
- Earnings decreased from propane operations.
- Earnings decreased from unregulated retail energy marketing
services.
12
<PAGE> 15
- Depreciation expense increased.
These decreases were partially offset for the reasons listed below.
- Operations expenses decreased.
- General taxes decreased.
- Utility interest charges decreased.
Net income for 1998 increased $6.2 million from 1997 primarily for the
reasons listed below.
- Regulatory rate changes increased rates and updated gas cost
components.
- Secondary market transactions increased.
- Interest income increased.
- Operations and maintenance expenses decreased.
- General taxes decreased.
- Utility interest charges decreased.
An increase in depreciation expense partially offset these increases in
net income.
Compared with the prior year, weather in our service area was 6% warmer
in 1999, 4% warmer in 1998 and 13% warmer in 1997. Volumes of gas delivered to
customers, which we refer to as system throughput, were 136 million dekatherms
in 1999, compared with 143 million dekatherms in 1998, a decrease of 5%, and
135.1 million dekatherms in 1997. In addition to this system throughput,
secondary-market sales volumes increased to 34.8 million dekatherms in 1999,
compared with 34 million dekatherms in 1998 and 24.5 million dekatherms in 1997.
Operating revenues were $686.5 million in 1999, $765.3 million in 1998
and $775.5 million in 1997.
Operating revenues for 1999 decreased by $78.8 million from 1998
primarily for the reasons listed below.
- Sales to residential, commercial and industrial customers
decreased due to warmer weather.
- North Carolina gross receipts taxes were eliminated from rates
during 1999 (see discussion of General Taxes below).
- Revenues from secondary market activity decreased even though
volumes increased.
Operating revenues for 1998 decreased by $10.2 million from 1997
primarily for the reasons listed below.
13
<PAGE> 16
- A reduction in the embedded cost of gas which is a component
of revenue.
- The shift from sales of gas to transportation on which there
is no commodity cost included in revenues.
- Increased volumes in secondary market sales at wholesale
market rates which are lower than retail tariff rates.
The weather normalization adjustment mechanism (WNA) generated revenues
of $19.7 million, $5 million and $10.6 million in 1999, 1998 and 1997,
respectively. The WNA in effect in all three states is designed to offset the
impact that unusually cold or warm weather has on residential and commercial
customer billings and margin. Weather 13% warmer than normal was experienced in
1999, compared with 8% warmer-than-normal weather in 1998 and 4%
warmer-than-normal weather in 1997.
In general rate proceedings, the state regulatory commissions authorize
us to recover a margin, applicable rate less cost of gas, on each unit of gas
sold. Each commission has also authorized us to negotiate lower rates to certain
of our industrial customers when necessary to remain competitive. We are
generally permitted to recover margin losses resulting from these negotiated
transactions through rates. The ability to recover such negotiated margin
reductions is subject to continuing regulatory approvals.
Cost of gas was $366 million in 1999, $442.4 million in 1998 and $460.7
million in 1997.
Cost of gas for 1999 decreased $76.4 million from 1998 primarily for
the reasons listed below.
- Decreases in embedded gas costs.
- Increased volumes in secondary market sales at wholesale
market rates which are lower than retail tariff rates.
- Increases in capacity release transactions.
Cost of gas for 1998 decreased $18.3 million from 1997 primarily for
the reasons listed below.
- Decreases in embedded gas costs.
- The shift from sales to transportation.
- Increased volumes in secondary market sales at wholesale
market rates which are lower than retail tariff rates.
Increases or decreases in purchased gas costs from suppliers have no
significant impact on margin as substantially all changes are passed on to
customers through purchased gas adjustment procedures.
14
<PAGE> 17
Margin was $320.5 million in 1999, $322.9 million in 1998 and $314.9
million in 1997. Margin increased or decreased due to the changes in revenues
and cost of gas noted above. The margin earned per dekatherm of system
throughput increased by $.10 in 1999 over 1998 and decreased by $.07 in 1998
from 1997.
Other operations and maintenance expenses were $116.8 million in 1999,
$119.6 million in 1998 and $126.8 million in 1997.
Operations and maintenance expenses for 1999 decreased $2.8 million,
compared with 1998, primarily for the reasons listed below.
- Decrease in risk insurance expense.
- Decrease in office supplies expense.
- Decrease in payroll expense.
- Decrease in employee benefits expense.
- Decrease in the provision for uncollectibles.
Increases in outside labor expense and advertising expense partially
offset these decreases in 1999.
Operations and maintenance expenses for 1998 decreased $7.2 million,
compared with 1997, primarily due to the following reasons.
- Decrease in payroll expense.
- Decrease in rent expense.
- Decrease in advertising expense.
- Decrease in the provision for uncollectibles.
An increase in outside labor expense partially offset these decreases
in 1998.
As part of a plan to reduce overall operating expenses, the Company
eliminated 93 positions in 1997 which reduced the utility workforce by 5% from
the employee count as of the end of 1996. The workforce reduction plan resulted
in a charge to operations expense of $1.8 million in the fourth quarter of 1997.
Depreciation expense increased from $39.2 million to $44.1 million over
the three-year period 1997 to 1999 primarily due to the growth in plant in
service.
General taxes decreased from $32.9 million to $29.5 million over the
three-year period 1997 to 1999 primarily due to
15
<PAGE> 18
decreases in gross receipts taxes charged on lower amounts billed to customers
and the elimination of North Carolina gross receipts taxes explained below.
Increases in property taxes resulting from rate increases and additions to
taxable property and state franchise taxes partially offset these decreases.
Effective July 1, 1999, for bills rendered after August 1, 1999, we
began charging a new excise tax on piped natural gas used in North Carolina.
This tax replaced the sales and use tax and gross receipts tax that were
previously applicable to piped natural gas. The excise tax is calculated using a
declining block rate structure applied to the number of therms delivered each
month. The excise tax is not intended to increase or decrease taxes, but to
replace the combination of the sales and use tax and gross receipts tax.
The gross receipts tax was included in our gas rates billed to
customers and therefore was in our operating revenues. Gross receipts tax
expense in the same amount was also included in general taxes. The sales and use
tax was not included in rates but was collected as a surcharge and remitted to
the state with no impact on the income statement. The excise tax follows the
previous sales and use tax treatment and is not included in revenues or
expenses. This change impacts the comparability of revenues and thus margin
(revenues less cost of gas) and general taxes for all periods prior to the
change.
Other income, net of income taxes, decreased to a loss of $1.1 million
in 1999 compared with income of $2.3 million in 1998 and $4.1 million in 1997
primarily due to the following reasons.
- Decrease in earnings from unregulated retail energy marketing
services.
- Decrease in interest earned on temporary cash investments.
Decreases in earnings from unregulated retail energy marketing services
result from start-up costs incurred by our retail marketing joint venture,
SouthStar Energy Services LLC (SouthStar), associated with its entry into the
unregulated retail gas market in Georgia.
Increases in earnings from non-utility LNG operations and in the
allowance for funds used during construction partially offset these decreases.
Utility interest charges were $32.4 million in 1999, $33.2 million in
1998 and $34 million in 1997.
16
<PAGE> 19
Utility interest charges for 1999 decreased $800,000, compared with
1998, primarily due to the following reasons.
- Decrease in interest on long-term debt due to lower balances
outstanding over the period.
- Decrease in interest charged on refunds due customers from
lower balances outstanding.
- Increase in the portion of the allowance for funds used during
construction attributable to borrowed funds.
An increase in interest on short-term debt due to greater balances
outstanding even at slightly lower interest rates partially offset these
decreases in 1999.
Utility interest charges for 1998 decreased $800,000, compared with
1997, primarily due to the following reasons.
- Decrease in interest on long-term debt due to lower balances
outstanding.
- Decrease in interest on short-term debt due to lower balances
outstanding but at slightly higher rates.
- Increase in the portion of the allowance for funds used during
construction attributable to borrowed funds.
An increase in interest on refunds due customers due to higher balances
outstanding partially offset these decreases in 1998.
Environmental Matters
We have owned, leased or operated manufactured gas plant (MGP)
facilities at 12 sites in our three-state service area. In 1997, we entered into
a settlement with a third party with respect to nine of these sites. As of
October 31, 1999, we had an environmental liability of $1.4 million for the
remaining three MGP sites not covered by the settlement. This liability is
estimated based on a generic MGP site study as we have not performed
site-specific evaluations.
Our three state regulatory commissions authorized us to utilize
deferral accounting, or to create a regulatory asset, for expenditures made in
connection with environmental matters. In connection with the settlement noted
above and the estimated liability for the three remaining sites, we have
recorded a regulatory asset of $6.6 million. As of October 31, 1999, we had an
additional regulatory asset in the amount of $377,000, net of recoveries from
customers, for other environmental costs, primarily legal fees and engineering
assessments.
17
<PAGE> 20
Further evaluations of the three remaining sites could significantly
affect recorded amounts; however, we believe that the ultimate resolution of
these matters will not have a material adverse effect on financial position or
results of operations.
Accounting Pronouncements
Effective November 1, 2000, we will adopt SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133), as amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133". We are currently evaluating the
effects of FAS 133 on financial position and results of operations.
Year 2000
Overview
In 1996, we formed a Year 2000 Project Team and selected a consulting
firm to help us with a comprehensive company-wide project to inventory, assess,
replace, remediate and test hardware, software and embedded systems intended to
make them Year 2000 ready. In 1997, we formed a Year 2000 Sub-Committee composed
of senior-level executives to monitor Year 2000 efforts and assure that our core
systems would be Year 2000 ready prior to the turn of the century.
In support of these efforts, we also formed a Test Management Group who
established specific testing processes and procedures that were used with both
Information Technology (IT) and non-IT systems. The testing methodology included
the use of various testing techniques such as regression, system, parallel,
interface and stress testing. Test plans included additional testing scenarios
to demonstrate Year 2000 readiness. The Test Management Group reviewed the
results of these tests to verify that a particular system's functional and Year
2000 readiness testing was properly completed.
During the fourth calendar quarter of 1999, we were required by some
software vendors to apply additional patches to systems that had been previously
upgraded or replaced. This work was completed and the systems were made Year
2000 ready.
During the transition weekend of December 31, 1999, through January 3,
2000, we had personnel on-site to monitor our gas distribution network and to
verify that our computer systems did not experience any Year 2000 impacts. We
did not experience any failures that resulted in the loss of gas service to our
customers or that posed any safety-related issues to the public or our
employees.
18
<PAGE> 21
Readiness of Systems, Applications and Embedded Devices
We completed the implementation of Year 2000 ready solutions for our
mission-critical applications in December 1998. Examples of these applications
are SCADA (real-time system pressure and flow monitoring), Customer Information,
Telemetering, Materials Management, Gas Management, Accounts Payable, General
Ledger and Asset Management. Many of our support-intensive and low-impact
applications were also Year 2000 ready by the end of December 1998. The final
application was completed on schedule in September 1999.
We completed the inventory and assessment of embedded systems and found
that approximately 4% of the devices had a Year 2000 impact. We developed a
remediation strategy for each of the impacted devices and completed the upgrades
on all of those systems.
We will continue to monitor the readiness status of our systems due to
the Year 2000 being a leap year in an effort to reduce the risk that any Year
2000 failures after January 1, 2000, could result in material impacts to us.
Suppliers and Vendors
We are dependent on a variety of suppliers and vendors to provide
essential equipment, materials and services. In many ways, our ability to
continue normal business operations is dependent on the timely delivery of these
goods and services. We committed significant resources to contacting our
critical suppliers and assessing their readiness. In cases where suppliers were
non-responsive or demonstrated a significant risk of being non-compliant, we
identified alternative sources. In other cases, we increased our inventory
levels of specific critical items. Our intent was to minimize or avoid the
impact of any disruptions associated with the inability of a given supplier to
respond to our business needs.
Risks
The Year 2000 Sub-Committee reviewed and approved ten specific "worst
case" scenarios. We designated plan owners for each scenario and developed
contingency plans to address each of the items. Our worst case scenarios were as
follows:
- Electrical outages,
- Telecommunication outages,
- Natural gas shortages,
- Water outages,
- Vehicle fuel shortages,
- Staff shortages,
- Postal service outages,
19
<PAGE> 22
- Data center services outages,
- Emergency response impacts, and
- Financial institution impacts.
During the transition weekend, we were not required to invoke any
contingency plans related to our worst case scenarios.
Contingency Planning
We developed contingency plans in the areas of facilities,
applications, suppliers, embedded technologies and worst case scenarios. We
followed a standard template based on guidelines outlined by the General
Accounting Office for Year 2000 Business Continuity and Contingency Planning.
The contingency planning process assumed that there could be multiple concurrent
failures of systems, thus requiring an additional level of planning to
compensate for any assumptions that were made within a particular contingency
plan. During September 1999, we completed the testing of selected contingency
plans based on potential risks.
In addition, we developed a Year 2000 event plan that outlined the
staffing requirements and the system verification procedures that were utilized
during the transition weekend. The plan included a Command and Control Center
that was managed by one of our senior executives. Personnel in the center
monitored the system verification activities and coordinated the communication
of our status to state regulatory agencies, the American Gas Association and the
media.
In an effort to reduce our risk from staff shortages, we established a
policy which limits employee vacations during December 1999 and January 2000.
The policy provides for certain exceptions and reserves the right for management
to determine final work or vacation schedules based on the needs of our business
and customers.
Financial Impact
We estimate our total costs for Year 2000 readiness, including
inventory, assessment, replacements, upgrades, repairs and testing, to be $23.6
million, substantially all of which was incurred as of October 31, 1999. Total
operating costs are estimated to be $4.3 million. By order of the North Carolina
Utilities Commission, we defer and amortize over a three-year period the portion
of the operating costs attributable to North Carolina (57% based on utility
plant in service). Of the total estimated costs, we capitalized costs of $19.3
million to replace existing applications with new systems that are Year 2000
operational and that provide additional business management information and
functionality. We did not defer or cancel any planned IT projects due to Year
2000 issues.
20
<PAGE> 23
As of October 31, 1999, we have expensed $3 million and deferred $1.3
million. Year 2000 costs were funded by revenues generated from operations or
through borrowings under existing credit agreements. The Year 2000 costs for
fiscal 1999 comprised approximately 33% of the IT budget.
Total costs associated with Year 2000 readiness did not significantly
impact our financial position or results of operations.
Disclaimer
The Year 2000 statements in this document are Year 2000 Readiness
Disclosures under the Year 2000 Information and Readiness Disclosure Act and are
made to the best of our knowledge and belief.
Forward-Looking Statements
Our discussion contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Statements concerning
plans, objectives, proposed capital expenditures and future events or
performance are some of the items included in forward-looking statements. Our
statements reflect our current expectations and involve a number of risks and
uncertainties. Although we believe that our expectations are based on reasonable
assumptions, we can give no assurances that these expectations will be achieved.
Important factors that could cause actual results to differ include:
- - Regulatory issues, including those that affect allowed rates of return,
rate structure and financings,
- - Industrial, commercial and residential growth in the service
territories,
- - Deregulation, unanticipated impacts of restructuring and increased
competition in the energy industry,
- - The potential loss of large-volume industrial customers due to bypass
or the shift by such customers to special competitive contracts at
lower per-unit margins,
- - Economic and capital market conditions,
- - The ability to meet internal performance goals,
- - The capital intensive nature of our business, including development
project delays or changes in project costs,
- - Changes in the availability and price of natural gas,
- - Changes in demographic patterns and weather conditions, and
- - Changes in environmental requirements and cost of compliance.
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<PAGE> 24
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is set forth in Note 5, Financial
Instruments and Related Fair Value, in Item 8 of this report on page 34.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements and schedules required by this Item
are listed in Item 14(a)1 and 2 in Part IV of this report on page 53.
22
<PAGE> 25
BLANK PAGE
23
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
October 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Utility Plant:
Utility plant in service $1,378,241 $1,293,797
Less accumulated depreciation 420,140 381,585
---------- ----------
Utility plant in service, net 958,101 912,212
Construction work in progress 63,081 52,128
---------- ----------
Total utility plant, net 1,021,182 964,340
---------- ----------
Other Physical Property, at cost (net of
accumulated depreciation of $18,967,000
in 1999 and $17,406,000 in 1998) 25,793 26,300
---------- ----------
Current Assets:
Cash and cash equivalents 6,174 9,720
Restricted cash 40,156 27,484
Receivables (less allowance for doubtful
accounts of $864,000 in 1999 and
$2,314,000 in 1998) 32,106 24,459
Receivables from affiliate 22,354 --
Inventories:
Gas in storage 48,685 42,465
Materials, supplies and merchandise 6,294 5,673
Deferred cost of gas 8,267 5,217
Refundable income taxes 17,670 13,897
Prepayments 16,689 13,627
---------- ----------
Total current assets 198,395 142,542
---------- ----------
Deferred Charges and Other Assets:
Unamortized debt expense (amortized
over life of related debt on a
straight-line basis) 4,009 2,455
Other 39,278 27,207
---------- ----------
Total deferred charges and
other assets 43,287 29,662
---------- ----------
Total $1,288,657 $1,162,844
========== ==========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES 1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Capitalization:
Stockholders' equity:
Cumulative preferred stock - no par
value - 175,000 shares authorized $ -- $ --
Common stock - no par value - 100,000,000
shares authorized; outstanding, 31,294,955
shares in 1999 and 30,737,983 shares in 1998 297,149 279,709
Retained earnings 194,598 178,559
---------- ----------
Total stockholders' equity 491,747 458,268
Long-term debt 423,000 371,000
---------- ----------
Total capitalization 914,747 829,268
---------- ----------
Current Liabilities:
Current maturities of long-term debt and sinking
fund requirements 2,000 10,000
Notes payable 79,500 32,000
Accounts payable 63,116 67,296
Customers' deposits 8,477 7,478
Deferred income taxes 23,002 15,367
Income taxes accrued -- 1,581
General taxes accrued 11,904 11,312
Refunds due customers 26,204 28,408
Other 12,501 12,406
---------- ----------
Total current liabilities 226,704 185,848
---------- ----------
Deferred Credits and Other Liabilities:
Unamortized federal investment tax credits 7,265 7,823
Accumulated deferred income taxes 116,134 110,851
Other 23,807 29,054
---------- ----------
Total deferred credits and other liabilities 147,206 147,728
---------- ----------
Total $1,288,657 $1,162,844
========== ==========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 28
STATEMENTS OF CONSOLIDATED INCOME
For the Years Ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(in thousands except per share amounts)
<S> <C> <C> <C>
Operating Revenues $ 686,470 $ 765,277 $ 775,517
Cost of Gas 365,962 442,422 460,665
--------- --------- ---------
Margin 320,508 322,855 314,852
--------- --------- ---------
Other Operating Expenses:
Operations 101,263 104,933 110,689
Maintenance 15,562 14,708 16,160
Depreciation 44,131 42,175 39,187
General taxes 29,465 32,633 32,882
Income taxes 38,365 37,249 31,948
--------- --------- ---------
Total other operating expenses 228,786 231,698 230,866
--------- --------- ---------
Operating Income 91,722 91,157 83,986
--------- --------- ---------
Other Income (Expense):
Non-utility activities, net of
income taxes (2,007) 684 2,813
Other income, net of income taxes 863 1,659 1,271
--------- --------- ---------
Total other income (expense) (1,144) 2,343 4,084
--------- --------- ---------
Income Before Utility Interest Charges 90,578 93,500 88,070
--------- --------- ---------
Utility Interest Charges:
Interest on long-term debt 31,005 31,507 32,429
Allowance for borrowed funds used
during construction (credit) (2,027) (1,242) (712)
Other interest 3,393 2,922 2,279
--------- --------- ---------
Total utility interest charges 32,371 33,187 33,996
--------- --------- ---------
Net Income $ 58,207 $ 60,313 $ 54,074
========= ========= =========
Average Shares of Common Stock:
Basic 31,013 30,472 29,883
Diluted 31,242 30,717 30,229
Earnings Per Share of Common Stock:
Basic $ 1.88 $ 1.98 $ 1.81
Diluted $ 1.86 $ 1.96 $ 1.79
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 29
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 58,207 $ 60,313 $ 54,074
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 47,917 46,113 43,441
Deferred income taxes 12,918 10,693 3,983
Amortization of investment
tax credits (558) (558) (558)
Allowance for funds used during
construction (3,461) (2,611) (1,418)
Changes in assets and liabilities:
Restricted cash (12,672) (6,099) (904)
Receivables (7,647) 7,908 11
Receivables from affiliate (22,354) -- --
Inventories (6,841) 6,319 3,059
Other assets, net (23,832) (19,706) 19,269
Accounts payable (4,180) 2,193 4,953
Refunds due customers (2,204) 13,311 15,029
Other liabilities, net (3,692) 5,512 362
--------- --------- ---------
Total adjustments (26,606) 63,075 87,227
--------- --------- ---------
Net cash provided by operating activities 31,601 123,388 141,301
--------- --------- ---------
Cash Flows from Investing Activities:
Utility construction expenditures (98,576) (90,898) (92,057)
Other (1,643) (1,112) (3,440)
--------- --------- ---------
Net cash used in investing activities (100,219) (92,010) (95,497)
--------- --------- ---------
Cash Flows from Financing Activities:
Increase (Decrease) in bank loans, net 47,500 7,000 (14,000)
Proceeds from issuance of
long-term debt 90,000 -- --
Retirement of long-term debt (46,000) (10,000) (10,000)
Issuance of common stock through
dividend reinvestment and
employee stock plans 15,740 15,136 14,420
Dividends paid (42,168) (39,004) (36,008)
--------- --------- ---------
Net cash provided by (used in)
financing activities 65,072 (26,868) (45,588)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents (3,546) 4,510 216
Cash and Cash Equivalents at
Beginning of Year 9,720 5,210 4,994
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 6,174 $ 9,720 $ 5,210
========= ========= =========
Cash Paid During the Year for:
Interest $ 32,647 $ 33,226 $ 33,324
Income taxes $ 49,359 $ 47,139 $ 34,636
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 30
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
For the Years Ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
(in thousands)
Balance at Beginning of Year $178,559 $157,250 $139,184
Net Income 58,207 60,313 54,074
-------- -------- --------
Total 236,766 217,563 193,258
Deduct:
Dividends declared on common
stock ($1.36 a share in 1999,
$1.28 in 1998 and $1.205 in 1997) 42,168 39,004 36,008
-------- -------- --------
Balance at End of Year $194,598 $178,559 $157,250
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
A. Operations and Principles of Consolidation.
Piedmont Natural Gas Company, Inc., is an investor-owned public utility
primarily engaged in the sale and transportation of natural gas to residential,
commercial and industrial customers in the Piedmont region of North Carolina and
South Carolina and the metropolitan Nashville, Tennessee, area. The consolidated
financial statements include the accounts of our wholly owned subsidiaries. All
revenues and expenses of non-state-regulated operations are included in other
income in the consolidated income statements. Significant intercompany
transactions have been eliminated in consolidation where appropriate.
B. Utility Plant and Depreciation.
Utility plant is stated at original cost, including direct labor and
materials, allocable overheads and an allowance for borrowed and equity funds
used during construction (AFUDC). AFUDC totaled $3,461,000 for 1999, $2,611,000
for 1998 and $1,418,000 for 1997. The portion of AFUDC attributable to equity
funds is included in other income, and the portion attributable to borrowed
funds is shown as a reduction of utility interest charges. The costs of property
retired are removed from utility plant and such costs, including removal costs
net of salvage, are charged to accumulated depreciation.
We compute depreciation expense using the straight-line method. The
composite weighted-average rates were 3.38% for 1999, 3.43% for 1998 and 3.41%
for 1997.
We review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Our review did not result in
a material effect on results of operations or financial condition.
C. Inventories.
We maintain inventories on the basis of the average cost charged
thereto.
D. Deferred Purchased Gas Adjustment.
Rate schedules include gas adjustment provisions that permit the
recovery of gas costs. We revise rates in all three states periodically without
formal rate proceedings to reflect changes in the cost of gas. Charges to cost
of gas are based on the amount recoverable under approved rate schedules. The
net of any over- or under-recoveries of gas costs are added to or deducted from
cost of gas and included in refunds due customers in the financial statements.
29
<PAGE> 32
E. Income Taxes.
We provide deferred income taxes for differences between the book and
tax basis of assets and liabilities, principally attributable to accelerated tax
depreciation and the timing of the recording of revenues and cost of gas. We
amortize deferred investment tax credits to income over the estimated useful
life of the related property.
F. Operating Revenues.
We recognize revenues from meters read on a monthly cycle basis which
results in unrecognized revenue from the cycle date through month end. We defer
the cost of gas for volumes delivered to customers but not yet billed under the
cycle-billing method.
G. Earnings Per Share.
We compute basic earnings per share using the weighted average number
of shares of Common Stock outstanding during each period. A reconciliation of
basic and diluted earnings per share for the years ended October 31, 1999, 1998
and 1997, is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(in thousands except per share amounts)
<S> <C> <C> <C>
Net Income $58,207 $60,313 $54,074
======= ======= =======
Average shares of
Common Stock
outstanding for
basic earnings
per share 31,013 30,472 29,883
Contingently issuable
shares under
the long-term
incentive plan 229 245 346
------- ------- -------
Average shares of
dilutive stock 31,242 30,717 30,229
======= ======= =======
Earnings Per Share:
Basic $ 1.88 $ 1.98 $ 1.81
Diluted $ 1.86 $ 1.96 $ 1.79
</TABLE>
H. Rate-Regulated Basis of Accounting.
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting
for the Effects of Certain Types of Regulation" (FAS 71), provides that
rate-regulated public utilities account for and report assets and liabilities
consistent with the economic effect of the manner in which independent
third-party regulators establish rates. In applying FAS 71, we have capitalized
certain costs and benefits as regulatory assets and liabilities, respectively,
pursuant to orders of the state utility regulatory commissions, either in
general rate proceedings or expense deferral proceedings, in order to provide
for recovery of or refunds to utility customers in future periods.
30
<PAGE> 33
We monitor the regulatory and competitive environment in which we
operate to determine that our regulatory assets continue to be probable of
recovery. If we, at some point in the future, determine that all or a portion of
these regulatory assets no longer meet the criteria for continued application of
FAS 71, then we would be required to write off that portion which we could not
recover, net of any regulatory liabilities which would be deemed no longer
necessary.
The amounts recorded as regulatory assets and liabilities in the
consolidated balance sheets at October 31, 1999 and 1998, are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Regulatory Assets
Unamortized debt expense $ 4,009 $ 2,455
Environmental 6,987 7,037
Pipeline transition costs -- 2,532
Demand-side management costs 3,937 3,214
Deferred Year 2000 costs 1,321 1,132
Deferred pension expense 1,016 1,016
Other 1,171 1,441
------- -------
Total $18,441 $18,827
======= =======
Regulatory Liabilities
Refunds due customers $26,204 $28,408
Excess deferred taxes 7,971 13,017
Deferred incentive plan 110 455
------- -------
Total $34,285 $41,880
======= =======
</TABLE>
I. Statement of Cash Flows.
For purposes of reporting cash flows, we consider all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents.
J. Other Recently Issued Accounting Standards.
SFAS No. 130, "Reporting Comprehensive Income", requires the reporting
and display of comprehensive income and its components in the financial
statements. We have no items of other comprehensive income in any period
presented.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (FAS 133), requires all derivative instruments to be recognized on
the balance sheet at their fair value. Changes in the fair value of derivatives
are to be recorded each period either in other comprehensive income or in
current earnings depending on the use of the derivative and whether it qualifies
for hedge accounting. FAS 133, as amended by
31
<PAGE> 34
SFAS No. 137, which deferred the effective date, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. We are currently
evaluating the effects of FAS 133 on financial position and results of
operations.
K. Use of Estimates.
We make estimates and assumptions when preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from estimates.
L. Reclassifications.
We have reclassified certain financial statement items for 1998 and
1997 to conform with the 1999 presentation.
2. Regulatory Matters
Our utility operations are subject to regulation by the North Carolina
Utilities Commission (NCUC), the Public Service Commission of South Carolina
(PSCSC) and the Tennessee Regulatory Authority (TRA) as to rates, service area,
adequacy of service, safety standards, extensions and abandonment of facilities,
accounting and depreciation. We are also subject to regulation by the NCUC as to
the issuance of securities.
We have been operating in an unbundled environment with all of our
interstate pipelines for several years under Federal Energy Regulatory
Commission (FERC) Order 636. In our opinion, present rules and regulations of
the NCUC, the PSCSC and the TRA permit the pass through to customers of
interstate pipeline capacity and storage service costs that may be incurred
under Order 636. Through 1999, the Company has recovered substantially all such
costs through purchased gas adjustment procedures.
In 1996, the NCUC ordered us to establish an expansion fund and
approved initial funding with supplier refunds due customers to enable the
extension of natural gas service into unserved areas of the state. As of October
31, 1999, the North Carolina State Treasurer held $30,500,000 in our expansion
fund account. This amount along with other supplier refunds, including interest
earned to date, is included in restricted cash in the consolidated balance
sheet. The NCUC decides the use of these funds as we file individual project
applications for unserved areas.
In November 1998, the NCUC issued an order approving our request for an
expansion project to extend natural gas service to the counties of Avery,
Mitchell and Yancey. We requested
32
<PAGE> 35
authority to use $26,300,000 in expansion fund money to pay a portion of the
estimated cost of the project of $31,900,000. In January 1999, we filed an
affidavit with the NCUC proposing an alternate route for the pipeline to these
counties at an additional cost of $1,500,000. In May 1999, the NCUC approved the
transfer of an additional $1,500,000 in supplier refunds to our expansion fund.
This provides funding of $27,800,000 for the project, now estimated to cost
$33,400,000.
In December 1999, we filed with the TRA for a general rate increase of
$10,688,000 annually. The case is expected to be set for hearing in early 2000.
3. Long-Term Debt
Long-term debt at October 31, 1999 and 1998, is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Senior Notes:
9.19%, due 2001 $ 30,000 $ 30,000
10.02%, due 2003 -- 20,000
10.06%, due 2004 10,000 12,000
10.11%, due 2004 -- 24,000
9.44%, due 2006 35,000 35,000
8.51%, due 2017 35,000 35,000
Medium-Term Notes:
6.23%, due 2003 45,000 45,000
7.35%, due 2009 30,000 --
6.87%, due 2023 45,000 45,000
8.45%, due 2024 40,000 40,000
7.40%, due 2025 55,000 55,000
7.50%, due 2026 40,000 40,000
7.95%, due 2029 60,000 --
-------- --------
Total 425,000 381,000
Less current maturities 2,000 10,000
-------- --------
Total $423,000 $371,000
======== ========
</TABLE>
Annual sinking fund requirements and maturities through 2004 are
$2,000,000 in 2000, $32,000,000 in 2001, $2,000,000 in 2002, $47,000,000 in 2003
and $2,000,000 in 2004.
On September 15, 1999, we prepaid our 10.02% and 10.11% Senior Notes
due in 2003 and 2004, respectively, in the amount of $36,000,000 plus accrued
interest and an early payment premium of $1,100,000. The premium was deferred
and is being amortized over ten years. To fund this prepayment and for other
working capital and construction purposes, we issued two medium-term notes under
a shelf registration statement for $150,000,000 of debt
33
<PAGE> 36
securities that was filed with the Securities and Exchange Commission in 1997.
These two medium-term notes consist of $30,000,000 of 7.35% notes due 2009 and
$60,000,000 of 7.95% notes due 2029. Both notes are to be redeemed in a single
payment at maturity.
The amount of cash dividends that may be paid on Common Stock is
restricted by provisions contained in our articles of incorporation and in note
agreements under which long-term debt was issued. At October 31, 1999, all
retained earnings were free of such restrictions.
4. Capital Stock
The changes in Common Stock for the years ended October 31, 1997, 1998
and 1999, are summarized as follows:
<TABLE>
<CAPTION>
Shares Amount
---------- ----------
(in thousands)
<S> <C> <C>
Balance, October 31, 1996 29,548,868 $ 246,907
Issue to participants in the Employee
Stock Purchase Plan (SPP) 24,948 555
Issue to the Dividend Reinvestment and
Stock Purchase Plan (DRIP) 568,482 13,865
Issue to participants in the
long-term incentive plan (LTIP) 50,716 1,249
---------- ----------
Balance, October 31, 1997 30,193,014 262,576
Issue to SPP 18,668 555
Issue to DRIP 464,040 14,582
Issue to LTIP 62,261 1,996
---------- ----------
Balance, October 31, 1998 30,737,983 279,709
Issue to SPP 25,945 777
Issue to DRIP 479,507 14,963
Issue to LTIP 51,520 1,700
---------- ----------
Balance, October 31, 1999 31,294,955 $ 297,149
========== ==========
</TABLE>
At October 31, 1999, 3,269,861 shares of Common Stock were reserved for
issuance as follows:
SPP 201,015
DRIP 2,128,366
LTIP 940,480
---------
Total 3,269,861
=========
5. Financial Instruments and Related Fair Value
Various banks provide lines of credit totaling $75,000,000 to finance
current cash requirements. Additional lines are also available on an as needed,
if available, basis. These short-term borrowings under the lines, with maturity
dates of less than 90
34
<PAGE> 37
days, include bankers' acceptances, transactional borrowings and overnight
cost-plus loans based on the lending bank's cost of money, with a maximum rate
of the lending bank's commercial prime interest rate. At October 31, 1999, the
lines of credit were on either a fee basis or compensating balance basis, with
average annual balance requirements of $300,000.
At October 31, 1999, outstanding notes payable consisted of $50,000,000
in bankers' acceptances and $29,500,000 in overnight cost-plus loans. The
weighted average interest rate on such borrowings was 5.63%.
Our principal business activity is the sale and transportation of
natural gas to customers located in North Carolina, South Carolina and
Tennessee. At October 31, 1999, gas receivables totaled $23,867,000 and other
receivables totaled $9,103,000. The uncollected balance of installment
receivables which have been transferred with recourse was $18,699,000 and
$20,969,000 at October 31, 1999 and 1998, respectively. We have provided an
adequate allowance for any receivables which may not be ultimately collected,
including the receivables transferred with recourse.
During 1999, we made equity contributions to our subsidiary, Piedmont
Energy Company (Piedmont Energy), who is a member of SouthStar Energy Services
LLC (SouthStar). Piedmont Energy used these equity contributions to make loans
to SouthStar in accordance with a loan agreement between SouthStar and its
members. Loans are funded by the members based on ownership percentage and our
loans are limited to $22,500,000. Interest is charged on the outstanding
principal balance of each loan at an annual fixed rate equal to LIBOR plus 85
basis points with interest payable quarterly. All loans mature on June 27, 2000.
At October 31, 1999, SouthStar owed Piedmont Energy $22,354,000,
including accrued interest. Piedmont Energy received $265,000 as interest earned
on the loans for the twelve months ended October 31, 1999.
The carrying amounts in the consolidated balance sheets of cash and
cash equivalents, restricted cash, receivables, notes payable and accounts
payable approximated their fair values due to the short-term maturities of these
financial instruments. Based on quoted market prices of similar issues having
the same remaining maturities, redemption terms and credit ratings, the
estimated fair values of long-term debt at October 31, 1999 and 1998, including
current portion, were as follows:
35
<PAGE> 38
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(in thousands)
<S> <C> <C> <C> <C>
Long-term debt $425,000 $427,936 $381,000 $435,840
</TABLE>
The use of different market assumptions or estimation methodologies may
have a material effect on the estimated fair values. The fair value amounts are
not intended to reflect principal amounts that we will ultimately be required to
pay.
We engage in minimal derivative products activities, such as
exchange-traded futures and over-the-counter forward contracts, to manage
commodity price and basis risk when appropriate. The hedging activities permit
us to translate physical market activities into a common pricing index against
which transaction values will be measured at the margin. Under internal
guidelines, we utilize limited speculative positions in the derivatives market
or in the form of fixed-price gas supply contracts. Our derivative products
activity is not material to financial position or results of operations.
SouthStar enters into derivative instruments to hedge its exposure to
the impact of price and basis fluctuations on gas contracts and utilizes a
balanced book approach for matching sales to customers and supply from third
parties. Market risk is managed through adherence to open position limits,
signature authorizations and day-to-day commercial procedures maintained by
SouthStar. Risk of loss is mitigated by continually assessing such risks in the
context of the business and the structure of deals. All hedge transactions are
subject to a risk management policy, approved by SouthStar's Board of Directors,
which does not permit speculative positions. SouthStar's derivative products
activity is not material to our financial position or results of operations.
6. Employee Benefit Plans
We have a defined-benefit pension plan for the benefit of substantially
all full-time regular employees. Plan benefits are generally based on credited
years of service and the level of compensation during the five consecutive years
of the last ten years prior to retirement during which the participant received
the highest compensation. Our policy is to fund the plan in an amount not in
excess of the amount that is deductible for income tax purposes. Plan assets
consist primarily of marketable securities and cash equivalents. We amend the
plan from time to time in accordance with changes in tax law.
36
<PAGE> 39
We provide certain postretirement health care and life insurance
benefits to substantially all full-time regular employees. As of October 31,
1999, the liability associated with such benefits was funded in irrevocable
trust funds which can only be used to pay the benefits.
A reconciliation of the changes in the plans' benefit obligations and
fair value of assets for the years ended October 31, 1999 and 1998, and a
statement of the funded status as of October 31, 1999 and 1998, are presented
below:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation
Obligation at beginning of year $ 119,572 $ 112,330 $ 22,936 $ 21,941
Service cost 5,388 5,228 648 620
Interest cost 7,309 7,663 1,443 1,489
Plan amendments -- 1,624 -- --
Actuarial (gain) loss (9,761) 1,641 871 512
Benefit payments (6,915) (8,914) (1,926) (1,626)
--------- --------- --------- ---------
Obligation at end of year $ 115,593 $ 119,572 $ 23,972 $ 22,936
========= ========= ========= =========
Change in fair value of plan assets
Fair value of plan assets at beginning of
year $ 149,453 $ 141,540 $ 7,172 $ 4,709
Actual return on plan assets 19,377 16,827 287 232
Employer contributions -- -- 2,789 3,412
Benefit payments (6,915) (8,914) (1,674) (1,181)
--------- --------- --------- ---------
Fair value of plan assets at
end of year $ 161,915 $ 149,453 $ 8,574 $ 7,172
========= ========= ========= =========
Funded status
Funded status at end of year $ 46,322 $ 29,881 $ (15,398) $ (15,764)
Unrecognized transition
obligation 60 75 13,018 13,948
Unrecognized prior-service cost 4,426 4,969 -- --
Unrecognized (gain) loss (58,949) (42,849) 2,096 4,270
--------- --------- --------- ---------
Prepaid (accrued) benefit cost $ (8,141) $ (7,924) $ (284) $ 2,454
========= ========= ========= =========
</TABLE>
37
<PAGE> 40
The amounts recognized in the consolidated balance sheets as of October
31, 1999 and 1998, are presented below:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------- ---------------------
1999 1998 1999 1998
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Prepaid benefit cost $ -- $ -- $ -- $ 2,454
Accrued benefit cost (8,141) (7,924) (284) --
------- ------- ------- -------
Net asset (liability) recognized $(8,141) $(7,924) $ (284) $ 2,454
======= ======= ======= =======
</TABLE>
Net periodic benefit cost for the years ended October 31, 1999, 1998
and 1997, includes the following components:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 5,388 $ 5,228 $ 5,146 $ 648 $ 620 $ 627
Interest cost 7,309 7,663 7,251 1,443 1,489 1,367
Expected return
on plan assets (12,079) (11,474) (10,139) (497) (393) (377)
Amortization of
transition
obligation 15 15 15 930 930 930
Amortization of
prior-service
cost 543 459 417 -- -- --
Amortization of
net (gain)
loss (959) (565) (297) 232 108 25
-------- -------- -------- -------- -------- --------
Net periodic
benefit cost $ 217 $ 1,326 $ 2,393 $ 2,756 $ 2,754 $ 2,572
======== ======== ======== ======== ======== ========
</TABLE>
We amortize unrecognized prior-service cost over the average remaining
service period for active employees. We amortize the unrecognized net transition
asset over the average remaining service period for active employees expected to
receive benefits under the plan as of the date of transition. We amortize gains
and losses in excess of 10% of the greater of the benefit obligation and the
market-related value of assets over the average remaining service period of
active employees. The method of amortization in all cases is straight-line.
The weighted average assumptions used in the measurement of the benefit
obligation as of October 31, 1999, 1998 and 1997, are presented below:
38
<PAGE> 41
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
----------------------- ------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.5% 6.5% 6.75% 7.75% 6.75% 7.0%
Expected long-term rate of
return on plan assets 9.5% 9.5% 9.5% 9.5% 9.5% 9.5%
Rate of compensation increase 5.5% 4.5% 4.75% 4.5% 4.5% 4.75%
</TABLE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for the medical plans is 6.75% for
2000, declining gradually to 4% in 2005 and remaining at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. A one-percentage point change in assumed health care cost
trend rates would have the following effects:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
----------- -----------
(in thousands)
<S> <C> <C>
Effect on total of service and
interest cost components of net
periodic postretirement health
care benefit cost $ 94 $ (83)
Effect on the health care
component of the accumulated
postretirement benefit
obligation $1,216 $(1,077)
</TABLE>
We maintain salary investment plans which are profit-sharing plans
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the Tax
Code), which include qualified cash or deferred arrangements under Tax Code
Section 401(k). Employees who have completed six months of service are eligible
to participate. Participants are permitted to defer a portion of their base
salary to the plans and we match a portion of the participants' contributions.
All contributions vest immediately. For the years ended October 31, 1999, 1998
and 1997, we contributed $2,298,000, $2,135,000 and $2,172,000, respectively, in
matching contributions to the plans.
39
<PAGE> 42
7. Income Taxes
The components of income tax expense for the years ended October 31,
1999, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Federal State Federal State Federal State
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income taxes charged
to operations:
Current $ 28,005 $ 5,972 $ 23,101 $ 4,912 $ 24,074 $ 5,311
Deferred 4,071 875 8,035 1,759 2,696 425
Amortization of
investment tax
credits (558) -- (558) -- (558) --
-------- -------- -------- -------- -------- --------
Total 31,518 6,847 30,578 6,671 26,212 5,736
-------- -------- -------- -------- -------- --------
Income taxes charged
to other income:
Current (591) (129) 451 208 2,101 (261)
Deferred -- -- 834 65 127 735
-------- -------- -------- -------- -------- --------
Total (591) (129) 1,285 273 2,228 474
-------- -------- -------- -------- -------- --------
Total income tax
expense $ 30,927 $ 6,718 $ 31,863 $ 6,944 $ 28,440 $ 6,210
======== ======== ======== ======== ======== ========
</TABLE>
A reconciliation of income tax expense at the federal statutory rate to
recorded income tax expense for the years ended October 31, 1999, 1998 and 1997,
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal taxes at 35% $ 33,566 $ 34,692 $ 31,054
State income taxes, net of
federal benefit 4,367 4,510 4,037
Amortization of investment tax credits (558) (558) (558)
Other, net 270 163 117
-------- -------- --------
Total income tax expense $ 37,645 $ 38,807 $ 34,650
======== ======== ========
</TABLE>
At October 31, 1999 and 1998, deferred income taxes consist of the
following temporary differences:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Excess of tax over book depreciation and tax and
book asset basis differences $ 124,177 $ 116,966
Revenues and cost of gas 21,550 17,507
Long-term incentive plan (4,368) (5,037)
Pension expense (2,471) 225
Other, net 248 (3,443)
--------- ---------
Net deferred income taxes $ 139,136 $ 126,218
========= =========
</TABLE>
Total deferred income tax liabilities were $151,824,000 and
$145,669,000 and total deferred income tax assets were $12,688,000 and
$19,451,000 at October 31, 1999 and 1998, respectively.
40
<PAGE> 43
8. Business Segments and Other Non-Utility Activities
We adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", in 1999. The statement requires that operating
segments be reported on the basis that is used internally by the chief operating
decision maker in making decisions related to resource allocation and segment
performance. We have one reportable segment, domestic natural gas distribution.
Our reportable segment is operated and managed as three strategic business units
and is organized based on products and services and regulatory environments.
Our domestic natural gas distribution business is conducted through the
following three companies:
- Piedmont Natural Gas Company, the parent company, is primarily
engaged in the sale and transportation of natural gas to
residential, commercial and industrial customers in the
Piedmont region of North Carolina and South Carolina and the
metropolitan Nashville, Tennessee, area.
- Piedmont Intrastate Pipeline Company, a wholly owned
subsidiary, is a 36% member of Cardinal Pipeline Company,
L.L.C. (Cardinal), a North Carolina limited liability company.
Cardinal owns and operates a natural gas pipeline from a
connection with an interstate pipeline to facilities owned by
us and facilities owned by another utility company who is also
a member. Because our investment is treated as utility assets
for ratemaking purposes, we include our share of the assets
and operations of Cardinal in utility operations.
- Piedmont Interstate Pipeline Company, a wholly owned
subsidiary, is a 35% member of Pine Needle LNG Company, L.L.C.
(Pine Needle), a North Carolina limited liability company.
Pine Needle owns a liquified natural gas (LNG) peak-demand
facility in North Carolina from which peaking service began in
May 1999. Storage capacity is four billion cubic feet with
vaporization capability of 400 million cubic feet per day. We
subscribe to one-half of this capacity to provide gas for
peak-use periods when demand is the highest. We made an equity
contribution of $18,725,000 to Pine Needle in 1999 to cover
our portion of the permanent financing of the facility.
In 1995, the two members of Cardinal along with another utility company
and an interstate pipeline formed Cardinal Extension Company, L.L.C. (Cardinal
Extension), a North Carolina limited liability company, to extend the existing
Cardinal pipeline by approximately 67 miles. Effective November 1, 1999,
41
<PAGE> 44
the new facilities were placed in service and Cardinal was merged into Cardinal
Extension with the surviving entity named Cardinal Pipeline Company, L.L.C. Our
investment in Cardinal was transferred to the new entity and our percentage
membership in the new entity is approximately 16%. Effective November 1, 1999,
our investment is no longer treated as utility assets for ratemaking purposes
and our share of the assets and operations of Cardinal will be accounted for in
non-utility operations.
The accounting policies of our domestic natural gas distribution
segment are described in the summary of significant accounting policies in Note
1. Performance is evaluated based on margin, operations and maintenance
expenses, operating income and income before taxes. All of our operations are
within the United States. No single customer's revenues exceeded 10% or more of
our consolidated revenues.
All of our other activities are included in Other in the segment tables
and consist of the following:
- Piedmont Propane Company, a wholly owned subsidiary, markets
propane and propane appliances to residential, commercial and
industrial customers within and adjacent to our three-state
natural gas service area.
- Piedmont Energy Company (Piedmont Energy), a wholly owned
subsidiary, has an equity interest in SouthStar Energy
Services LLC (SouthStar), a Delaware limited liability
company. SouthStar offers a combination of unregulated energy
products and services to industrial, commercial and
residential customers in the southeastern United States. These
products and services include natural gas, electricity, fuel
oil and propane, along with related services. Prior to July
1998, Piedmont Energy was a 51% member of Resource Energy
Services Company, L.L.C. (Resource Energy), a North Carolina
limited liability company. Resource Energy offered natural gas
acquisition, transportation and storage services to industrial
users and other utilities in the southeastern, mid-Atlantic
and midwestern regions of the United States.
Continuing operations by segment for the years ended October 31, 1999,
1998 and 1997, are presented below:
42
<PAGE> 45
<TABLE>
<CAPTION>
Domestic
Natural Gas
Distribution Other Total
------------ ----------- -----------
(in thousands)
<S> <C> <C> <C>
1999
Revenues from external
customers $ 686,470 $ 28,250 $ 714,720
Margin 320,508 13,896 334,404
Operations and maintenance
expenses 116,825 9,058 125,883
Depreciation and amortization 44,131 2,133 46,264
Operating income 91,706 2,046 93,752
Interest expense 32,371 443 32,814
Other income 4,915 (8,842) (3,927)
Income before income taxes 102,657 (6,805) 95,852
Total assets 1,286,783 59,997 1,346,780
Capital expenditures 101,607 1,429 103,036
1998
Revenues from external
customers $ 765,277 $ 32,911 $ 798,188
Margin 322,855 14,512 337,367
Operations and maintenance
expenses 119,641 10,116 129,757
Depreciation and amortization 42,175 2,184 44,359
Operating income 91,107 1,506 92,613
Interest expense 33,187 622 33,809
Other income 4,699 (1,631) 3,068
Income before income taxes 99,868 (747) 99,121
Total assets 1,155,866 41,223 1,197,089
Capital expenditures 93,520 1,105 94,625
1997
Revenues from external
customers $ 775,517 $ 36,816 $ 812,333
Margin 314,852 15,140 329,992
Operations and maintenance
expenses 126,849 9,737 136,586
Depreciation and amortization 39,187 2,216 41,403
Operating income 83,967 2,500 86,467
Interest expense 33,996 618 34,614
Other income 3,996 928 4,924
Income before income taxes 85,916 2,809 88,725
Total assets 1,099,082 39,795 1,138,877
Capital expenditures 93,585 1,491 95,076
</TABLE>
A reconciliation to the consolidated financial statements for the years
ended October 31, 1999, 1998 and 1997, is presented below:
43
<PAGE> 46
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Revenues (1):
Revenues for reportable
segments $ 686,470 $ 765,277 $ 775,517
Net Income:
Income before income taxes
for reportable segments $ 102,657 $ 99,868 $ 85,916
Income before income taxes
for other non-utility
activities (6,805) (747) 2,809
Income taxes 37,645 38,808 34,651
----------- ----------- -----------
Net income $ 58,207 $ 60,313 $ 54,074
=========== =========== ===========
Consolidated Assets:
Total assets for
reportable segments $ 1,304,453 $ 1,155,866 $ 1,099,082
Other assets 59,997 41,223 39,795
Eliminations/Adjustments (75,793) (34,245) (40,721)
----------- ----------- -----------
Consolidated assets $ 1,288,657 $ 1,162,844 $ 1,098,156
=========== =========== ===========
</TABLE>
(1) Operating revenues shown in the consolidated financial statements
represent revenues from utility operations only.
9. Environmental Matters
We have owned, leased or operated manufactured gas plant (MGP)
facilities at 12 sites in our three-state service area. In 1997, we entered into
a settlement with a third party with respect to nine of these sites. As of
October 31, 1999, we had an environmental liability of $1,360,000 for the
remaining three MGP sites not covered by the settlement. This liability is
estimated based on a generic MGP site study as we have not performed
site-specific evaluations.
Our three state regulatory commissions authorized us to utilize
deferral accounting, or to create a regulatory asset, for expenditures made in
connection with environmental matters. In connection with the settlement noted
above and the estimated liability for the three remaining sites, we have
recorded a regulatory asset of $6,610,000. As of October 31, 1999, we had an
additional regulatory asset in the amount of $377,000, net of recoveries from
customers, for other environmental costs, primarily legal fees and engineering
assessments.
44
<PAGE> 47
Further evaluations of the three remaining sites could significantly
affect recorded amounts; however, we believe that the ultimate resolution of
these matters will not have a material adverse effect on financial position or
results of operations.
45
<PAGE> 48
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Piedmont Natural Gas Company is responsible for the
preparation and integrity of the accompanying consolidated financial statements
and related notes. We prepared the statements in conformity with generally
accepted accounting principles appropriate in the circumstances and included
amounts which are necessarily based on our best estimates and judgments made
with due consideration to materiality. Financial information presented elsewhere
in this report is consistent with that in the financial statements.
We have established and are responsible for maintaining a comprehensive
system of internal accounting controls which we believe provides reasonable
assurance that policies and procedures are complied with, assets are safeguarded
and transactions are executed according to management's authorization. We
continually review this system for effectiveness and modify it in response to
changing business conditions and operations and as a result of recommendations
by internal and external auditors.
The Audit Committee of the Board of Directors, consisting solely of
outside Directors, meets periodically with Deloitte & Touche LLP, the internal
auditors and representatives of management to discuss auditing and financial
reporting matters. The Audit Committee reviews audit plans and results and
accounting, financial reporting and internal control practices, procedures and
results. Both Deloitte & Touche LLP and the internal auditors have full and free
access to all levels of management.
46
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
Piedmont Natural Gas Company, Inc.
We have audited the accompanying consolidated balance sheets of
Piedmont Natural Gas Company, Inc. and subsidiaries (the Company) as of October
31, 1999 and 1998, and the related statements of consolidated income, retained
earnings and cash flows for each of the three years in the period ended October
31, 1999. Our audits also included the supplemental consolidated financial
statement schedule listed in Item 14. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at October 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended October 31, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Charlotte, North Carolina
December 17, 1999
47
<PAGE> 50
QUARTERLY FINANCIAL DATA
Quarterly financial data for 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
Earnings
Per Share of
Operating Operating Net Common Stock
Revenues Margin Income Income Basic Diluted
- --------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
1999
January 31 $255,742 $121,556 $47,506 $40,564 $1.32 $1.31
April 30 $239,247 $113,774 $42,201 $34,667 $1.12 $1.11
July 31 $ 96,728 $ 44,425 $ 1,860 $(8,216) $(.26) $(.26)
October 31 $ 94,753 $ 40,753 $ 155 $(8,808) $(.28) $(.28)
1998
January 31 $313,255 $123,093 $46,994 $ 41,249 $1.36 $1.35
April 30 $261,477 $113,981 $42,926 $ 35,463 $1.17 $1.16
July 31 $103,026 $ 45,499 $ 3,083 $ (6,253) $(.20) $(.20)
October 31 $ 87,519 $ 40,282 $(1,846) $(10,146) $(.33) $(.33)
</TABLE>
The pattern of quarterly earnings is the result of the highly seasonal
nature of the business as variations in weather conditions generally result in
greater earnings during the winter months. Basic earnings per share are
calculated using the weighted average number of shares outstanding during the
quarter. The annual amount may differ from the total of the quarterly amounts
due to changes in the number of shares outstanding during the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
48
<PAGE> 51
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required under this item with respect to directors is
contained in our proxy statement filed with the Securities and Exchange
Commission (SEC) on or about January 25, 2000, and is incorporated herein by
reference.
All of our executive officers' names, ages and positions as of October
31, 1999, are listed below along with their business experience during the past
five years.
So far as practicable, all elected officers are elected at the first
meeting of the Board of Directors held following the annual meeting of
shareholders in each year and hold office until the meeting of the Board
following the annual meeting of shareholders in the next subsequent year and
until their respective successors are elected and qualify. All other officers
hold office during the pleasure of the Board. There are no family relationships
among these officers.
There are no arrangements or understandings between any officer and any
other person pursuant to which the officer was selected except for employment
agreements with Messrs. Dzuricky, Killough, Maxheim, Schiefer and Skains which
were in effect during the year ended October 31, 1999. Effective December 1,
1999, new employment and severance agreements were executed with Messrs.
Dzuricky, Killough, Schiefer and Skains.
Business Experience
Name, Age and Position During Past Five Years
- ---------------------- ----------------------
John H. Maxheim, 65 Elected in 1984. Prior to
Chairman of the Board February 1999, he was also
and Chief Executive Officer President.
Ware F. Schiefer, 61 Elected February 1999.
President and Chief Operating From 1995 to his
Officer election, he was Executive
Vice President. Prior to
1995, he was Senior Vice
President - Marketing and
Gas Supply.
49
<PAGE> 52
David J. Dzuricky, 48 Elected in 1995. From
Senior Vice President - Finance 1993 until his election, he
was Vice President and
Treasurer of
Consolidated Natural Gas
Company, Pittsburgh,
Pennsylvania.
Ray B. Killough, 51 Elected in 1993.
Senior Vice President - Operations
Thomas E. Skains, 43 Elected in 1995. Prior to
Senior Vice President - Gas Supply his election, he was
and Services Senior Vice President,
Transportation and Customer
Services, of Transcontinental
Gas Pipe Line Corporation,
Houston, Texas.
John L. Clark, Jr., 56 Elected in 1998. Prior to
Vice President - Tennessee his election, he was
Operations Vice President - Operations
of the Nashville Division.
Ted C. Coble, 56 Elected in 1982.
Vice President and Treasurer, and
Assistant Secretary
Stephen D. Conner, 51 Elected in 1990.
Vice President - Corporate
Communications
Nicholas Emanuel, 50 Elected in 1998. Prior to
Vice President - Engineering his election, he was
Director - Engineering.
Charles W. Fleenor, 49 Elected in 1987.
Vice President - Gas Services
Paul C. Gibson, 60 Elected in 1986.
Vice President - Rates
Barry L. Guy, 55 Elected in 1986.
Vice President and Controller
50
<PAGE> 53
Donald F. Harrow, 44 Elected in 1992.
Vice President - Governmental
Relations
Dale C. Hewitt, 54 Elected in 1993.
Vice President - North Carolina
Operations
Richard A. Linville, 52 Elected in 1997. Prior to
Vice President - Human Resources his election, he was
Vice President - Human
Resources of Harriet and
Henderson Yarns, Inc.,
Henderson, North Carolina.
Kevin M. O'Hara, 41 Elected in 1993.
Vice President - Corporate
Planning
William R. Pritchard, Jr., 56 Elected in 1986.
Vice President - Information
Services
Martin C. Ruegsegger, 49 Elected in 1997. Prior to
Vice President, Corporate Counsel his election, he was
and Secretary Corporate Secretary.
David L. Trusty, 42 Elected in 1997. Prior to
Vice President - Marketing his election, he was
Vice President - Marketing
of the Nashville Division.
Ranelle Q. Warfield, 42 Elected in 1997. Prior to
Vice President - Customer Services her election, she was
Director - Marketing.
William D. Workman III, 59 Elected in 1993.
Vice President - South Carolina
Operations
Item 11. Executive Compensation
Information required under this item is contained in our proxy
statement filed with the SEC on or about January 25, 2000, and is incorporated
herein by reference.
51
<PAGE> 54
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Information with respect to security ownership of certain beneficial
owners is contained in our proxy statement filed with the SEC on or about
January 25, 2000, and is incorporated herein by reference.
(b) Security Ownership of Management
Information with respect to security ownership of directors and
officers is contained in our proxy statement filed with the SEC on or about
January 25, 2000, and is incorporated herein by reference.
(c) Changes in Control
We know of no arrangements or pledges which may result in a change in
control.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain transactions with directors is
contained in our proxy statement filed with the SEC on or about January 25,
2000, and is incorporated herein by reference.
52
<PAGE> 55
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and
its subsidiaries and the related independent auditors' report for the year ended
October 31, 1999, are included in Item 8 of this report as follows:
Page
----
Consolidated Balance Sheets - October 31, 1999 and 1998 24
Statements of Consolidated Income - Years Ended
October 31, 1999, 1998 and 1997 26
Statements of Consolidated Cash Flows - Years Ended
October 31, 1999, 1998 and 1997 27
Statements of Consolidated Retained Earnings - Years
Ended October 31, 1999, 1998 and 1997 28
Notes to Consolidated Financial Statements 29
Management's Responsibility for Financial Reporting 46
Independent Auditors' Report 47
(a) 2. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Page
----
II Valuation and Qualifying Accounts 64
Schedules other than those listed above and certain other
information are omitted for the reason that they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.
(a) 3. EXHIBITS
Where an exhibit is filed by incorporation by reference to a
previously filed registration statement or report, such
registration statement or report is identified in parentheses.
Upon written request of a shareholder, the Company will
provide a copy of the exhibit at a nominal charge.
3.1 Articles of Incorporation of the Company, filed in the
Department of State of the State of North Carolina on December
14, 1993 (Exhibit No. 2, Registration Statement on Form 8-B,
dated March 2, 1994).
53
<PAGE> 56
3.2 By-Laws of the Company as amended (Exhibit No. 2, Registration
Statement on Form 8-B, dated March 2, 1994).
3.3 Articles of Amendment of the Company (Exhibit No. 3, Amendment
to Form 10-Q for the period ended April 30, 1997).
4.1 Note Agreement, dated as of June 15, 1989, between the Company
and The Mutual Life Insurance Company of New York (Exhibit
4.27, Form 10-K for the fiscal year ended October 31, 1989).
4.2 Note Agreement, dated as of July 30, 1991, between the Company
and The Prudential Insurance Company of America (Exhibit 4.29,
Form 10-K for the fiscal year ended October 31, 1991).
4.3 Note Agreement, dated as of September 21, 1992, between the
Company and Provident Life and Accident Insurance Company
(Exhibit 4.30, Form 10-K for the fiscal year ended October 31,
1992).
4.4 Indenture, dated as of April 1, 1993, between the Company and
Citibank, N.A., Trustee (Exhibit 4.1, Registration Statement
No. 33-60108).
4.5 Medium-Term Note, Series A, dated as of July 23, 1993 (Exhibit
4.7, Form 10-K for the fiscal year ended October 31, 1993).
4.6 Medium-Term Note, Series A, dated as of October 6, 1993
(Exhibit 4.8, Form 10-K for the fiscal year ended October 31,
1993).
4.7 Medium-Term Note, Series A, dated as of September 19, 1994
(Exhibit 4.9, Form 10-K for the fiscal year ended October 31,
1994).
4.8 Pricing Supplement of Medium-Term Notes, Series B, dated
October 3, 1995 (Exhibit 4.10, Form 10-K for the fiscal year
ended October 31, 1995).
4.9 Pricing Supplement of Medium-Term Notes, Series B, dated
October 4, 1996 (Exhibit 4.11, Form 10-K for the fiscal year
ended October 31, 1996).
54
<PAGE> 57
4.10 Rights Agreement, dated as of February 27, 1998, between the
Company and Wachovia Bank, N.A., as Rights Agent, including
the Rights Certificate (Exhibit 10.1, Current Report on Form
8-K dated February 27, 1998).
4.11 Form of Master Global Note (executed September 9, 1999,
substantially as filed as Exhibit 4.4, Registration Statement
No. 333-26161).
4.12 Pricing Supplement of Medium-Term Notes, Series C, dated
September 15, 1999 (Rule 424(b)(3) Pricing Supplement to
Registration Statement Nos. 33-59369 and 333-26161).
4.13 Pricing Supplement of Medium-Term Notes, Series C, dated
September 15, 1999 (Rule 424(b)(3) Pricing Supplement to
Registration Statement Nos. 33-59369 and 333-26161).
10.1 Executive Long-Term Incentive Plan (Exhibit 99.1, Registration
Statement No. 333-34435).
10.2 Employment Agreement between the Company and John H. Maxheim,
dated February 26, 1993 (Exhibit 10.4, Form 10-K for the
fiscal year ended October 31, 1993).
10.3 Amendment to Restated Employment Agreement between the Company
and John H. Maxheim, dated August 27, 1999.
10.4 Articles of Organization of Cardinal Pipeline Company, L.L.C.,
dated April 5, 1994 (Exhibit 10.1, Form 10-Q for the quarterly
period ended April 30, 1994).
10.5 Operating Agreement of Cardinal Pipeline Company, L.L.C.,
dated March 23, 1994 (Exhibit 10.2, Form 10-Q for the
quarterly period ended April 30, 1994).
10.6 Construction, Operating and Management Agreement by and
between Public Service Company of North Carolina, Inc. and
Cardinal Pipeline Company, L.L.C., dated March 23, 1994
(Exhibit 10.3, Form 10-Q for the quarterly period ended April
30, 1994).
10.7 Articles of Merger of Cardinal Extension Company, LLC, and
Cardinal Pipeline Company, LLC, dated October 27, 1999.
55
<PAGE> 58
10.8 Service Agreement under Rate Schedule LG-A, dated January 15,
1971, between the Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 67, Registration Statement No. 2-59631).
10.9 Service Agreement (5,900 Mcf per day) (Contract No. 4995),
dated August 1, 1991, between the Company and Transcontinental
Gas Pipe Line Corporation (Exhibit 10.20, Form 10-K for the
fiscal year ended October 31, 1991).
10.10 Service Agreement under Rate Schedule WSS (69,701 Mcf per day)
(Contract No. 26419-001), dated August 1, 1991, between the
Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.10, Form 10-K for the fiscal year ended October
31, 1995).
10.11 Service Agreement FT-Incremental Mainline (6,222 Mcf per day)
(Contract No. 2268), dated August 1, 1991, between the Company
and Transcontinental Gas Pipe Line Corporation (Exhibit 10.16,
Form 10-K for the fiscal year ended October 31, 1992).
10.12 Service Agreement (FT, 205,200 Mcf per day) (Contract No.
3702), dated February 1, 1992, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.20,
Form 10-K for the fiscal year ended October 31, 1992).
10.13 Service Agreement (Contract #800059) (SCT, 1,677 dt/day),
dated June 1, 1993, between the Company and Texas Eastern
Transmission Corporation (Exhibit 10.28, Form 10-K for the
fiscal year ended October 31, 1993).
10.14 Gas Transportation Agreement for Use Under FT-A Rate Schedule
(Contract No. 237) (FTA, 130,000 Dt/day), dated September 1,
1993, between the Company and Tennessee Gas Pipeline Company
(Exhibit 10.30, Form 10-K for the fiscal year ended October
31, 1993).
10.15 Gas Storage Contract for Use Under Rate Schedule FS (Contract
No. 2400) (672,091 Dt total capacity), dated September 1,
1993, between the Company and Tennessee Gas Pipeline Company
(Exhibit 10.31, Form 10-K for the fiscal year ended October
31, 1993).
56
<PAGE> 59
10.16 FTS Service Agreement (23,000 Dt/day), dated November 1, 1993,
between the Company and Columbia Gas Transmission Corporation
(Exhibit 10.24, Form 10-K for the fiscal year ended October
31, 1994).
10.17 Service Agreement under Rate Schedule FSS (2,263,920 dekatherm
storage capacity quantity, 37,000 dekatherm maximum daily
storage deliverability) (Contract No. 38015), dated November
1, 1993, between the Company and Columbia Gas Transmission
Corporation (Exhibit 10.25, Form 10-K for the fiscal year
ended October 31, 1994).
10.18 Service Agreement under Rate Schedule SST (Winter: 10,000
Dt/day; Summer: 5,000 Dt/day) (Contract No. 38052), dated
November 1, 1993, between the Company and Columbia Gas
Transmission Corporation (Exhibit 10.26, Form 10-K for the
fiscal year ended October 31, 1994).
10.19 FSS Service Agreement (10,000 dekatherms per day daily storage
quantity) (Contract No. 38017), dated November 1, 1993,
between the Company and Columbia Gas Transmission Corporation
(Exhibit 10.26, Form 10-K for the fiscal year ended October
31, 1995).
10.20 SST Service Agreement (37,000 dekatherms per day) (Contract
No. 38054), dated November 1, 1993, between the Company and
Columbia Gas Transmission Corporation (Exhibit 10.27, Form
10-K for the fiscal year ended October 31, 1995).
10.21 Service Agreement (20,504 Mcf per day), dated June 6, 1994,
between the Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.29, Form 10-K for the fiscal year
ended October 31, 1995).
10.22 FTS-1 Service Agreement (5,000 dekatherms per day) (Contract
No. 43462), dated September 14, 1994, between the Company and
Columbia Gulf Transmission Company (Exhibit 10.30, Form 10-K
for the fiscal year ended October 31, 1995).
10.23 FTS 1 Service Agreement (23,455 Dt per day)(Contract No.
43461), dated September 14, 1994, between the Company and
Columbia Gulf Transmission Company (Exhibit 10.23, Form 10-K
for the fiscal year ended October 31, 1996).
57
<PAGE> 60
10.24 Letter of Agreement of Amendment No. 1 to Gas Storage Service
Agreement (50,798 Mcf maximum storage withdrawal per day)
(Contract No. 6815), dated July 1, 1995, between the Company
and Tennessee Gas Pipeline Company (Exhibit 10.24, Form 10-K
for the fiscal year ended October 31, 1996).
10.25 Letter of Agreement of Amendment No. 1 to Gas Storage Service
Agreement (6,190 Mcf maximum storage withdrawal per day)
(Contract No. 2400), dated July 1, 1995, between the Company
and Tennessee Gas Pipeline Company (Exhibit 10.25, Form 10-K
for the fiscal year ended October 31, 1996).
10.26 Firm Transportation Agreement (FT/NT), dated September 22,
1995, between the Company and Texas Gas Transmission
Corporation (Exhibit 10.26, Form 10-K for the fiscal year
ended October 31, 1996).
10.27 Service Agreement Applicable to Transportation of Natural Gas
Under Rate Schedule FT (X-74 Assignment) (12,875 Dt per day),
dated October 18, 1995, between the Company and CNG
Transmission Corporation (Exhibit 10.27, Form 10-K for the
fiscal year ended October 31, 1996).
10.28 FT Service Agreement #01632 (24,995 Dt per day, NIPPS), dated
October 18, 1995, between the Company and National Fuel Gas
Supply Corporation (Exhibit 10.28, Form 10-K for the fiscal
year ended October 31, 1996).
10.29 Service Agreement (Southern Expansion, FT 53,000 Mcf per day
peak winter months, 47,700 Mcf per day shoulder winter months)
(Contract No. 0.4189), dated November 1, 1995, between the
Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.29, Form 10-K for the fiscal year ended October
31, 1996).
10.30 Service Agreement (24,140 Mcf per day) (Contract No. 1.1996
NIPPS), dated November 1, 1995, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.30,
Form 10-K for the fiscal year ended October 31, 1996).
10.31 Service Agreement (12,785 Mcf per day) (Contract No. 1.1994,
FT/NT), dated November 1, 1995, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.31,
Form 10-K for the fiscal year ended October 31, 1996).
58
<PAGE> 61
10.32 Rate Schedule GSS Service Agreement, dated May 15, 1996,
between the Company and CNG Transmission Corporation (Exhibit
10.32, Form 10-K for the fiscal year ended October 31, 1996).
10.33 Employment Agreement between the Company and David J.
Dzuricky, dated May 31, 1996 (Exhibit 10.33, Form 10-K for the
fiscal year ended October 31, 1996).
10.34 Employment Agreement between the Company and Ray B. Killough,
dated May 31, 1996 (Exhibit 10.34, Form 10-K for the fiscal
year ended October 31, 1996).
10.35 Employment Agreement between the Company and Ware F. Schiefer,
dated May 31, 1996 (Exhibit 10.35, Form 10-K for the fiscal
year ended October 31, 1996).
10.36 Employment Agreement between the Company and Thomas E. Skains,
dated May 31, 1996 (Exhibit 10.36, Form 10-K for the fiscal
year ended October 31, 1996).
10.37 Employment Agreement between the Company and David J.
Dzuricky, dated December 1, 1999.
10.38 Employment Agreement between the Company and Ray B. Killough,
dated December 1, 1999.
10.39 Employment Agreement between the Company and Ware F. Schiefer,
dated December 1, 1999.
10.40 Employment Agreement between the Company and Thomas E. Skains,
dated December 1, 1999.
10.41 Severance Agreement between the Company and David J. Dzuricky,
dated December 1, 1999.
10.42 Severance Agreement between the Company and Ray B. Killough,
dated December 1, 1999.
10.43 Severance Agreement between the Company and Ware F. Schiefer,
dated December 1, 1999.
10.44 Severance Agreement between the Company and Thomas E. Skains,
dated December 1, 1999.
59
<PAGE> 62
10.45 Service Agreement (SE95/96), dated June 25,1996, between the
Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.37, Form 10-K for the fiscal year ended October
31, 1996).
10.46 FSS Service Agreement (25,000 dekatherms per day) (Contract
No. 49775), dated November 22, 1995, between the Company and
Columbia Gas Transmission Corporation (Exhibit 10.38, Form
10-K for the fiscal year ended October 31, 1997).
10.47 SST Service Agreement (25,000 dekatherms per day peak winter
months, 12,500 dekatherms per day shoulder months) (Contract
No. 49773), dated November 22, 1995, between the Company and
Columbia Gas Transmission Corporation (Exhibit 10.39, Form
10-K for the fiscal year ended October 31, 1997).
10.48 FSS Service Agreement (1,150,166 dekatherms storage capacity
quantity, 19,169 dekatherms maximum daily storage
deliverability) (Contract No. 49777), dated November 22, 1995,
between the Company and Columbia Gas Transmission Corporation
(Exhibit 10.39, Form 10-K for the fiscal year ended October
31, 1998).
10.49 Columbia Gas SST Service Agreement (19,169 dekatherms per day)
dated November 22, 1995, between the Company and Columbia Gas
Transmission Corporation (Exhibit 10.40, Form 10-K for the
fiscal year ended October 31, 1998).
10.50 Transco Sunbelt Service Agreement & Precedent Agreement
(41,400 dekatherms of transportation contract quantity per
day), dated January 24, 1997, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.41,
Form 10-K for the fiscal year ended October 31, 1998).
10.51 CNG Service Agreement (7,000 dekatherms per day), dated May
15, 1996, between the Company and CNG Transmission Corporation
(Exhibit 10.42, Form 10-K for the fiscal year ended October
31, 1998).
10.52 Loan Agreement between SouthStar Energy Services, LLC, Georgia
Natural Gas Company, Piedmont Energy Company and Dynegy Hub
Services Inc., dated June 30, 1999.
60
<PAGE> 63
10.53 Indemnification Agreement between Piedmont Propane Company and
AGL Resources Inc., dated January 15, 1999.
10.54 Form of Director Retirement Benefits Agreement between the
Company and its outside directors, dated September 1, 1999.
10.55 Service Agreement under Rate Schedule GSS (Storage withdrawal
of 68,955 Mcf per day, Storage capacity of 3,858,940 Mcf),
dated July 1, 1996, between the Company and Transcontinental
Gas Pipe Line Corporation.
10.56 Amendment to Service Agreement under Rate Schedule LG-A
(Storage of 72,770 Mcf), dated August 30, 1996, between the
Company and Transcontinental Gas Pipe Line Corporation.
10.57 Service Agreement, dated January 29, 1997, between the Company
and Pine Needle LNG Company, LLC.
10.58 Firm Transportation Agreement (60,000 Mcf per day), dated June
26, 1998, between the Company and Cardinal Extension Company,
LLC.
12 Computation of Ratio of Earnings to Fixed Charges.
23 Independent Auditors' Consent.
27 Financial Data Schedule (for Securities and Exchange
Commission use only).
99 Annual Report on Form 11-K.
(b) Reports on Form 8-K
None.
61
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on January 24, 2000.
PIEDMONT NATURAL GAS COMPANY, INC.
----------------------------------
(Registrant)
By: /s/ John H. Maxheim
---------------------------------
John H. Maxheim
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of January 24, 2000.
Signature Title
--------- -----
/s/ John H. Maxheim Chairman of the Board,
- ---------------------- Chief Executive Officer, and
John H. Maxheim Director
/s/ David J. Dzuricky Senior Vice President - Finance
- ---------------------- (Principal Financial Officer)
David J. Dzuricky
/s/ Barry L. Guy Vice President and Controller
- ---------------------- (Principal Accounting Officer)
Barry L. Guy
62
<PAGE> 65
Signature Title
--------- -----
Director
- -----------------------------
Jerry W. Amos
Director
- -----------------------------
C. M. Butler III
/s/ Sam J. DiGiovanni Director
- -----------------------------
Sam J. DiGiovanni
/s/ John W. Harris Director
- -----------------------------
John W. Harris
/s/ Muriel W. Helms Director
- -----------------------------
Muriel W. Helms
/s/ John F. McNair III Director
- -----------------------------
John F. McNair III
/s/ Ned R. McWherter Director
- -----------------------------
Ned R. McWherter
/s/ Walter S. Montgomery, Jr. Director
- -----------------------------
Walter S. Montgomery, Jr.
/s/ Donald S. Russell, Jr. Director
- -----------------------------
Donald S. Russell, Jr.
/s/ Ware F. Schiefer Director
- -----------------------------
Ware F. Schiefer
/s/ John E. Simkins, Jr. Director
- -----------------------------
John E. Simkins, Jr.
63
<PAGE> 66
Schedule II
Piedmont Natural Gas Company, Inc. And Subsidiaries
Valuation and Qualifying Accounts
For the Years Ended October 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Balance at Additions Balance
Beginning Charged to Deductions at End
Description of Period Costs and Expenses (A) of Period
- --------------------------------------------------------------------------------
(in thousands)
Allowance for doubtful accounts:
1999 $2,314 $ 705 $2,155 $ 864
1998 2,027 2,508 2,221 2,314
1997 1,960 3,922 3,855 2,027
(A) Uncollectible accounts written off, net of recoveries and adjustments.
64
<PAGE> 67
Piedmont Natural Gas Company, Inc.
Form 10-K
For the Fiscal Year Ended October 31, 1999
Exhibits
10.3 Amendment to Restated Employment Agreement between the Company and John
H. Maxheim, dated August 27, 1999.
10.7 Articles of Merger of Cardinal Extension Company, LLC, and Cardinal
Pipeline Company, LLC, dated October 27, 1999.
10.37 Employment Agreement between the Company and David J. Dzuricky, dated
December 1, 1999.
10.38 Employment Agreement between the Company and Ray B. Killough, dated
December 1, 1999.
10.39 Employment Agreement between the Company and Ware F. Schiefer, dated
December 1, 1999.
10.40 Employment Agreement between the Company and Thomas E. Skains, dated
December 1, 1999.
10.41 Severance Agreement between the Company and David J. Dzuricky, dated
December 1, 1999.
10.42 Severance Agreement between the Company and Ray B. Killough, dated
December 1, 1999.
10.43 Severance Agreement between the Company and Ware F. Schiefer, dated
December 1, 1999.
10.44 Severance Agreement between the Company and Thomas E. Skains, dated
December 1, 1999.
10.52 Loan Agreement between SouthStar Energy Services, LLC, Georgia Natural
Gas Company, Piedmont Energy Company and Dynegy Hub Services Inc.,
dated June 30, 1999.
10.53 Indemnification Agreement between Piedmont Propane Company and AGL
Resources Inc., dated January 15, 1999.
10.54 Form of Director Retirement Benefits Agreement between the Company and
its outside directors, dated September 1, 1999.
10.55 Service Agreement under Rate Schedule GSS (Storage withdrawal of 68,955
Mcf per day, Storage capacity of 3,858,940 Mcf), dated July 1, 1996,
between the Company and Transcontinental Gas Pipe Line Corporation.
<PAGE> 68
10.56 Amendment to Service Agreement under Rate Schedule LG-A (Storage of
72,770 Mcf), dated August 30, 1996, between the Company and
Transcontinental Gas Pipe Line Corporation.
10.57 Service Agreement, dated January 29, 1997, between the Company and Pine
Needle LNG Company, LLC.
10.58 Firm Transportation Agreement (60,000 Mcf per day), dated June 26,
1998, between the Company and Cardinal Extension Company, LLC.
12 Computation of Ratio of Earnings to Fixed Charges.
23 Independent Auditors' Consent.
27 Financial Data Schedule (for Securities and Exchange use only).
99 Annual Report on Form 11-K.
<PAGE> 1
Exhibit 10.3
AMENDMENT TO RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT TO THE RESTATED EMPLOYMENT AGREEMENT is entered into
this the 27th day of August, 1999, by and between PIEDMONT NATURAL GAS COMPANY,
INC., a North Carolina corporation (the "Corporation"), and JOHN H. MAXHEIM, a
resident of Mecklenburg County, North Carolina (the "Officer").
WITNESSETH:
WHEREAS, the Corporation and the Officer entered into a Restated
Employment Agreement, dated as of February 26, 1993 (the "Restated Employment
Agreement"); and
WHEREAS, the term of the Restated Employment Agreement has been
extended from time to time pursuant to Section 4 thereof; and
WHEREAS, the Restated Employment Agreement provides that the term of
the Officer's employment by the Corporation shall not extend beyond the date on
which the Officer reaches 65 years of age; and
WHEREAS, the Officer will reach 65 years of age on October 4, 1999; and
WHEREAS, the Board of Directors of the Corporation, with the agreement
of the Officer, has determined that it is in the best interests of the
Corporation to extend the term of the Officer's employment to February 25, 2000
(the date of the next annual meeting of shareholders).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. The first paragraph of Section 4 of the Restated Employment
Agreement is amended to replace the phrase "beyond the date on which the Officer
reaches 65 years of age" with the phrase "beyond February 29, 2000."
2. In all other respects, the Restated Employment Agreement shall
remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first hereinabove written.
CORPORATION:
Piedmont Natural Gas Company, Inc.
ATTEST:
/s/ Martin C. Ruegsegger
- ----------------------------------
Secretary
By: /s/ Ware F. Schiefer
----------------------------------
President
OFFICER:
/s/ John H. Maxheim
-------------------------------------
John H. Maxheim
This Amendment to Restated Employment Agreement has been approved by the Board
of Directors, this 27th day of August, 1999.
/s/ John F. McNair III
-------------------------------------
Chairman of Compensation Committee
<PAGE> 1
Exhibit 10.7
ARTICLES OF MERGER
OF
CARDINAL EXTENSION COMPANY, LLC
AND
CARDINAL PIPELINE COMPANY, LLC
Pursuant to Section 57C-9-04 of the General Statutes of North Carolina,
Cardinal Extension Company, LLC, a North Carolina limited liability company
("Extension"), as the surviving limited liability company of the merger of
Cardinal Pipeline Company, LLC, a North Carolina limited liability company
("Pipeline"), with and into Extension (the "Merger"), hereby submits the
following Articles of Merger.
1. The name of the surviving company is Cardinal Extension Company,
LLC, a North Carolina limited liability company. The name of the merged company
is Cardinal Pipeline Company, LLC, a North Carolina limited liability company.
Upon the effectiveness of these Articles of Merger, the name of Cardinal
Extension Company, LLC shall be changed to "Cardinal Pipeline Company, LLC."
2. Attached as Appendix A is a copy of the Plan of Merger that was duly
authorized and approved by the unanimous consent of the members of Extension and
by the unanimous consent of the members of Pipeline in accordance with N.C.G.S.
Section 57C-9-03.
3. These Articles of Merger will be effective at the following time:
9:00 a.m., Eastern Standard Time, Monday, November 1, 1999.
This the 27th day of October, 1999
CARDINAL EXTENSION COMPANY, LLC
TRANSCARDINAL COMPANY, Member
By: /s/ Frank J. Ferazzi
------------------------
Name: Frank J. Ferazzi
Title: Vice President
PSNC CARDINAL PIPELINE COMPANY, Member
By: /s Franklin H. Yoho
----------------------
Name: Franklin H. Yoho
Title: Vice President
<PAGE> 2
PIEDMONT INTRASTATE PIPELINE COMPANY, Member
By: /s/ Thomas E. Skains
-----------------------
Name: Thomas E. Skains
Title: Vice President
NCNG CARDINAL PIPELINE INVESTMENT CORPORATION
Member
By: /s/ Terrence D. Davis
-------------------------
Name: Terrence D. Davis
Title: Vice President
CARDINAL PIPELINE COMPANY, LLC
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.,
Member
By: /s/ Franklin H. Yoho
-------------------------
Name: Franklin H. Yoho
Title: Vice President
PIEDMONT INTRASTATE PIPELINE COMPANY, Member
By: /s/ Thomas E. Skains
------------------------
Name: Thomas E. Skains
Title: Vice President
<PAGE> 3
APPENDIX A
PLAN OF MERGER
OF
CARDINAL PIPELINE COMPANY, LLC
A NORTH CAROLINA LIMITED LIABILITY COMPANY
INTO
CARDINAL EXTENSION COMPANY, LLC
A NORTH CAROLINA LIMITED LIABILITY COMPANY
I. Limited Liability Companies Participating in the Merger
The name of the limited liability company planning to merge is Cardinal
Pipeline Company, LLC, a North Carolina Limited Liability Company (hereinafter
sometimes referred to as "Pipeline" or the "Merging Company"), and the name of
the surviving limited liability company into which it plans to merge is Cardinal
Extension Company, LLC, a North Carolina limited liability company (hereinafter
sometimes referred to as "Extension" or the "Surviving Company").
II. Effective Time of Merger
The Merger of Pipeline into Extension shall become effective at the
time specified in the Articles of Merger to be filed with the Secretary of State
in accordance with N.C.G.S. Section 57C-9-04 (the "Time of Merger).
III. Name of Surviving Limited Liability Company
At the Time of Merger, the name of the Surviving Company shall be
changed to "Cardinal Pipeline Company, LLC" pursuant to the Articles of Merger
filed with the Secretary of State of North Carolina (the "Articles of Merger").
IV. Terms and Conditions of the Merger
At the Time of Merger,
(a) Pipeline and Extension (together, the "Constituent Companies")
shall become a single entity which shall be the Surviving Company;
(b) The separate existence of Pipeline shall cease;
(c) The Surviving Company shall thereupon and thereafter possess all of
the properties, rights, privileges, immunities, powers, franchises and authority
of a public or of a private nature of the Constituent Companies and shall be
subject to all the restrictions, obligations, liabilities and duties of each of
the Constituent Companies;
<PAGE> 4
(d) All property, real, personal and mixed, and all debts due on
whatever account, including promises to make capital contributions, and all
other choses in action, and all and every other interest of or belonging to or
due to the Constituent Companies shall be vested in the Surviving Company
without further act or deed;
(e) The title of all real estate and interest therein vested in either
of the Constituent Companies shall not revert or in any way be impaired by
reason of the Merger;
(f) The Surviving Company shall be responsible and liable for all
liabilities and obligations of each of the Constituent Companies, and any claim
existing or action or proceeding pending by or against either of the Constituent
Companies may be prosecuted as if the Merger had not taken place, or the
Surviving Company may be substituted in the action;
(g) Neither the rights of creditors nor any liens on the property of
either of the Constituent Companies shall be impaired by the Merger;
(h) The Articles of Organization of Extension in effect at the Time of
Merger shall become the Articles of Organization of the Surviving Company and
shall not be amended in any way in connection with the Merger, except that
Article I of the Articles of Organization shall be amended to change the name of
the Surviving Company to "Cardinal Pipeline Company, LLC."
(i) The Operating Agreement of Extension in effect at the Time of
Merger shall become the Operating Agreement of the Surviving Company, in full
force and effect until amended or repealed as provided by law or by such
Operating Agreement, and shall not be amended in any way in connection with the
Merger except to change the name of the Surviving Company to "Cardinal Pipeline
Company, LLC."
IV. Conversion of Membership Interests
At the Time of Merger, the Membership Interest of each Member of
Pipeline shall be converted into a Membership Interest of the Surviving Company
and all Membership Interests in Pipeline shall cease to exist. Each Member of
Pipeline will receive a Membership Interest (expressed as a percentage) in the
Surviving Company that is equal to the net book value of its capital account in
Pipeline divided by the net book value of all capital accounts in the Surviving
Company (including the net book value of the capital accounts of the former
Pipeline Members). The Membership Interests in the Surviving Company to be
received by Members of Pipeline shall be in addition to any other Membership
Interests which may be held by such Members in Extension immediately prior to
the time of Merger.
<PAGE> 1
Exhibit 10.37
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of December 1, 1999, by and between
PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the
"Corporation"), and, DAVID J. DZURICKY, a resident of Mecklenburg County, North
Carolina (the "Officer").
W I T N E S S E T H:
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 retain the services of a well-qualified Senior Vice President
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 affairs of the Corporation, and his reputation and contacts in the
Corporation's industry are extremely 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 parties desire to enter into this Agreement in order to
clearly set forth the terms and conditions of the Officer's employment
relationship with the Corporation; and
WHEREAS, contemporaneous with 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 hereby employs the Officer and the
Officer hereby accepts such employment, upon the terms and conditions stated
herein, as Senior Vice President of the Corporation. The Officer shall render
such administrative and management services to the Corporation as are
customarily performed by persons 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. 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.
<PAGE> 2
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 at the rate of $210,000 per year. 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 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 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 December 1, 1999; 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, 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. Provided, further, no extension shall cause
this Agreement to extend beyond the date on which the Officer reaches 65 years
of age. Upon any extension, the base salary of the extended agreement shall be
the base salary in effect on the effective date of such extension.
2
<PAGE> 3
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 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 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.
3
<PAGE> 4
(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) as provided below. 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 an
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.
8. Successors and Assigns.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Corporation which
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. 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.
4
<PAGE> 5
10. 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.
11. Severability. The provision 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.
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/ Martin C. Ruegsegger
- ----------------------------
Secretary
By: /s/ John H. Maxheim
-----------------------------------
OFFICER:
/s/ David J. Dzuricky (SEAL)
-----------------------------------
Employment Agreement reviewed and approved by the Board of Directors this 3rd
Day of December, 1999.
BY: /s/ John F. McNair III
-----------------------------------
Chairman of Compensation Committee
5
<PAGE> 1
Exhibit 10.38
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of December 1, 1999, by and between
PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the
"Corporation"), and, RAY B. KILLOUGH, a resident of Mecklenburg County, North
Carolina (the "Officer").
W I T N E S S E T H:
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 retain the services of a well-qualified Senior Vice President
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 affairs of the Corporation, and his reputation and contacts in the
Corporation's industry are extremely 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 parties desire to enter into this Agreement in order to
clearly set forth the terms and conditions of the Officer's employment
relationship with the Corporation; and
WHEREAS, contemporaneous with 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 hereby employs the Officer and the
Officer hereby accepts such employment, upon the terms and conditions stated
herein, as Senior Vice President of the Corporation. The Officer shall render
such administrative and management services to the Corporation as are
customarily performed by persons 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. 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.
<PAGE> 2
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 at the rate of $215,000 per year. 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 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 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 December 1, 1999; 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, 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. Provided, further, no extension shall cause
this Agreement to extend beyond the date on which the Officer reaches 65 years
of age. Upon any extension, the base salary of the extended agreement shall be
the base salary in effect on the effective date of such extension.
2
<PAGE> 3
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 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 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.
3
<PAGE> 4
(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) as provided below. 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 an
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.
8. Successors and Assigns.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Corporation which
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. 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.
4
<PAGE> 5
10. 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.
11. Severability. The provision 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.
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/ Martin C. Ruegsegger
- ----------------------------
Secretary
By: /s/ John H. Maxheim
----------------------------------
OFFICER:
/s/ Ray B. Killough (SEAL)
----------------------------
Employment Agreement reviewed and approved by the Board of Directors this 3rd
Day of December, 1999.
BY: /s/ John F. McNair III
----------------------------------
Chairman of Compensation Committee
5
<PAGE> 1
Exhibit 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of December 1, 1999, by and between
PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the
"Corporation"), and, WARE F. SCHIEFER, a resident of Mecklenburg County, North
Carolina (the "Officer").
W I T N E S S E T H:
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 retain the services of a well-qualified Senior Vice President
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 affairs of the Corporation, and his reputation and contacts in the
Corporation's industry are extremely 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 parties desire to enter into this Agreement in order to
clearly set forth the terms and conditions of the Officer's employment
relationship with the Corporation; and
WHEREAS, contemporaneous with 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 hereby employs the Officer and the
Officer hereby accepts such employment, upon the terms and conditions stated
herein, as President of the Corporation. The Officer shall render such
administrative and management services to the Corporation as are customarily
performed by persons 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. 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.
<PAGE> 2
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 at the rate of $280,000 per year. 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 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 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 two-year period commencing December 1, 1999; 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, 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. Provided, further, no extension shall cause
this Agreement to extend beyond the date on which the Officer reaches 65 years
of age. Upon any extension, the base salary of the extended agreement shall be
the base salary in effect on the effective date of such extension.
2
<PAGE> 3
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 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 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.
3
<PAGE> 4
(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) as provided below. 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 an
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.
8. Successors and Assigns.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Corporation which
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. 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.
4
<PAGE> 5
10. 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.
11. Severability. The provision 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.
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/ Martin C. Ruegsegger
- ------------------------------
Secretary
By: /s/ John H. Maxheim
-----------------------------------
OFFICER:
/s/ Ware F. Schiefer (SEAL)
------------------------------
Employment Agreement reviewed and approved by the Board of Directors this 3rd
Day of December, 1999.
BY: /s/ John F. McNair III
-----------------------------------
Chairman of Compensation Committee
5
<PAGE> 1
Exhibit 10.40
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of December 1, 1999, by and between
PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the
"Corporation"), and, THOMAS E. SKAINS, a resident of Mecklenburg County, North
Carolina (the "Officer").
W I T N E S S E T H:
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 retain the services of a well-qualified Senior Vice President
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 affairs of the Corporation, and his reputation and contacts in the
Corporation's industry are extremely 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 parties desire to enter into this Agreement in order to
clearly set forth the terms and conditions of the Officer's employment
relationship with the Corporation; and
WHEREAS, contemporaneous with 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 hereby employs the Officer and the
Officer hereby accepts such employment, upon the terms and conditions stated
herein, as Senior Vice President of the Corporation. The Officer shall render
such administrative and management services to the Corporation as are
customarily performed by persons 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. 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.
<PAGE> 2
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 at the rate of $217,000 per year. 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 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 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 December 1, 1999; 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, 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. Provided, further, no extension shall cause
this Agreement to extend beyond the date on which the Officer reaches 65 years
of age. Upon any extension, the base salary of the extended agreement shall be
the base salary in effect on the effective date of such extension.
2
<PAGE> 3
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 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 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.
3
<PAGE> 4
(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) as provided below. 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 an
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.
8. Successors and Assigns.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Corporation which
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. 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.
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10. 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.
11. Severability. The provision 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.
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/ Martin C. Ruegsegger
- ----------------------------
Secretary
By: /s/ John H. Maxheim
-----------------------------------
OFFICER:
/s/ Thomas E. Skains (SEAL)
------------------------------
Employment Agreement reviewed and approved by the Board of Directors this 3rd
Day of December, 1999.
BY: /s/ John F. McNair III
-----------------------------------
Chairman of Compensation Committee
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Exhibit 10.41
SEVERANCE AGREEMENT
THIS AGREEMENT, dated December 1, 1999, is made by and between PIEDMONT
NATURAL GAS COMPANY, INC., a North Carolina corporation (the "Company"), and
DAVID J. DZURICKY (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; and
WHEREAS, contemporaneous with this Agreement, the Company and the
Executive have entered into an Employment Agreement.
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, 2001; provided,
however, that commencing on January 1, 2002 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, 1999, the Term of this Agreement
would expire on June 30, 2002, and if a Change in Control were to occur on July
1, 2002, the Term of this Agreement would expire on June 30, 2005 (regardless of
whether on or before September 30, 2001 either party had given notice to the
other party not to extend the Term as provided above).
<PAGE> 2
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.
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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 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, 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 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
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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
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
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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 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, 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).
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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 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 which 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's employment is
terminated 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's employment is terminated 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).
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.
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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. 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
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.
9. Successors; Binding Agreement.
9.1 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.
9.2 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.
10. 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
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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: Corporate Secretary
11. 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 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;
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.
12. 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.
13. 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.
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14. Settlement of Disputes; Arbitration.
14.1 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.
14.2 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 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.
15. 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
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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
(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
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<PAGE> 11
(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 15(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.
(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) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "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
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<PAGE> 12
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;
(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
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<PAGE> 13
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.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "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.
(Q) "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
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<PAGE> 14
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(R) "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.
(S) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(U) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(V) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
(W) "W-2 Compensation" shall mean all amounts received for
services actually rendered in the course of employment with the Company to the
extent that such amounts are includible in gross income as wages for federal
income tax purposes plus all amounts that are contributed by the Company
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Executive under Code Sections 125 or 401(k) and minus all
amounts includible in the gross income of the Executive for annual base salary,
expense reimbursements or allowances, moving expenses, club initiation fees or
special assessments, deferred compensation and welfare benefits, or gross-ups
for taxes.
PIEDMONT NATURAL GAS COMPANY
By: /s/ John H. Maxheim
------------------------------------------
Name: John H. Maxheim
Title: Chairman and Chief Executive Officer
DAVID J. DZURICKY
/s/ David J. Dzuricky
----------------------------------------------
Address: 3900 Ayrshire Place
Charlotte, NC 28210
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<PAGE> 1
Exhibit 10.42
SEVERANCE AGREEMENT
THIS AGREEMENT, dated December 1, 1999, is made by and between PIEDMONT
NATURAL GAS COMPANY, INC., a North Carolina corporation (the "Company"), and RAY
B. KILLOUGH (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; and
WHEREAS, contemporaneous with this Agreement, the Company and the
Executive have entered into an Employment Agreement.
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, 2001; provided,
however, that commencing on January 1, 2002 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, 1999, the Term of this Agreement
would expire on June 30, 2002, and if a Change in Control were to occur on July
1, 2002, the Term of this Agreement would expire on June 30, 2005 (regardless of
whether on or before September 30, 2001 either party had given notice to the
other party not to extend the Term as provided above).
<PAGE> 2
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.
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<PAGE> 3
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 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, 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 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.
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<PAGE> 4
(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 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
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<PAGE> 5
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 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, 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
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<PAGE> 6
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 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 which 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's employment is
terminated 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's employment is terminated 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).
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.
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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. 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
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.
9. Successors; Binding Agreement.
9.1 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.
9.2 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.
10. 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
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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: Corporate Secretary
11. 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 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;
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.
12. 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.
13. 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.
14. Settlement of Disputes; Arbitration.
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<PAGE> 9
14.1 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.
14.2 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 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.
15. 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
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<PAGE> 10
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
(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
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<PAGE> 11
(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 15(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.
(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) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "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:
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(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;
(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
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<PAGE> 13
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.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "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.
(Q) "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
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<PAGE> 14
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.
(R) "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.
(S) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(U) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(V) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
(W) "W-2 Compensation" shall mean all amounts received for
services actually rendered in the course of employment with the Company to the
extent that such amounts are includible in gross income as wages for federal
income tax purposes plus all amounts that are contributed by the Company
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Executive under Code Sections 125 or 401(k) and minus all
amounts includible in the gross income of the Executive for annual base salary,
expense reimbursements or allowances, moving expenses, club initiation fees or
special assessments, deferred compensation and welfare benefits, or gross-ups
for taxes.
PIEDMONT NATURAL GAS COMPANY
By: /s/ John H. Maxheim
-----------------------------------------
Name: John H. Maxheim
Title: Chairman and Chief Executive Officer
RAY B. KILLOUGH
/s/ Ray B. Killough
---------------------------------------------
Address: 5025 Old Monroe Road
Matthews, NC 28105
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<PAGE> 1
Exhibit 10.43
SEVERANCE AGREEMENT
THIS AGREEMENT, dated December 1, 1999, is made by and between PIEDMONT
NATURAL GAS COMPANY, INC., a North Carolina corporation (the "Company"), and
WARE F. SCHIEFER (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; and
WHEREAS, contemporaneous with this Agreement, the Company and the
Executive have entered into an Employment Agreement.
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, 2001; provided,
however, that commencing on January 1, 2002 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, 1999, the Term of this Agreement
would expire on June 30, 2002, and if a Change in Control were to occur on July
1, 2002, the Term of this Agreement would expire on June 30, 2005 (regardless of
whether on or before September 30, 2001 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
<PAGE> 2
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
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<PAGE> 3
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 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, 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 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,
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<PAGE> 4
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 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
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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 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, 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).
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<PAGE> 6
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 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 which 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's employment is
terminated 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's employment is terminated 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).
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
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<PAGE> 7
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. 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
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.
9. Successors; Binding Agreement.
9.1 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.
9.2 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.
10. 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
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<PAGE> 8
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: Corporate Secretary
11. 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 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;
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.
12. 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.
13. 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.
14. Settlement of Disputes; Arbitration.
14.1 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
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<PAGE> 9
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.
14.2 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 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.
15. 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
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<PAGE> 10
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
(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
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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 15(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.
(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) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "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
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<PAGE> 12
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;
(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
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(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.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "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.
(Q) "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
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<PAGE> 14
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(R) "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.
(S) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(U) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(V) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
(W) "W-2 Compensation" shall mean all amounts received for
services actually rendered in the course of employment with the Company to the
extent that such amounts are includible in gross income as wages for federal
income tax purposes plus all amounts that are contributed by the Company
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Executive under Code Sections 125 or 401(k) and minus all
amounts includible in the gross income of the Executive for annual base salary,
expense reimbursements or allowances, moving expenses, club initiation fees or
special assessments, deferred compensation and welfare benefits, or gross-ups
for taxes.
PIEDMONT NATURAL GAS COMPANY
By: /s/ John H. Maxheim
---------------------------------------
Name: John H. Maxheim
Title: Chairman and Chief Executive Officer
WARE F. SCHIEFER
/s/ Ware F. Schiefer
-------------------------------------------
Address: 2522 Windsor Crescent Court
Charlotte, NC 28226
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<PAGE> 1
Exhibit 10.44
SEVERANCE AGREEMENT
THIS AGREEMENT, dated December 1, 1999, 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; and
WHEREAS, contemporaneous with this Agreement, the Company and the
Executive have entered into an Employment Agreement.
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, 2001; provided,
however, that commencing on January 1, 2002 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, 1999, the Term of this Agreement
would expire on June 30, 2002, and if a Change in Control were to occur on July
1, 2002, the Term of this Agreement would expire on June 30, 2005 (regardless of
whether on or before September 30, 2001 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
<PAGE> 2
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
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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 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, 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 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,
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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 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
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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 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, 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).
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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 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 which 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's employment is
terminated 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's employment is terminated 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).
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
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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. 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
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.
9. Successors; Binding Agreement.
9.1 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.
9.2 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.
10. 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
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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: Corporate Secretary
11. 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 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;
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.
12. 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.
13. 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.
14. Settlement of Disputes; Arbitration.
14.1 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
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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.
14.2 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 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.
15. 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
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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
(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
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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 15(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.
(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) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "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
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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;
(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
12
<PAGE> 13
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.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "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.
(Q) "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
13
<PAGE> 14
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(R) "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.
(S) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(U) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(V) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
(W) "W-2 Compensation" shall mean all amounts received for
services actually rendered in the course of employment with the Company to the
extent that such amounts are includible in gross income as wages for federal
income tax purposes plus all amounts that are contributed by the Company
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Executive under Code Sections 125 or 401(k) and minus all
amounts includible in the gross income of the Executive for annual base salary,
expense reimbursements or allowances, moving expenses, club initiation fees or
special assessments, deferred compensation and welfare benefits, or gross-ups
for taxes.
PIEDMONT NATURAL GAS COMPANY
By: /s/ John H. Maxheim
---------------------------------------
Name: John H. Maxheim
Title: Chairman and Chief Executive Officer
THOMAS E. SKAINS
/s/ Thomas E. Skains
-------------------------------------------
Address: 8222 Greencastle Drive
Charlotte, NC 28210
14
<PAGE> 1
EXHIBIT 10.52
LOAN AGREEMENT
This Loan Agreement (hereinafter called "Agreement") is effective June 30, 1999
and is between SouthStar Energy Services, LLC (hereinafter called "SouthStar"),
Georgia Natural Gas Company (hereinafter called "GNG"), Piedmont Energy Company
(hereinafter called "Piedmont") and Dynegy Hub Services Inc. (hereinafter called
"Dynegy").
WHEREAS, SouthStar, a joint venture of GNG, Piedmont and Dynegy, was formed for
the purpose of selling, on a non-regulated basis, energy commodities to retail
customers; and
WHEREAS, SouthStar wishes to establish lines of credit in the maximum aggregate
available principal amount of $75,000,000.00 which lines of credit contemplate
borrowing directly from GNG and Piedmont and Dynegy; and
WHEREAS, GNG, Piedmont and Dynegy wish to facilitate such credit arrangements on
the terms and conditions set forth herein.
NOW, THEREFORE FOR AND IN CONSIDERATION of the premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
<PAGE> 2
1. GNG agrees to loan to SouthStar, from time to time upon the terms and
conditions set forth herein, up to Thirty-Seven Million Five Hundred
Thousand and no/100 Dollars (US$37,500,000.00). Piedmont agrees to loan
to SouthStar, from time to time upon the terms and conditions set forth
herein, up to Twenty-Two Million Five Hundred Thousand and no/100
Dollars (US$22,500,000.00). Dynegy agrees to loan to SouthStar, from
time to time upon the terms and conditions set forth herein, up to
Fifteen Million and no/100 Dollars (US$15,000,000.00).
Whenever SouthStar shall desire to borrow funds pursuant to this
Agreement (each such borrowing being hereinafter referred to as a
"Loan" and all such borrowings requested or outstanding at any given
time being hereinafter referred to as "Loans"), SouthStar shall borrow
50% of the requested Loan amount from GNG, 30% of the requested Loan
amount from Piedmont and 20% of the requested Loan amount from Dynegy.
Neither GNG, Piedmont nor Dynegy shall have any obligation to SouthStar
whatsoever to make any Loan pursuant to this Agreement if at the time
of the proposed funding thereof the aggregate principal amount of all
Loans then outstanding exceeds, or upon the funding of such proposed
Loan would exceed, $75,000,000.00. Similarly, (i) GNG shall have no
obligation to SouthStar whatsoever to make any Loan pursuant to this
Agreement if at the time of the proposed funding thereof the aggregate
principal amount of all Loans then outstanding from GNG to SouthStar
exceeds, or upon the funding of such proposed Loan would exceed,
Thirty-Seven Million Five Hundred Thousand and no/100 Dollars
(US$37,500,000.00), (ii) Piedmont, shall have no obligation to
SouthStar
<PAGE> 3
whatsoever to make any Loan pursuant to this Agreement if at the time
of the proposed funding thereof the aggregate principal amount of all
Loans then outstanding exceeds, or upon the funding of such proposed
Loan would exceed, Twenty-Two Million Five Hundred Thousand and no/100
Dollars (US$22,500,000.00), and (iii) Dynegy, shall have no obligation
to SouthStar whatsoever to make any Loan pursuant to this Agreement if
at the time of the proposed funding thereof the aggregate principal
amount of all Loans then outstanding exceeds, or upon the funding of
such proposed Loan would exceed, Fifteen Million and no/100 Dollars
(US$15,000,000.00). In the event that any one of the parties, GNG,
Piedmont or Dynegy, shall fail to fund all or part of their respective
portions of a SouthStar requested Loan pursuant to a Loan request made
by SouthStar under this Agreement, neither of the other parties shall
have any obligation to make a loan pursuant to that SouthStar request.
Any person listed in Appendix A is authorized to consummate Loans from
GNG, Piedmont and Dynegy under this Agreement on behalf of SouthStar.
Each of GNG, Piedmont and Dynegy shall designate in writing one contact
person for all matters concerning Loans to SouthStar which designee may
be changed by GNG, Piedmont or Dynegy, respectively, upon written
notice to all parties to this Agreement.
2. The Loans shall be made by GNG, Piedmont and Dynegy under this
Agreement from time to time upon telephonic request from any person
listed in Appendix A. At the time of each Loan, SouthStar will confirm
the details of such Loan by transmitting a written notice to GNG,
Piedmont and Dynegy, substantially in the form of Appendix B, detailing
<PAGE> 4
the borrowing including: (i) the date of the notice; (ii) the requested
date of the Loan; (iii) the aggregate principal amount of the Loan
requested; (iv) the bank account to which Loan funds are to be
disbursed; and (v) that the Loan is being requested pursuant to this
Agreement. Further, such notice shall contain an affirmative
representation and warranty that each of GNG, Piedmont and Dynegy are
participating in the Loan pro rata based upon the following
percentages: 50% for GNG; 30% for Piedmont; and 20% for Dynegy.
3. Any and all payments (whether consisting of principal or interest) on
an outstanding Loan shall be made by SouthStar to GNG, Piedmont and
Dynegy pro rata based on the percentage of the Loan amount lent by
each. In other words, assuming all Loans outstanding at the time of the
payment were made by the Parties in percentages required in Paragraph 2
above, GNG, Piedmont and Dynegy shall each receive the following
percentage of any principal payment or interest payment by SouthStar:
50% for GNG; 30% for Piedmont; and 20% for Dynegy. All payments by
SouthStar to GNG, Piedmont and Dynegy shall be applied first to accrued
interest, then to principal. All payments shall be applied to Loans in
the order in which each Loan was made, such that payments are applied
first to repayment of interest and principal on the Loan that has been
outstanding for the longest period of time. The principal balance of
Loans outstanding to GNG, Piedmont and Dynegy may be prepaid, in whole
or in part, at any time without penalty (provided that prepayments are
applied in the order described in the immediately preceding sentence).
Principal amounts repaid to GNG, Piedmont and Dynegy may be re-borrowed
by SouthStar, provided that the aggregate outstanding principal balance
of all Loans does not at any time exceed Seventy-Five Million and
no/100 Dollars
<PAGE> 5
(US$75,000,000.00) and provided further that all other terms and
conditions of this Agreement are complied with.
4. Interest will accrue on the outstanding principal balance of each Loan
made by GNG, Piedmont, and Dynegy at an annual fixed rate equal to
LIBOR (hereinafter defined), plus eighty-five basis points. Interest
shall be calculated based upon the actual number of days the principal
amount in question has been outstanding and based upon a year
consisting of 360 days.
Payments of interest on the outstanding principal balance of Loans
shall be due and payable, in arrears, quarterly on September 30, 1999,
December 31, 1999, March 31, 2000, and June 27, 2000. If the due date
for an interest payment is not a business day, then such payment shall
be due on the next succeeding business day.
Notwithstanding anything herein to the contrary, any Loan payments
(whether principal or interest) not made as and when due shall bear
interest from the date due until paid at a floating rate equal to the
Prime Rate (hereinafter defined) plus 200 basis points. Such interest
shall be calculated on the basis of a 360 day year for the actual
number of days elapsed.
For purposes of this Agreement, LIBOR shall mean the London Interbank
Offered Rate for the Applicable Period (hereinafter defined) as
published in the "Money Rates" column of the Eastern Edition of the
Wall Street Journal on the effective date of the Loan
<PAGE> 6
in question, or if the Wall Street Journal is not published on such
date, then as published in the Wall Street Journal on the next
preceding business day.
For purposes of this Agreement, "Applicable Period" shall mean: (i) one
year for Loans with an effective date on or after June 30, 1999, but
before December 28, 1999; (ii) six months for Loans with an effective
date on or after December 28, 1999, but before March 28, 2000; (iii)
three months for Loans with an effective date on or after March 28,
2000, but before May 28, 2000; and (iv) one month for Loans with an
effective date on or after May 28, 2000.
For purposes of the Agreement, "Prime Rate" shall mean the "Prime Rate"
as published in the "Money Rates" column of the Eastern Edition of the
Wall Street Journal on the date in question, or if the Wall Street
Journal is not published on such date, then as published in the Wall
Street Journal on the next preceding business day. Changes in the Prime
Rate shall become effective on the date on which they are published in
the Wall Street Journal.
5. The amount borrowed by SouthStar under each Loan shall be deposited in
an account specified by SouthStar in the confirmation notice specified
in Section 2 hereof. Notwithstanding anything to the contrary contained
in this Agreement or in any confirmation notice from SouthStar to GNG,
Piedmont or Dynegy, all Loans (principal and interest) from GNG,
Piedmont and Dynegy to SouthStar shall mature and shall be due and
payable in full on June 27, 2000. Simultaneously with its execution of
this
<PAGE> 7
Agreement, SouthStar shall execute Master Notes in favor of GNG,
Piedmont and Dynegy in the forms set forth in Exhibit A, Exhibit B and
Exhibit C, respectively.
6. From the date of this Agreement until the later of (i) June 27, 2000,
or (ii) the date on which all outstanding Loans have been paid in full,
the Company covenants and agrees that it will not, without the prior
written consent of each Lender, (a) pledge, sell, assign, or discount
any of its accounts receivable, other than the discount of such
accounts in the ordinary course of business for collection, or (b)
pledge, sell or assign any gas storage inventory.
7. This Agreement shall be governed by and construed under the laws of the
State of Georgia.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their duly authorized officers or other duly authorized representatives as of
the day and year first written above.
SOUTHSTAR ENERGY SERVICES, LLC
By: /s/ Stephen J. Gunther
---------------------------
Title: President
---------------------------
<PAGE> 8
GEORGIA NATURAL GAS COMPANY
By: /s/ Stephen J. Gunther
-----------------------------
Title: President
-----------------------------
PIEDMONT ENERGY COMPANY
By: /s/ David J. Dzuricky
-----------------------------
Title: Vice President
-----------------------------
DYNEGY HUB SERVICES, INC.
By: /s/ Mathew K. Schatzman
-----------------------------
Title: Executive Vice President
-----------------------------
<PAGE> 9
APPENDIX A
AUTHORIZED EMPLOYEES
The following SouthStar employees are authorized under the Agreement to request
Loans from GNG, Piedmont and Dynegy on behalf of SouthStar:
Stephen Gunther
Mark Chesla
Peter Welch
<PAGE> 10
APPENDIX B
LOAN CONFIRMATION NOTICE
Pursuant to Section 2 of that certain Loan Agreement (the "Agreement") dated as
of June 30, 1999, by and among SouthStar Energy Services, LLC ("SouthStar"),
Georgia Natural Gas Company ("GNG"), Piedmont Energy Company ("Piedmont") and
Dynegy Hub Services, Inc. ("Dynegy"), the undersigned, on behalf of SouthStar,
hereby confirms to GNG, Piedmont and Dynegy the following:
1) The date of this Loan Confirmation Notice is _______________;
2) SouthStar has requested a Loan under the Agreement in the aggregate principal
amount of $_______________ (the "Requested Loan");
3) SouthStar has requested that the Requested Loan be funded on ____________'
4) The Requested Loan is to be funded by GNG, Piedmont and Dynegy as follows:
GNG: $_______________
Piedmont: $_______________
Dynegy: $_______________
Total Amount of Requested Loan: $_______________
5) The undersigned hereby represents and warrants on behalf of SouthStar that
GNG, Piedmont and Dynegy are participating in the funding of the Requested Loan
as follows:
GNG: 50%
Piedmont: 30%
Dynegy: 20%
6) SouthStar hereby requests that GNG, Piedmont and Dynegy fund their respective
portions of the Requested Loan by wire transferring the applicable amount to the
following SouthStar account:
Financial Institution: NationsBank (Bank of America)
-----------------------------
ABA#:
----------------------------
Account Number:
-------------------------
By:
------------------------
Title:
------------------------
<PAGE> 11
APPENDIX B
(CONTINUED)
SouthStar Energy Services LLC
Requested Loan Journal
Aggregate Amount of Requested Loan Advanced by:
Requested Loan Principal Amount ------------------------------------
Funding Date of Requested Loan GNG Piedmont Dynegy
- -------------- ----------------- --- -------- ------
Total
----------------- ------- -------- ------
<PAGE> 12
EXHIBIT A
(GNG)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services, LLC (the "Company"), hereby
promises to pay to the order of Georgia Natural Gas Company (the "Lender") at
its office located at __________________________________________________________
_______________________________________________________________________ or such
other place as Lender may designate, the principal sum of Thirty Seven Million
Five Hundred Thousand and no/100 Dollars ($37,500,000.00) or the aggregate
unpaid sum of all advances which the Lender actually makes hereunder to the
Company, whichever amount is less, together with interest at a rate computed as
set forth in that certain Loan Agreement of even date herewith by and among
Company, Lender, Piedmont Energy Company and Dynegy Hub Services, Inc. (the
"Loan Agreement"). The amount of advances hereunder, the interest rate
applicable to each such advance, and the maturity date for the payment of the
principal amount of and interest on each such advance shall be determined in
accordance with the Loan Agreement. The Company hereby agrees to pay all costs
of collection hereof, including, without limitation, reasonable attorneys' fees
actually incurred in the event amounts evidenced by this Master Note are
collected by or through an attorney-at-law. Failure or forbearance of Lender to
exercise any right hereunder or otherwise granted to it by law or another
agreement shall not constitute a waiver of such rights unless so stated by
Lender in writing. Time is of the essence in payment and performance of this
Master Note.
SOUTHSTAR ENERGY SERVICES, LLC
By: ________________________________
Title: ________________________________
<PAGE> 13
EXHIBIT B
(Piedmont)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services Inc. (the "Company"), hereby
promises to pay to the order of Piedmont Energy Company (the "Lender") at its
office located at ______________________________________________________________
______________________________ or such other place as Lender may designate, the
principal sum of Twenty Two Million Five Hundred Thousand and no/100 Dollars
($22,500,000.00) or the aggregate unpaid sum of all advances which the Lender
actually makes hereunder to the Company, whichever amount is less, together with
interest at a rate computed as set forth in that certain Loan Agreement of even
date herewith by and among Company, Lender, Georgia Natural Gas Company and
Dynegy Hub Services, Inc. (the "Loan Agreement"). The amount of advances
hereunder, the interest rate applicable to each such advance, and the maturity
date for the payment of the principal amount of and interest on each such
advance shall be determined in accordance with the Loan Agreement. The Company
hereby agrees to pay all costs of collection hereof, including, without
limitation, reasonable attorneys' fees actually incurred in the event amounts
evidenced by this Master Note are collected by or through an attorney-at-law.
Failure or forbearance of Lender to exercise any right hereunder or otherwise
granted to it by law or another agreement shall not constitute a waiver of such
rights unless so stated by Lender in writing. Time is of the essence in payment
and performance of this Master Note.
SOUTHSTAR ENERGY SERVICES, LLC
By: ________________________________
Title: ________________________________
<PAGE> 14
EXHIBIT C
(Dynegy)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services, LLC (the "Company"), hereby
promises to pay to the order of Dynegy Hub Services, Inc. (the "Lender") at its
office located at ______________________________________________________________
______________________________ or such other place as Lender may designate, the
principal sum of Fifteen Million and no/100 Dollars ($15,000,000.00) or the
aggregate unpaid sum of all advances which the Lender actually makes hereunder
to the Company, whichever amount is less, together with interest at a rate
computed as set forth in that certain Loan Agreement of even date herewith by
and among Company, Lender, Piedmont Energy Company and Georgia Natural Gas
Company (the "Loan Agreement"). The amount of advances hereunder, the interest
rate applicable to each such advance, and the maturity date for the payment of
the principal amount of and interest on each such advance shall be determined in
accordance with the Loan Agreement. The Company hereby agrees to pay all costs
of collection hereof, including, without limitation, reasonable attorneys' fees
actually incurred in the event amounts evidenced by this Master Note are
collected by or through an attorney-at-law. Failure or forbearance of Lender to
exercise any right hereunder or otherwise granted to it by law or another
agreement shall not constitute a waiver of such rights unless so stated by
Lender in writing. Time is of the essence in payment and performance of this
Master Note.
SOUTHSTAR ENERGY SERVICES, LLC
By: ________________________________
Title: ________________________________
<PAGE> 1
EXHIBIT 10.53
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into on this 15th
day of January 1999 by Piedmont Propane Company ("Indemnifying Party") in favor
of AGL Resources Inc. ("AGLR"). AGLR's affiliate, Atlanta Gas Light Services,
Inc., and the Indemnifying Party's affiliate, Piedmont Energy Company (the
"Affiliate"), are parties to that certain Limited Liability Company Agreement of
SouthStar Energy Services LLC dated July 1, 1998 ("LLC Agreement") as members of
SouthStar Energy Services LLC ("SouthStar"). Pursuant to that certain Guaranty
Agreement (the "Guaranty"), effective November 1, 1998, between AGLR and Atlanta
Gas Light Company, AGLR has agreed to guaranty SouthStar's obligations to
Atlanta Gas Light Company. AGLR's agreement with SouthStar to provide the
Guaranty to Atlanta Gas Light Company was subject to the condition that certain
affiliates of each member of SouthStar would indemnify AGLR against any losses
AGLR incurs as a result of AGLR providing financial support for SouthStar under
the Guaranty in accordance with the applicable SouthStar member's Allocable
Share of Net Profits and Losses, as set forth in the LLC Agreement. This
Indemnification Agreement sets forth the terms and conditions of that
indemnification.
In consideration of the benefit the Indemnifying Party and its
affiliates derive from AGLR providing financial support to SouthStar pursuant to
the Guaranty and the benefit to AGLR of the Indemnifying Party indemnifying
AGLR, the parties agree as follows:
1. The Indemnifying Party shall indemnify, defend and hold AGLR harmless
against any losses, costs, fees, liabilities or other expenses AGLR
incurs as a result of AGLR's providing financial support for SouthStar
under the Guaranty ("Indemnified Expenses"). The Indemnifying Party shall
be liable for indemnifying AGLR hereunder for an amount equal to the
product of the Affiliate's Allocable Share (as set forth in the LLC
Agreement or any successor agreement) and the Indemnified Expenses.
Notwithstanding any statement herein to the contrary, the Indemnifying
Party shall not be liable to AGLR to the extent that the Indemnified
Expenses resulted from AGLR's gross negligence or willful misconduct.
2. AGLR shall invoice the Indemnifying Party (at the address set forth in
numbered paragraph 9 below) no later than ten days prior to the end of
each calendar month for the Indemnifying Party's share of the Indemnified
Expenses due from the previous calendar month or any portion thereof. The
Indemnifying Party shall pay AGLR the amount of such invoice (via wire
transfer to the account specified on the invoice) no later than the last
day of
<PAGE> 2
the calendar month during which AGLR sent the Indemnifying Party an
invoice.
If the Indemnifying Party fails to pay all of the amount of any invoice
when that amount becomes due, the Indemnifying Party shall pay AGLR a
late charge on the unpaid balance that shall accrue daily on each
calendar day from the due date at an annual rate equal to two percentage
points above the then-effective monthly prime commercial lending rate per
annum announced by NationsBank, N.A. from time to time multiplied by the
unpaid balance; provided, that for any period that such rate exceeds any
applicable maximum rate permitted by law, the rate shall equal the
applicable maximum rate.
3. This Indemnification Agreement shall inure to the benefit of each party,
its successors, assigns and creditors, and can be modified only by a
written instrument signed by the Indemnifying Party and AGLR. No
Indemnifying Party shall have the right to assign this Indemnification
Agreement or its obligations hereunder to any person or entity without
the prior written consent of AGLR, which shall not be unreasonably
withheld.
4. This Indemnification Agreement shall be governed by, and construed in
accordance with the internal laws (but not the laws concerning conflicts
of laws) of the state of Georgia.
5. The Indemnifying Party represents and warrants to AGLR that it is
authorized to indemnify AGLR under the terms of this Indemnification
Agreement, that it has all of the rights and powers necessary to do so,
and that the individual signing below is authorized to bind the
Indemnifying Party to its obligations under this Indemnification
Agreement.
6. The Indemnifying Party hereby agrees to provide AGLR with copies of
Indemnifying Party's annual financial statements (consisting of at least
a balance sheet and statements of income and cash flows) within 90 days
following the end of the fiscal year to which such financial statements
relate. If such financial statements have been reviewed or audited, the
statements provided pursuant to the immediately preceding sentence shall
be the reviewed or audited statements, as the case may be.
7. The Indemnifying Party hereby agrees to notify AGLR within 45 days
following the close of each of the first three quarters of each of
Indemnifying Party's fiscal years if at the end of such quarter,
Indemnifying Party's stockholders' equity, determined in accordance with
generally accepted accounting principles consistently applied, shall be
less than $30 million.
8. On the date of each delivery of financial statements pursuant numbered
paragraph 6 above, Indemnifying Party represents and warrants to AGLR
that the balance sheet delivered by Indemnifying Party on such date
reflects
<PAGE> 3
all obligations, contingent or otherwise, which in accordance with
generally accepted accounting principles should be classified upon
Indemnifying Party's balance sheet as liabilities or disclosed in
footnotes thereto.
9. Notices hereunder must be given in writing (which may be a facsimile
transmission) to be effective and shall be effective upon receipt by AGLR
or the Indemnifying Party at the address set forth below or at such other
address as AGLR or the Indemnifying Party may notify the other:
If to AGLR:
AGL Resources Inc.
P. O. Box 4569
Atlanta, Georgia 30302-4569
Attention: Chief Financial Officer
Facsimile No.: (404) 584-3419
If to Indemnifying Party:
Piedmont Propane Company
1915 Rexford Road
Charlotte, NC 28211
Attention: Treasurer
Facsimile No.: (704)365-8515
10. THE INDEMNIFYING PARTY HEREBY INTENTIONALLY AND VOLUNTARILY WAIVES ANY
DEFENSE TO PAYMENT UNDER THIS INDEMNIFICATION AGREEMENT THAT IS BASED
UPON OR ARISES OUT OF AGLR'S DIRECT OR INDIRECT OWNERSHIP OF AN EQUITY
INTEREST IN SOUTHSTAR AND/OR ATLANTA GAS LIGHT COMPANY.
AGREED TO AND ENTERED INTO the date first written above by:
AGL Resources Inc. Piedmont Propane Company
By: /s/ Paul R. Shlanta By: /s/ David J. Dzuricky
------------------------------ --------------------------------
Title: Senior Vice President Title: Vice President
------------------------- ----------------------------
<PAGE> 1
Exhibit 10.54
DIRECTOR RETIREMENT BENEFITS AGREEMENT
This DIRECTOR RETIREMENT BENEFITS AGREEMENT, made and effective this
the 1st day of September, 1999, by and between Piedmont Natural Gas Company,
Inc. (the "Company"), and ____________ (the "Director").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") by
resolutions adopted at a meeting of the Board on April 26, 1994 (a) approved a
directors' retirement benefit plan (the "Plan") providing for the payment of
retirement benefits to non-employee directors under certain conditions and (b)
authorized the Company to enter into a contract with each non-employee director
of the Company for the payment of benefits in accordance with the provisions of
the Plan; and
WHEREAS, the Board by resolutions adopted at a meeting of the Board on
February 26, 1999 (a) authorized an amendment to the Plan and (b) directed the
Chairman of the Board to execute on behalf of the Company an amendment to the
then existing retirement agreements between the Company and each director; and
WHEREAS, the Board by resolutions adopted at a meeting of the Board on
August 27, 1999 (a) authorized a further amendment to the Plan and (b) directed
the appropriate officers of the Company to execute on behalf of the Company
amended retirement agreements between the Company and each director.
NOW, THEREFORE, in consideration of the services to be rendered by the
Director to the Company, the Company and the Director agree as follows:
1. If at the time of his or her retirement from the Board, the Director
shall be not less than 72 years of age or shall have served not less than ten
continuous years on the Board, the
<PAGE> 2
Director shall receive from the Company an annual retirement benefit equal to
the directors' annual retainer fee (presently $24,000) at the time of his or her
retirement, which annual retirement benefits shall (a) commence upon retirement
from the Board, (b) continue for life, and (c) be payable in twelve (12) equal
monthly payments.
2. Should the Director die after retirement before receiving the
retirement benefit described in paragraph one above for at least ten years (120
monthly payments), the retirement benefits shall be paid to the Director's
designated beneficiary(s) for the remaining portion of the ten year period. The
Director shall determine in the Addendum attached hereto and incorporated in all
respects, that any payment due pursuant to this Agreement shall be paid to the
designated beneficiary(s) either (1) as a lump-sum payment within ninety days of
the Director's death, or (2) in periodic monthly payments for the remainder of
the ten-year period following the Director's retirement date from the Board. If
no Addendum shall be attached hereto, the Director shall be deemed to have
elected a lump sum payment payable to his or her estate.
3. Should the Director die while serving on the Board, the Director's
previously designated beneficiary(s) shall be paid ten times the annual director
retainer fees that are in effect at the date of the Director's death. Such
payment shall be made within ninety days of the death of such Director.
4. In the event of a "Change in Control" (as hereinafter defined) or a
"Potential Change in Control" (as hereinafter defined) during the time when the
Director is serving on the Board, Director shall have the option, at his or her
sole discretion, (i) to receive a lump sum cash payment equal to his or her
"Fixed Retirement Benefits" (as hereinafter defined) or (ii) to receive the
benefits to which he or she would otherwise be entitled under Paragraphs 1 and 2
of this Agreement had the Director retired on the date immediately preceding the
Change in Control or Potential Change in Control and served not less than 10
continuous years on the Board. For the purposes of option (ii) above, it shall
be assumed that the Director has served not less than 10
2
<PAGE> 3
continuous years without regard to the actual time of service. For purposes of
this Paragraph, 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) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) 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 (a) of paragraph (iii)
below; or
(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
3
<PAGE> 4
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 (a) 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 (b) 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
4
<PAGE> 5
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.
(E) "Company" shall mean Piedmont Natural Gas Company, Inc.
and, except in determining 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.
(F) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(G) "Fixed Retirement Benefits" shall with respect to a
non-employee director mean the lump sum cash amount equal to 150% of
the net present value of the retirement benefits to the Director would
otherwise be determined to receive under this Agreement had he or she
been entitled to the payments provided in paragraph 1 above. In
determining the applicable lump sum cash amount, the net cash value
shall be determined in the same manner as provided in the case of a
lump sum election under the Company's Employee Retirement Plan as in
effect on the date immediately prior to the Change in Control or
Potential Change in Control.
(H) "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 (a) the Company or any
of its subsidiaries, (b) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Affiliates, (c) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (d) 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.
5
<PAGE> 6
(I) "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:
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control; or
(b) 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; or
(c) 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
(d) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control
has occurred.
A Change in Control or a Potential Change in Control shall not relieve the
Company or its successors or assigns of the obligations to make any payments
required by paragraphs 2 or 3 of this Agreement.
5. The Company will pay the premium for medical insurance for the
Director while he or she is serving on the Board. The medical insurance will
provide substantially the same benefits as the Company provides to its senior
executive officers or, if the Company is owned or controlled by another entity,
the same benefits as the controlling entity provides to its senior executive
officers or to persons preforming functions similar to those provided by senior
executive officers of a corporation. In addition, the Director shall have the
option to include his or her spouse and/or dependent children upon payment of
the additional premiums required to
6
<PAGE> 7
insure such persons. If at this time of his or her retirement from the Board,
the Director is entitled to receive the benefits provided by paragraph 1 or
paragraph 4 of this Agreement, the Company will continue to pay the insurance
premiums (and shall provide the Director the option to pay the premiums for his
or her spouse and/or dependent children) for the Director for his or her life.
If the Director is entitled to receive other medical insurance benefits from the
Company, he or she shall have the option of selecting such other medical
insurance benefits or the medical insurance benefits provided under this
Agreement, but not both.
6. That this Agreement shall supersede in all respects any previously
executed agreement between the Company and the Director pertaining to director
retirement benefits.
7. The retirement benefits provided for in this Agreement may not be
canceled or terminated except upon the written agreement of the Company and the
Director.
IN WITNESS WHEREOF, Piedmont Natural Gas Company, Inc., has caused this
Agreement to be executed in its name by its duly authorized officers and its
corporate seal to be hereto affixed; and the above named Director has hereto
subscribed his or her signature, all the day and year first above written.
PIEDMONT NATURAL GAS COMPANY, INC. DIRECTOR
By: /s/ John H. Maxheim
-------------------------------- -----------------------------
Chairman of the Board
ATTEST: /s/ Martin C. Ruegsegger
----------------------------
7
<PAGE> 8
ADDENDUM TO DIRECTOR RETIREMENT BENEFITS AGREEMENT
The undersigned Director directs that any payment due pursuant to
Paragraph 2 or 3 to the attached Director Retirement Benefits Agreement be paid
to the beneficiary(s) designated below as follow:
1. Lump-sum payment within ______________________
ninety days of my death:
or
2. Periodic monthly payments ______________________
following my death while serving
on the Board of Directors of the
Company or for the reminder of the
ten -year period following my
retirement date from the Board of
Directors of the Company
----------------------------------------------------------------
Beneficiary(s) designated pursuant to the attached Director Retirement
Benefits Agreement.
Payment of any Director retirement benefits shall be made directly to
the following person(s):
- ---------------------------- -----------------------------
Name Name
- ---------------------------- -----------------------------
Printed or Typed Name Printed or Typed Name
- ---------------------------- -----------------------------
Street Address Street Address
- ---------------------------- -----------------------------
City and State City and State
- ---------------------------- -----------------------------
Zip Code Zip Code
<PAGE> 9
- ---------------------------- -----------------------------
Name Name
- ---------------------------- -----------------------------
Printed or Typed Name Printed or Typed Name
- ---------------------------- -----------------------------
Street Address Street Address
- ---------------------------- -----------------------------
City and State City and State
- ---------------------------- -----------------------------
Zip Code Zip Code
- ---------------------------- -----------------------------
Name Name
- ---------------------------- -----------------------------
Printed or Typed Name Printed or Typed Name
- ---------------------------- -----------------------------
Street Address Street Address
- ---------------------------- -----------------------------
City and State City and State
- ---------------------------- -----------------------------
Zip Code Zip Code
Director:
--------------------
Date:
------------------------
<PAGE> 1
Exhibit 10.55
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
THIS AGREEMENT entered into this 1st day of July, 1996, by and between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation, hereinafter
referred to as "Seller", first party, and, PIEDMONT NATURAL GAS COMPANY, INC.,
a(n) New York corporation, hereinafter referred to as "Buyer", second party,
WITNESSETH:
WHEREAS, Buyer desires to purchase and Seller desires to sell natural
gas storage service under Seller's Rate Schedule GSS as set forth herein; and
WHEREAS, pursuant to the terms of the Joint Stipulation and Settlement
Agreement approved by the Federal Energy Regulatory Commission's ("Commission")
Order dated July 16, 1993 in Docket Nos. RS92-86-003, RP92-108-000, and
RP92-137-000 which amended Seller's Certificate in Docket No. CP61-194, Seller
and Buyer agreed to a twenty year contract term through March 31, 2013, as set
forth in that Order, for the Storage Demand Quantity and Storage Capacity
quantity which are supported by service provided by CNG Transmission
Corporation; and
WHEREAS, pursuant to the terms of the Application to Amend Seller's
Certificate, in Docket No. CP61-194, as approved by the Commission's Order dated
June 13, 1996 in Docket No. CP96-226-000, Seller and Buyer agreed to the Storage
Demand Quantity and Storage Capacity Quantity set forth in Article I hereof;
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
SERVICE TO BE RENDERED
Subject to the terms and provisions of this agreement and of Seller's
Rate Schedule GSS, Seller agrees to receive from Buyer for storage, inject into
storage for Buyer's account, store, withdraw from storage (or cause to be
injected into storage for Buyer's account, stored, and withdrawn from storage)
and deliver to Buyer, quantities of natural gas as follows:
To withdraw from storage or cause to be withdrawn from storage,
transport and deliver to Buyer at the delivery points set forth below,
the gas stored for Buyer's account up to a maximum quantity in any day
of
68,955 Mcf, during the period beginning on July 1, 1996 and
ending on June 30, 2001, and 37,486 Mcf during the period
beginning on July 1, 2001 and ending on March 31, 2013,
which quantity shall be Buyer's Storage Demand.
To receive and store or cause to be stored up to a total quantity at
any one time of
3,858,940 Mcf, during the period beginning on July 1, 1996 and
ending on June 30, 2001, and 2,197,887 Mcf during the period
beginning on July 1, 2001 and ending on March 31, 2013,
which quantity shall be Buyer's Storage Capacity Quantity.
ARTICLE II
POINT(S) OF DELIVERY
<PAGE> 2
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
(Continued)
The Point or Points of Delivery for all natural gas delivered by Seller
to Buyer under this agreement shall be at or near:
(1) Anderson Meter Station, located at milepost 1162.72 on Seller's main
transmission line in Anderson County, South Carolina, approximately 3.5
miles southeasterly from Anderson, South Carolina, on County Road near
Broadway Lake.
(2) Charlotte Meter Station, located at milepost 1287.10 on Seller's main
transmission line in Iredell County, North Carolina, adjoining Seller's
Compressor Station No. 150 site near Davidson, North Carolina.
(3) Greensboro Meter Station, located at milepost 1355.06 on Seller's main
transmission line in Guilford County, North Carolina, approximately 12
miles southwesterly from Greensboro, North Carolina, near the
intersection of State Highway #150 and State Highway #68.
(4) Greenville Meter Station, located at milepost 1183.96 on Seller's main
transmission line in Greenville County, South Carolina, approximately
17 miles southeasterly from Greenville, South Carolina, on County Road
near Woodville, South Carolina.
(5) Iva-Starr Meter Station, located at milepost 1159.01 on Seller's main
transmission line, approximately 4 miles south of Anderson, Anderson
County, South Carolina.
(6) Owens-Corning Meter Station, located at milepost 1159.01 on Seller's
main transmission line approximately 4 miles south of Anderson, South
Carolina, near the juncture of South Carolina Highway #82 and #811.
(7) Salisbury Meter Station, located at milepost 1308.45 on Seller's main
transmission line in Rowan County, North Carolina, approximately 6
miles northwesterly from Salisbury, North Carolina, near U.S. Highway
#70.
(8) Simpsonville Meter Station, located at milepost 1190.00 on Seller's
main transmission line on U. S. Highway No. 276, approximately 1.75
miles northwesterly from Fountain Inn, Greenville County, South
Carolina.
(9) Spartanburg Meter Station, located at milepost 1214.34 on Seller's main
transmission line in Spartanburg County, South Carolina, approximately
3.5 miles southeasterly from Spartanburg, South Carolina on State
Highway #56.
(10) Startex Meter Station, located in Spartanburg County, South Carolina,
approximately 7.5 miles south of Spartanburg, South Carolina, on
Compressor Station No. 140 Site.
(11) Winston-Salem Meter Station, located at milepost 1340.48 on Seller's
main transmission line in Davidson County, North Carolina,
approximately 8 miles southeasterly from Winston-Salem, North Carolina,
near Wallburg, North Carolina.
(12) Woodruff Meter Station, located at milepost 1171.30 on Seller's main
transmission line on State Highway No. 101, approximately 5.5 miles
northwesterly from Woodruff, Spartanburg County, South Carolina.
(13) Belton Meter Station, located at milepost 1171.30 on Seller's main
transmission line in Anderson
<PAGE> 3
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
(Continued)
County, South Carolina, near the City of Belton, South Carolina.
(14) Greenwood Meter Station, located at the point of connection of Seller's
facilities and those of the City of Greenwood, South Carolina on
Seller's main transmission line approximately 2 miles northeast of the
City of Belton, Anderson County, South Carolina.
(15) Stokesdale Meter Station, located at milepost 1359.63 on Seller's main
transmission line in Guilford County, North Carolina, near the City of
Stokesdale, North Carolina.
(16) Kernersville Meter Station, located at milepost 1348.86 on Seller's
main transmission line near Kernersville, Forsyth County, North
Carolina.
(17) Cowpens Meter Station, located at milepost 1222.66 on Seller's main
transmission line near Cowpens, Cherokee County, South Carolina.
(18) Inman Meter Station, located on Seller's Mill Spring Extension at
approximately milepost 15.16 in Spartanburg County, South Carolina.
(19) Landrum Meter Station, located on Seller's Mill Spring Extension at
approximately milepost 23.81 in Spartanburg County, South Carolina.
(20) Hickory Meter Station, located at milepost 1269.23 on Seller's main
transmission line near Stanley, North Carolina.
(21) Lowesville Meter Station, located on Seller's Maiden Extension at
approximately milepost 0.18 at the intersection of State Highway Nos.
1394 and 73 in Lincoln County, North Carolina.
(22) Maiden Meter Station, located on Seller's Maiden Extension at
approximately milepost 17.76 near the intersection of State Highway
Nos. 1882 and 1883 in Catawba County, North Carolina.
(23) Moore Meter Station, located at milepost 1205.89 on Seller's main
transmission line on the side of Seller's Compressor Station No. 140,
Spartanburg County, South Carolina.
(24) Spencer-Buck Meter Station, located milepost 1312.72 on Seller's main
transmission line in Rowan County, North Carolina, near the
intersection of State Highway 601 and Young Road.
(25) West Startex Meter Station, located adjacent to Seller's Mill Spring
Extension in Spartanburg County, South Carolina approximately 6.0 miles
from Seller's Compressor Station No. 140.
(26) The point of connection of Seller's facilities and those of Duke Power
Company adjacent to Seller's main transmission line at milepost
1175.55, in Anderson County, South Carolina for delivery to gas to the
Duke Lee Meter Station.
ARTICLE III
DELIVERY PRESSURE
Seller shall deliver natural gas to Buyer at the Point(s) of Delivery
at a pressure(s) of: not less than fifty (50) pounds per square inch gauge, or
at such pressures as may be agreed upon in the day-to-day operations of Buyer
and Seller.
<PAGE> 4
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
(Continued)
ARTICLE IV
TERM OF AGREEMENT
This agreement shall be effective July 1, 1996 and shall remain in
force and effect through March 31, 2013.
ARTICLE V
RATE SCHEDULE AND PRICE
Buyer shall pay Seller for natural gas service rendered hereunder in
accordance with Seller's Rate Schedule GSS and the applicable provisions of the
General Terms and Conditions of Seller's FERC Gas Tariff as filed with the
Federal Energy Regulatory Commission, and as the same may be amended or
superseded from time to time at the initiative of either party. Such rate
schedule and General Terms and Conditions are by this reference made a part
hereof.
ARTICLE VI
MISCELLANEOUS
1. The subject headings of the Articles of this agreement are inserted
for the purpose of convenient reference and are not intended to be a part of
this agreement nor to be considered in any interpretation of the same.
2. This agreement supersedes and cancels as of the effective date
hereof the following contract(s):
Any and all Service Agreements previously entered into between
Buyer and Seller under Seller's Rate Schedule GSS.
3. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
4. This agreement shall be interpreted, performed and enforced in
accordance with the laws of the State of North Carolina.
5. This agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns.
<PAGE> 5
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
(Continued)
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed by their respective Presidents or Vice Presidents thereunto duly
authorized and have caused their respective corporate seals to be hereunto
affixed and attested by their respective Secretaries or Assistant Secretaries
the day and year above written.
TRANSCONTINENTAL GAS PIPE
LINE CORPORATION
(Seller)
ATTEST:
(SEAL)
/s/ Randall R. Conkle BY /s/ Frank J. Ferazzi
- ---------------------------- ------------------------------
Asst. Secretary Frank J. Ferazzi
Vice President
Customer Service
PIEDMONT NATURAL GAS COMPANY,
INC.
(Buyer)
ATTEST:
(SEAL)
/s/ Ted C. Coble By /s/ Thomas E. Skains
- ---------------------------- ------------------------------
Asst. Secretary Sr. Vice President
Gas Supply and Services
<PAGE> 1
Exhibit 10.56
AMENDMENT TO SERVICE AGREEMENT
THIS AMENDMENT ("Amendment") is entered into this 30 day of August,
1996, by and between TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware
corporation, hereinafter referred to as "Seller", first party, and PIEDMONT
NATURAL GAS COMPANY, INC., a New York corporation, hereinafter referred to as
"Buyer", second party.
WITNESSETH:
WHEREAS, Seller and Buyer entered into that certain Service Agreement,
dated January 1, 1971 under Seller's Rate Schedule LG-A ("Service Agreement")
pursuant to which Seller provides liquefied natural gas storage service for
Buyer up to a total volume of 72,770 Mcf of natural gas which is Buyer's
Liquefaction Capacity Volume; and
WHEREAS, Seller and Buyer now desire to renew and extend the primary
term of the Service Agreement.
NOW THEREFORE, Seller and Buyer hereby agree to renew and amend the
Service Agreement as follows:
1. Article IV of the Service agreement is hereby deleted in its entirety
and replaced by the following:
"ARTICLE IV
TERM OF AGREEMENT
This agreement shall be effective as of November 1, 1971 and shall
remain in force and effect until 8:00 a.m. Eastern Standard Time
October 31, 2001, and thereafter until terminated by Seller or Buyer
upon at least one hundred eighty (180) days prior written notice."
2. As herein amended, the Service Agreement is hereby renewed in full
force and effect pursuant to the terms thereof.
3. This Amendment shall be effective as of the date first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed by their respective officers or representatives thereunto duly
authorized.
TRANSCONTINENTAL GAS PIPE LINE PIEDMONT NATURAL GAS COMPANY,
CORPORATION ("Seller") INC. ("Buyer")
By /s/ Frank J. Ferazzi By /s/ Thomas E. Skains
-------------------- --------------------
Frank J. Ferazzi Title Senior Vice President
Vice President ---------------------
Customer Service
<PAGE> 1
Exhibit 10.57
SERVICE AGREEMENT
THIS AGREEMENT entered into this 29th day of January, 1997, by and
between PINE NEEDLE LNG COMPANY, LLC, a North Carolina limited liability
company, hereinafter referred to as "Pine Needle," and PIEDMONT NATURAL GAS
COMPANY, INC., hereinafter referred to as "Customer,"
WITNESSETH
WHEREAS, by order issued November 27, 1996, in Docket No. CP96-52, the
Federal Energy Regulatory Commission granted a certificate of public convenience
and necessity to Pine Needle to construct and operate a liquefied natural gas
storage facility in Guilford County, North Carolina; and
WHEREAS, Pine Needle's LNG storage facility, which is proposed to be
in service by May 1, 1999, will have a total storage capacity of 4 Bcf of gas,
with the ability to vaporize 400 MMcf/day and to liquefy at a net rate of 20
MMcf/day; and
WHEREAS, Customer has requested firm storage service at Pine Needle's
LNG storage facility under Pine Needle's Rate Schedule LNG-1 and has executed
with Pine Needle a Precedent Agreement dated September 22, 1995 for such
service; and
WHEREAS, Pine Needle is willing to provide the requested firm storage
service for Customer pursuant to the terms and provisions of this Service
Agreement, Rate Schedule LNG-1, and the Precedent Agreement.
NOW, THEREFORE, Pine Needle and Customer agree as follows:
ARTICLE I
SERVICE TO BE RENDERED
Subject to the terms and provisions of this agreement and of Pine
Needle's Rate Schedule LNG1, as amended from time to time, Pine Needle agrees to
liquefy natural gas; store such gas in liquefied form; and vaporize and deliver
such gas to Customer or for Customer's account as follows:
To withdraw from storage and vaporize the gas stored in liquefied form
by Pine Needle for Customer's account up to a maximum quantity on any day of the
dekatherm equivalent of 200,000 Mcf, which quantity shall be Customer's
Vaporization Quantity. 1/
To liquefy natural gas for Customer up to a maximum quantity on any day
of the dekatherm equivalent of 10,000 Mcf, which shall be Customer's
Liquefaction Quantity. 1/
To store in liquefied form for Customer's account up to a total
quantity of the dekatherm equivalent of 2,000,000 Mcf, which quantity shall be
Customer's Storage Capacity.
1/ In addition to these quantities, Pine Needle shall retain
quantities of gas for fuel and gas otherwise used or lost
and unaccounted for pursuant to Rate Schedule LNG-1.
1
<PAGE> 2
SERVICE AGREEMENT (CONTINUED)
POINT OF RECEIPT AND DELIVERY
1. The Point of Receipt for all gas tendered to Pine Needle
for liquefaction hereunder shall be at the following point(s):
Gas Pipe Line Corporation's ("Transco") mainline system at
milepost 1356.95 on Transco's mainline in Guilford County,
North Carolina.
2. The Point of Delivery for all gas delivered by Pine Needle
to Customer or for the account of Customer shall be at the
following point(s):
The interconnection between Pine Needle's 24-inch outlet
pipeline and Transco's mainline system at milepost 1356.95
on Transco's mainline in Guilford County, North Carolina.
ARTICLE III
TERM OF AGREEMENT
This agreement shall be effective as of the date that Pine Needle's
facilities necessary to provide service hereunder to Customer have been
constructed and are ready for liquefaction of gas, as determined by Pine Needle
in its sole opinion, hereinafter referred to as the "In-Service Date," and shall
remain in force and effect for a primary term of twenty (20) years from and
after the In-Service Date, and year to year thereafter, subject to termination
by either party upon two (2) years prior written notice to the other.
RATE SCHEDULE AND PRICE
1. Customer shall pay Pine Needle for service rendered hereunder in
accordance with Pine Needle's Rate Schedule LNG-1 and the applicable provisions
of the General Terms and Conditions of Pine Needle's FERC Gas Tariff as filed
with the Federal Energy Regulatory Commission, and as the same may be amended or
superseded from time to time. Such rate schedule and General Terms and
Conditions are by this reference made a part hereof.
2. Pine Needle shall have the unilateral right to propose, file, and
make effective with the Federal Energy Regulatory Commission, or other
regulatory authority having jurisdiction, changes and revisions to the rates and
rate design proposed pursuant to Section 4 of the Natural Gas Act, or to
propose, file and make effective superseding rates or rate schedules, for the
purposes of changing the rates, charges, rate design, terms and conditions of
service and other provisions thereof effective as to Customer; provided however
that the (i )firm character of service, (ii) term of agreement (as set forth in
Article III above), (iii) quantities, and (iv) points of receipt and delivery
shall not be subject to unilateral change under this paragraph. Customer shall
have the right to file with the Commission or other regulatory authority in
opposition to any such filings or proposals by Pine Needle.
2
<PAGE> 3
SERVICE AGREEMENT (CONTINUED)
MISCELLANEOUS
1. The subject headings of the Articles of this agreement are inserted
for the purpose of convenient reference and are not intended to be a part of
this agreement nor to be considered in the interpretation of the same.
2. This agreement supersedes and cancels as of the effective date
hereof the following contracts between the parties hereto: None.
3. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or be
construed as a waiver of any future default or defaults, whether of alike or
different character.
4. This agreement shall be interpreted, performed and enforced in
accordance with the laws of the State of North Carolina.
5. This agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns.
6. Notices to either party shall be in writing and shall be considered
as duly delivered when mailed to the other party at the following address:
(a) If to Pine Needle:
Pine Needle LNG Company, LLC
c/o Pine Needle Operating Company
P.O. Box 1396
(2800 Post Oak Boulevard 77056)
Houston, Texas 77251-1396
Attention: Director - Customer Services and Scheduling
(b) If to Customer:
Piedmont Natural Gas Company, Inc.
P.O. Box 33068
(1915 Rexford Road 28211)
Charlotte, North Carolina 28233
Attention: Senior Vice President, Gas Supply
Such addresses may be changed from time to time by mailing appropriate notice
thereof to the other party.
3
<PAGE> 4
SERVICE AGREEMENT (CONTINUED)
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed by their respective officers or representatives thereunto duly
authorized.
PINE NEEDLE LNG COMPANY, LLC
by its agent
PINE NEEDLE OPERATING COMPANY
By: /s/ Frank J. Ferazzi
---------------------------------
Vice President
PIEDMONT NATURAL GAS COMPANY, INC.
By: /s/ Thomas E. Skains
---------------------------------
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Exhibit 10.58
FIRM TRANSPORTATION
CARDINAL INTRASTATE PIPELINE
This Service Agreement, entered into this the 26th day of June, 1998,
by and between Cardinal Extension Company, LLC, a North Carolina limited
liability company, hereinafter referred to as "Transporter," and Piedmont
Natural Gas Company, Inc., a North Carolina corporation, hereinafter referred to
as "Shipper."
WITNESSETH
WHEREAS, Transporter is the owner of an intrastate natural gas pipeline
which interconnects with the interstate pipeline system of Transcontinental Gas
Pipe Line Corporation ("Transco") in Rockingham County, North Carolina;
WHEREAS, Transporter has sufficient capacity available on its pipeline
system to provide firm transportation service for Shipper pursuant to the terms
specified herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
assumed, Transporter and Shipper agree as follows:
ARTICLE I
DEFINITIONS
1.01 As used herein, the following terms shall have meanings defined below:
(a) "British Thermal Unit" or "BTU" -- The amount of heat required
to raise the temperature of 1 pound of water 1 degree
Fahrenheit at 60 degrees Fahrenheit.
(b) "Contract Year" -- The year beginning with the date that
service shall commence as set forth in Paragraph 13.01 hereof,
or any anniversary thereof. Provided, however, that in the
event firm service commences on a day other than the first day
of the month, the Contract Year shall be considered to
commence on the first day of the month following the day on
which service has commenced.
(c) "Cubic Foot" -- The volume of gas which occupies one cubic
foot when such gas is at a temperature of 60 degrees
Fahrenheit and an absolute pressure of 14.73 pounds per square
inch.
(d) "Day" -- A period of 24 consecutive hours beginning as nearly
as practicable at 10:00 a.m. Eastern Standard Time or Eastern
Daylight Time, as appropriate, or at such other hour as
Transporter and Shipper mutually agree.
(e) "Dekatherm" or "dt" -- The quantity of heat energy which is
1,000,000 British Thermal Units.
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(f) "Equivalent Quantity" -- The volume of gas measured in Mcf
received by Transporter at the Point of Receipt during any
given period of time, adjusted for any variations in Btu
content, it being the intent of the parties that the volumes
of gas delivered hereunder at the Point of Delivery be the
thermal equivalent of the volumes of gas received at the Point
of Receipt less any amounts attributable to fuel and line
losses.
(g) Excess Rate Schedule CFT Service -- The service shall be
available on any Day when the total quantity of gas taken by
all firm shippers in Zone 1 is less than the dekatherm
equivalent of 130,000 Mcf per day and/or the total quantity of
gas taken by all Shippers in Zone 2 is less than the dekatherm
equivalent of 140,000 Mcf per day provided that such service
has been scheduled by Shipper and allocated by Transporter on
such Day.
(h) "Force Majeure" means acts of God, strikes, lockouts or other
industrial disturbances, acts of the public enemy or
terrorists, wars, blockades, insurrections, riots, epidemics,
landslides, lighting, earthquakes, fires, storms, floods,
washouts, arrests, the order of any court or governmental
authority having jurisdiction while the same is in force and
effect, civil disturbances, explosions, breakage, accidents to
machinery or pipelines, freezing of or damage to receipt or
delivery facilities, National Weather Service warnings or
advisories, whether official or unofficial, that result in the
evacuation of facilities, inability to obtain or unavoidable
delays in obtaining material or equipment, a Force Majeure
event or Operating Conditions on the pipeline system of
Transco or any other event, condition or incident which
prevents Transco from tendering gas to Transporter for
transportation hereunder, and any other cause whether of the
kind herein enumerated or otherwise, not reasonably within the
control of either party claiming suspension and which by the
exercise of due diligence such party is unable to prevent or
overcome.
(i) "Heating Value" -- Gross heating value on a dry basis which is
the number of British Thermal Units produced by the complete
combustion at constant pressure of the amount of dry gas which
would occupy a volume of one cubic foot at 14.73 Psia and 60
degrees Fahrenheit with combustion air at the same temperature
and pressure as the gas, the products of combustion being
cooled to the initial temperature of the gas and air and the
water formed by combustion condensed to the liquid state.
(j) "Mcf" -- 1,000 cubic feet of gas.
(k) "Month" -- A period beginning as nearly as practicable at
10:00 a.m. Eastern Standard Time or Eastern Daylight time, as
appropriate, or at such other hour as Transporter and Shipper
agree upon on the first day of a calendar month and shall end
at the aforesaid time on the first day of the next succeeding
calendar month.
(l) "Operating Conditions" means the necessity to make
modifications, tests or repairs to Transporter's pipeline
system. Transporter shall exercise reasonable diligence to
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schedule maintenance so as to minimize disruption of service
to Shipper and shall provide reasonable notice of the same.
(m) "Psia" -- Pounds per square inch absolute.
(n) "Psig" -- Pounds per square inch gauge.
(o) "Scheduled Daily Delivery Quantity" -- The daily quantity of
gas requested in advance by Shipper electronically or
otherwise to Transporter covering a specific period of time.
(p) "Transportation Contract Quantity" or "TCQ" -- The quantity of
gas specified in Article 2, Paragraph 2.01, which shall be the
maximum quantity that Transporter is obligated to deliver
hereunder on any day, at the Point(s) of Delivery set forth in
Article 4 hereof.
(q) "Year" -- A period of three hundred and sixty-five (365)
consecutive days beginning on the date of initial delivery of
gas under this Service Agreement, or on any anniversary
thereof, provided, however, that any such year which contains
a date of February 29, shall consist of three hundred and
sixty-six (366) consecutive days.
ARTICLE 2
GAS TRANSPORTATION SERVICE
2.01 Subject to the terms and provisions of this Service Agreement,
Transporter agrees to receive, transport and redeliver, on a firm
basis, for Shipper's account up to the dekatherm equivalent of a
Transportation Contract Quantity ("TCQ") of 60,000 Mcf per day of
natural gas from the Point of Receipt specified in Article 3 hereof to
the Point(s) of Delivery specified in Article 4 hereto.
2.02 Transportation service rendered hereunder shall be firm and shall not
be subject to interruption or curtailment except as provided in Article
17 hereof.
ARTICLE 3
POINT OF RECEIPT
3.01 Shipper shall deliver or cause to be delivered gas for transportation
hereunder and Transporter shall receive gas quantities up to Shipper's
TCQ, plus any applicable fuel and line loss makeup, at the existing
point of interconnection between Transporter and the pipeline system of
Transco in Rockingham County, North Carolina ("Point of Receipt").
Transporter shall accept deliveries at the Point of Receipt at a
pressure sufficient to allow the gas to enter Transporter's pipeline
system at the varying pressures that may exist in such system from
time-to-time; provided, however, that such pressure(s) of the gas
delivered or caused to be delivered by Shipper shall not exceed the
maximum operating pressure(s) specified by Transporter for the Point of
Receipt.
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3.02 Shipper shall make any necessary arrangements with Transco so as to be
able to deliver gas to Transporter at the Point of Receipt; provided,
however, that such arrangements are compatible with the operating
conditions on Transporter's pipeline system.
ARTICLE 4
POINT(S) OF DELIVERY
Transporter shall deliver to Shipper, or for the account of Shipper,
Equivalent Quantities hereunder at the existing Point of Delivery
between Transporter and Shipper on the southeast side of Burlington,
North Carolina, and any future upstream points of delivery within
Shipper's TCQ capacity entitlements. Transporter shall design its
pipeline facilities and use reasonable efforts to deliver gas at the
Point(s) of Delivery at a minimum pressure of not less than 550 psig.
The maximum pressure at the Point(s) of Delivery shall not exceed the
maximum operating pressure of Transporter's pipeline at such point(s).
ARTICLE 5
DETERMINATION OF RECEIPTS AND DELIVERIES
5.01 Receipts and deliveries shall be allocated by Transporter according to
a predetermined methodology administered by Transporter for the
allocation among shippers each Day of each dt of gas which is delivered
by Transporter at the Point(s) of Delivery. Under the current
allocation methodology, the quantity of gas allocated each Day to each
Shipper at the Point of Receipt shall be deemed to be, to the maximum
extent possible, the quantities of gas delivered for such Shipper's
account at the Point(s) of Delivery hereunder adjusted for any
quantities attributable to fuel and line loss makeup.
5.02 Shipper shall cause Transco to provide Transporter with a predetermined
daily allocation methodology in writing, or electronically (by
electronic data transfer) for measured quantities based on scheduled
quantities in advance of service each Day and prior to any intra-day
changes pursuant to Section 7.02 below. The daily allocation
methodology provided by Transco shall consist of rankings for
allocation among all shippers nominating service such that receipts are
equivalent to the quantities delivered by Transporter plus any
quantities applicable for fuel or line loss makeup.
ARTICLE 6
DETERMINATION OF ALLOWABLE DAILY DELIVERY VARIATIONS
AND OVERRUN PENALTIES
6.01 Allowable daily delivery variations shall be the quantity computed as
follows:
(a) During each Day of the period beginning May 1 of any Year and
extending through the next succeeding September 30, 5 percent of
Shipper's TCQ under this Service Agreement.
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(b) During each Day of the period beginning on October 1 of any Year
and extending through the next succeeding April 30, 3.5 percent
of Shipper's TCQ under this Service Agreement.
6.02 Any quantity of gas taken by Shipper on any Day from Transporter in
excess of Shipper's TCQ under this Service Agreement shall, as adjusted
by the allowable daily delivery variations above, be an unauthorized
daily overrun unless:
(a) Shipper is utilizing the firm capacity entitlements of another
firm shipper that is not using that capacity entitlement and
Shipper has provided prior notice to Transporter, or
(b) Shipper is utilizing Excess Rate Schedule CFT Service which has
been scheduled by Shipper and allocated by Transporter on such
Day.
6.03 In the event of a Force Majeure, Shipper's revised TCQ pursuant to
Article 17 below shall be utilized to determine the allowable daily
delivery variation and unauthorized daily overrun quantity and any
penalties thereon. Notice shall be provided by Transporter to Shipper
of such revised TCQ by telephone or telecopy. Such notice shall be
confirmed in writing as soon as reasonably possible.
6.04 In the event on any Day Shipper takes unauthorized daily overrun
quantities, Shipper shall pay Transporter:
(a) an overrun charge equal to the 100 percent load factor FT rate
per dt for quantities up to, but not exceeding, the daily
allowable delivery variation set forth in Section 6.01 above,
and
(b) an overrun penalty of $25 per dt for each dt of unauthorized
daily overrun quantities in excess of the daily delivery
variation set forth in Section 6.01 above.
6.05 All overrun penalties collected by Transporter during any calendar
year, less an amount equal to the 100 percent load factor FT rate per
dt multiplied by the total volume of overruns, shall be directly
refunded to each non-overrunning firm transportation shipper for the
Month(s) in which such penalties were incurred based on each such
non-overrunning shipper's fixed cost contribution under its service
agreement with Transporter as a percentage of the total fixed cost
contributions of all non-overrunning shippers under all firm service
agreements. Such refunds shall be made by January 31 of each calendar
year.
6.06 The payment of a penalty for an unauthorized overrun quantity shall
under no circumstances be considered as giving Shipper the right to
take such unauthorized overrun quantity nor shall such payment be
considered as a substitute for any other remedy available to
Transporter or any other shipper against the offending shipper for such
unauthorized overrun.
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ARTICLE 7
SCHEDULING AND BALANCING
7.01 Shipper shall nominate service under this Service Agreement in advance
of each Month or in advance of each Day in accordance with the
nomination deadlines of Transco. Transporter, in its sole judgement,
may waive any nomination deadlines, on a non-discriminatory basis, if
Transporter determines that operating conditions permit. Such nominated
quantities shall be subject to confirmation by Transporter which shall
be based on the best operating information available to Transporter.
Such confirmed quantity shall be deemed the scheduled quantity. Shipper
and Transporter shall have scheduling personnel available to be
contacted seven days a week, twenty-four hours a day.
7.02 During any Day, Shipper may request to reschedule, on a prospective
basis, quantities scheduled pursuant to Section 7.01 above, provided
that such quantities are consistent with rescheduled quantities and
deadlines on Transco.
7.03 Shipper shall endeavor to balance receipts and deliveries as reasonably
as practicable so that the quantities delivered by Transco to
Transporter are consistent with the actual quantities taken by Shipper
at the Point(s) of Delivery. Shipper shall have the responsibility to
monitor daily receipts and deliveries during the Month based on the
best information available.
7.04 Transporter shall provide its latest estimated allocation data on
receipts and deliveries to all parties requesting such data. These
allocated quantities will be subject to change and the data is offered
for informational purposes only, and should not be relied on by Shipper
for any purposes whatsoever.
ARTICLE 8
SHIPPER'S RESPONSIBILITIES
Shipper recognizes that, as between it and Transporter, Shipper has sole control
over its physical takes of gas from Transporter's system and therefore has a
duty to refrain from taking delivery of unauthorized overrun quantities. Shipper
further recognizes that Shipper may cause hardship and economic damage to other
shippers in the event Shipper takes delivery of unauthorized overrun quantities
for which Shipper may be held accountable either through a direct cause of
action by such other shippers or as an impleaded or third party defendant in a
suit by such other shippers. In no event shall the payment of a penalty for an
overrun quantity pursuant to this Service Agreement be considered as giving
Shipper the right to take such unauthorized overrun quantity nor shall such
payment be considered as a substitute for all other rights and remedies
(including but not limited to consequential damages) available to any other
shipper against Shipper.
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ARTICLE 9
TRANSPORTER'S RESPONSIBILITIES
Transporter recognizes that it has a duty to use reasonable care and prudent
operating procedures to allow Shipper to schedule for delivery within its TCQ,
as adjusted pursuant to a Force Majeure situation or Operating Conditions, the
gas quantities available to Shipper up to the amount verified and confirmed by
Transporter based on the best operating information available to Transporter.
Transporter also recognizes that unless forces beyond Transporter 's control
(including, but not limited to, Force Majeure, or the failure of Shipper or
Shipper's gas supplier to deliver scheduled gas quantities into Transporter's
system) cause interference with Transporter's ability to redeliver, Transporter
has a duty to tender to Shipper for redelivery the gas quantities which
Transporter has verified and confirmed as available to Shipper. Transporter
further recognizes that a breach of its duties herein may cause hardship and
economic damage to Shipper, for which Shipper reserves all rights and remedies
(including but not limited to consequential damages), and for which Transporter
may be held accountable.
ARTICLE 10
RATES AND CHARGES
10.01 For firm transportation service provided to Shipper hereunder, Shipper
shall pay to Transporter each month the sum of the following charges:
(a) Reservation Charge: Shipper's TCQ multiplied by the
reservation rate applicable to deliveries in the rate zone in
which the gas is delivered and as set forth on currently
effective Sheet No. 1 of Transporter's tariff.
(b) Commodity Charge: The applicable commodity rate set forth on
currently effective Sheet No. 1 multiplied by the quantities
of gas (dts) delivered.
(c) Excess CFT Charge: The applicable rate set forth on currently
effective Sheet No. 1 multiplied by the excess CFT quantity
delivered during that month.
10.02 Transporter shall retain from the quantities of gas received on behalf
of Shipper hereunder any applicable fuel and line loss make-up
associated with the transportation service provided hereunder.
Transporter will evaluate any fuel retention percentages applicable to
Shipper's service on an annual basis and will make any necessary
filings with the NCUC to reflect any changes at least thirty (30) days
prior to April 1 of each calendar year.
10.03 Transporter shall have the right, from time-to-time, through filings
with the governmental agency having jurisdiction to seek to change the
rates or allowance for fuel, and to change the other terms and
conditions of this Service Agreement, without limitation or
reservation; provided, however, that (a) the character of firm service,
(b) the term, (c) the quantities, (d) the Point(s) of Receipt and
Delivery, and (e) the delivery pressure shall not be subject to change
hereunder without mutual agreement of the parties. Shipper shall have
the right to
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oppose any of the foregoing and to seek other changes to the terms and
conditions of this Service Agreement to the extent that Shipper is
legally permitted to do so under applicable provision(s) of law.
Notwithstanding the foregoing, Transporter agrees to propose in any
subsequent rate cases a cost allocation and/or rate design for firm
deliveries upstream of Burlington, North Carolina that reasonably
approximate the rates Shipper would have paid if the costs of the
existing firm service had remained in the utility rate bases of PSNC
and Piedmont and in the absence of the merger of Transporter and
Cardinal Pipeline Company, LLC.
ARTICLE 11
QUALITY OF GAS
11.01 The parties hereto recognize that the natural gas delivered for
transportation hereunder will necessarily be commingled in
Transporter's pipeline system with gas received from other sources, and
that the specific gas delivered to Transporter cannot be redelivered
for Shipper's account. It is further agreed that the natural gas
delivered to and by Transporter hereunder shall be merchantable natural
gas.
11.02 All gas delivered to Transporter for Shipper and redelivered by
Transporter to Shipper shall meet the quality standards for
transportation on the interstate pipeline system of Transco as amended
from time-to-time.
ARTICLE 12
MEASUREMENT AND MEASURING EQUIPMENT
12.01 The unit of the natural gas deliverable hereunder shall be a Dekatherm
of gas on the measurement basis hereinafter set forth.
12.02 The quantity and the Heating Value of the natural gas delivered by
Transporter to or for the account of Shipper or delivered by Shipper to
Transporter for redelivery shall be determined as follows:
(i) The unit of volume for the purpose of measurement shall be one
(1) Cubic Foot of gas at a temperature of 60 degrees
Fahrenheit and at an absolute pressure of fourteen and
seventy-three hundredths (14.73) pounds per square inch.
(ii) The unit of weight for the purpose of measurement shall be one
(1) pound mass of gas.
(iii) The average absolute atmospheric pressure shall be assumed to
be 14.73 pounds per square inch.
(iv) The temperature of the gas flowing through the meters, when
necessary for computing gas quantities, shall be determined by
the use of a recording thermometer or other temperature
measuring device. The arithmetic average of the temperature
recorded each 24-hour day, or so much of the 24 hours as gas
has been flowing, shall be used
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in computing gas quantities or instantaneous temperature
measurements may be applied to metering instruments to provide
the quantity computation.
(v) The specific gravity of the gas flowing through the meters,
when necessary for computing gas quantities, shall be, unless
otherwise agreed upon, determined by the use of a recording
gravitometer or an online process type gas chromatograph. The
arithmetic average of the 24-hour record, or so much of the 24
hours as gas has been flowing, or continuous instantaneous
specific gravity measurement may be applied to metering
instruments to provide the quality computation.
(vi) The deviation of the gas from Ideal Gas Laws shall be
calculated following the recommendations of the ANSI/API 2530
"Orifice Metering of Natural Gas and Other Related Hydrocarbon
Fluids" (A.G.A. Report No. 3) including the A.G.A. Manual for
Determination of Supercompressibility Factors of natural Gas
or the A.G.A. Transmission Measurement Committee Report No. 8
"Compressibility and Supercompressibility for Natural Gas and
Other Hydrocarbon Gases." If the composition of the gas is
such as to render the above procedure inapplicable, other
methods for determination of the deviation factors, mutually
agreed upon by Shipper and Transporter, shall be used.
(vii) The Heating Value shall be determined by either (1) the use of
a suitably located and acceptable make gas chromatograph or
(2) calculation from a fractional analysis, or (3) methods
outlined in A.G.A. Gas Measurement Committee Report No. 5,
latest edition, or (4) other methods mutually acceptable.
Dekatherms delivered shall be determined by either (1)
multiplying the Mcf delivered by a fraction the numerator of
which is the Btu per cubic foot and the denominator of which
is 1,000 or (2) multiplying the pounds mass delivered by a
fraction the numerator of which is the Btu per pound mass and
the denominator of which is 1,000,000.
12.03 Unless otherwise agreed to, Transporter will install, maintain, own and
operate, at its own expense, at or near each Point of Receipt and each
Point of Delivery, measuring stations properly equipped with standard
orifice meters, flange connections, orifice plates and other necessary
measuring equipment or other standard type meter suitable for the
purpose by which the quantity of natural gas shall be measured and
determined. The Heating Value of natural gas received or delivered
shall be measured and determined as provided above. Orifice meters
where used shall be installed and operated in accordance with ANSI/API
"Orifice Metering of Natural Gas and Other Related Hydrocarbon Fluids,"
latest revision, and shall include the use of straightening vanes.
12.04 Shipper acting jointly with Transporter may install, maintain and
operate, at its own expense, such check measuring equipment as desired,
provided that such equipment shall be so installed as not to interfere
with the operation of Transporter 's measuring equipment.
12.05 Each party shall have the right to be present at the time of
installing, reading, cleaning, changing, repairing, inspecting,
testing, calibrating, or adjusting done in connection with
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measuring equipment involved in billing and used in measuring or
checking the measurement of receipts and deliveries. The records from
such measuring equipment shall remain the property of their owner, but
upon request, each will submit to the other its records and charts,
together with calculations therefrom for inspection and verification,
subject to return within ten (10) days after receipt thereof.
12.06 All installations of measurement equipment applying to or affecting
receipts and deliveries shall be made in such manner as to permit an
accurate determination of the quantity of natural gas delivered and
ready verification of the accuracy of measurement. Care shall be
exercised by Transporter and Shipper in the installation, maintenance
and operation of pressure regulating equipment so as to prevent any
inaccuracy in the determination of the quantity of gas received or
delivered hereunder.
12.07 In the event a meter is out of service, or registering inaccurately,
the quantity of natural gas received or delivered shall be determined,
(i) By using the registration of any check meter or meters if
installed and accurately registering, or, in the absence of (i),
(ii) By correcting the error or the percentage of error if
ascertainable by calibration, test, or mathematical calculation,
or in the absence of both (i) and (ii), then
(iii) By estimating the quantity of receipts or deliveries during
periods under similar conditions when the meter was registering
accurately.
12.08 The accuracy of Transporter 's measurement equipment shall be verified
by Transporter at reasonable intervals, and, if requested, in the
presence of representatives of Shipper, but Transporter shall not be
required as a matter of routine to verify the accuracy of such
equipment more frequently than once in any thirty (30) day period.
12.09 If, upon test, any measurement equipment, including recording gas
chromatograph, is found to be in error not more than two percent (2%),
previous recording of such equipment shall be considered accurate in
computing receipts and deliveries; but such equipment shall be adjusted
at once to record correctly. If, upon test, any measurement equipment
shall be found to be inaccurate by an amount exceeding two percent (2%)
at a recording corresponding to the average hourly rate of flow for the
period since the last preceding test, then any previous recordings of
such equipment shall be corrected to zero error for any period which is
definitely known, but, in case the period is not known definitely or
agreed upon, such correction shall be for a period extending over
one-half of the time elapsed since the date of the last test, not
exceeding a correction period of 16 days.
12.10 Transporter and Shipper shall preserve all original or equivalent
electronic test data, charts, or other similar records for a period
required by the applicable rules of regulatory agencies having
jurisdiction.
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ARTICLE 13
TERM OF AGREEMENT
13.01 This Agreement shall be effective as of the date hereof and shall
continue in effect until the expiration of the twentieth (20th)
Contract Year, and year-to-year thereafter, subject to termination by
either party at the end of the Contract Year or any year thereafter
upon two years advance written notice to the other party.
13.02 Firm transportation service hereunder shall commence at the Effective
Time of the Merger between Transporter and Cardinal Pipeline Company,
LLC as defined in the Agreement and Plan of Merger, as amended.
ARTICLE 14
BILLING AND PAYMENT
14.01 Transporter shall render its bill on or before the first Day of each
Month for the Reservation Charges due for service rendered hereunder
during the preceding calendar Month. On or before the 10th day of each
Month, Transporter shall render its bill for any remaining charges for
gas services rendered during the preceding calendar Month. Such bill
shall include any Commodity Charges, Excess CFT Charges, any
adjustments to the charges billed on the first day of the Month, and
any penalties for unauthorized overruns applicable to the Month for
which the bill is rendered.
14.02 Transporter and Shipper shall each, upon request of the other, deliver
to the other for examination such pertinent records and charts as shall
be necessary to verify the accuracy of any statement, chart, or
computation made by either of them under or pursuant to any of the
provisions hereof.
14.03 Shipper, except as otherwise hereinafter provided, shall pay to
Transporter by wire transfer of immediately available funds on or
before the 10th day of each Month for the Reservation Charges due for
service rendered by Transporter hereunder during the preceding month
and billed by Transporter in the statement for such month, and on or
before the 20th day for each Month for any remaining charges for
services which are due hereunder. If the normal payment due date is a
Saturday, Sunday or holiday, this payment is due the following business
Day.
14.04 Should Shipper fail to pay all of the amount of any bill for service
hereunder when such amount is due, interest on the unpaid portion of
such amount shall accrue at the rate equal to the prime rate of
CitiBank, N.A. or its successor, calculated from the due date until the
date of payment. If such failure to pay continues for thirty (30) days
after payment is due, Transporter, in addition to any other remedy it
may have hereunder, may suspend further transportation of natural gas
hereunder until such amount is paid; provided, however, that if Shipper
in good faith shall dispute the amount of any such bill or any part
hereof, and shall pay to Transporter such amount as it concedes to be
correct, and at any time thereafter within thirty (30) days of a demand
made by Transporter, shall furnish good and sufficient surety
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bond, guaranteeing payment to Transporter of the amount ultimately
found to be due under such bill after a final determination, which may
be reached either by agreement between the parties, arbitration or
judgment for a court or by any regulatory authority having
jurisdiction, then Transporter shall not be entitled to suspend further
delivery of natural gas unless and until default be made in the
conditions of such bond.
14.05 If within twelve (12) months of the date of payment, it shall be found
that Shipper has been overcharged or undercharged in any form
whatsoever under the provisions hereof, and Shipper shall have actually
paid the bill(s) containing such overcharge or undercharge, then within
thirty (30) days after the final determination thereof, Transporter
shall refund the amount of any such overcharge with interest thereon at
the prime rate of the CitiBank N.A. or its successor from the time such
overcharge was paid to the date of refund, and Shipper shall pay the
amount of any such undercharge but without interest.
14.06 In the event an error is discovered in the amount billed in any
statement rendered by Transporter, such error shall be adjusted within
thirty (30) days of the determination thereof, provided that claim
therefor shall have been made within sixty (60) days from the date of
discovery of such error, but in any event, within twelve (12) months
from the date of payment.
14.07 If rendition of a bill to Shipper by Transporter is delayed beyond the
date specified herein, then Shipper shall pay such bill by wire
transfer within ten (10) days after rendition thereof.
ARTICLE 15
ASSUMPTION OF RISK
15.01 As between the parties hereto, Shipper shall be deemed to be in control
and possession of the gas to be transported hereunder until it shall
have been delivered to Transporter at the Point of Receipt; and Shipper
shall be deemed to be in control and possession of the gas to be
transported hereunder after delivery for Shipper's account at the Point
of Delivery. Transporter shall be deemed to be in control and
possession of such gas after the delivery thereof to Transporter at the
Point of Receipt and prior to delivery thereof for Shipper's account at
the Point of Delivery.
15.02 Transporter shall have no responsibility with respect to any gas to be
transported hereunder or on account of anything which may be done,
happen or arise with respect thereto until it is delivered into its
facilities at the Point of Receipt and after it is received for
Shipper's account at the Point of Delivery. Shipper shall have no
responsibility with respect to such gas or on account of anything which
may be done, happen or arise with respect thereto after causing the
delivery thereof to Transporter at the Point of Receipt and prior to
delivery thereof for Shipper's account at the Point of Delivery.
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ARTICLE 16
WARRANTIES
Shipper warrants for itself, its successors and assigns, that it will at the
time of delivery to Transporter for transportation have good and merchantable
title to or the legal right to tender all gas delivered hereunder free and clear
of all liens, encumbrances and claims. Shipper shall indemnify Transporter and
save it harmless from all suits, actions, debts, accounts, damages, costs,
losses and expenses arising from or out of adverse claims of any or all persons
to said gas, including claims for any royalties, taxes, license fees or charges
applicable to such gas or to the delivery thereof to Transporter for
transportation under this Service Agreement.
ARTICLE 17
FORCE MAJEURE
17.01 In the event of either party being rendered unable, wholly or in part,
by Force Majeure or Operating Conditions to carry out its obligations
other than (i) the obligation of Shipper to pay the monthly Reservation
Charge due Transporter (except as provided in 17.03 below), and (ii)
the obligation to make payment of amounts accrued and due at the time
thereof, it is agreed that on such party's giving notice and full
particulars of such Force Majeure or Operating Conditions in writing or
by telecopy to the other party within a reasonable time after the
occurrence of the cause relied on, the obligation of both parties, so
far as they are affected by such Force Majeure or Operating Conditions,
shall be suspended during the continuance of any inability so caused,
but for no longer period, and such cause shall so far as possible be
remedied with all reasonable dispatch. Neither party shall be liable in
damages to the other for any act, omission or circumstance occasioned
by, or in consequence of, Force Majeure or Operating Conditions, as
herein defined in this Service Agreement.
17.02 If, due to Force Majeure or Operating Conditions, Transporter is unable
to receive, transport or redeliver gas tendered by Shipper for
transportation or if Shipper is unable to deliver gas to Transporter,
then Transporter, upon providing as much notice as possible under all
of the circumstances, shall order reduction of Shipper's TCQ to the
extent necessary depending upon the type and location of the
occurrence, in accordance with the following procedures: Transporter
shall order allocation, to the extent necessary, of affected
transportation service to all shippers proportionate to each shipper's
TCQ. Where Transporter's ability to render service is impaired in a
particular segment of Transporter's system, then such allocation shall
be effected only in that segment of Transporter's system in which
service has been impaired.
17.03 Such causes or contingencies affecting the performance by either party,
however, shall not relieve it of liability unless such party shall give
notice and full particulars of such cause or contingency in writing or
by telecopy to the other party within a reasonable time after the
occurrence relied upon, nor shall such causes or contingencies
affecting the performance by either party relieve it of liability in
the event of its failure to use due diligence to remedy the situation
and remove the cause with all reasonable dispatch, provided that the
resolution of strikes, lockouts or other labor disputes shall be within
the sole discretion of the parties involved therein. Such causes or
contingencies affecting the performance by either party
13
<PAGE> 14
shall not relieve Shipper from its obligations to make payments of
monthly Reservation Charge except to the extent of Transporter's
negligence or willful misconduct.
ARTICLE 18
NOTICES
Notice to either party shall be in writing and shall be considered as duly
delivered when mailed to the other party at the following address:
If to Shipper:
Piedmont Natural Gas Company, Inc.
P. O. Box 33068
Charlotte, North Carolina 28233
Attention: Senior Vice President - Gas Supply and Services
Facsimile number: (704) 364-8320
If to Transporter:
Cardinal Extension Company, LLC
c/o Cardinal Operating Company
P. O. Box 1396
Houston, Texas 77251
Attention: Vice President, Customer Service
Facsimile number: _________________
Such addresses may be changed from time-to-time by mailing appropriate notice
thereof to the other party by certified or registered mail.
ARTICLE 19
MISCELLANEOUS
19.01 Transporter grants the right to Shipper to direct tie-ins between its
distribution system and Transporter's intrastate pipeline for the
purpose of serving its franchise area subject to the negotiation of
mutual agreeable terms and conditions (including reimbursement
arrangements and/or incremental charges and the construction, operation
and maintenance specifications for such tie-ins) which will be set
forth in an Interconnect and Reimbursement Agreement to be negotiated
and executed by Shipper and Transporter.
19.02 This Agreement reflects the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral and written, among the parties with
respect to the subject matter hereof. This Agreement can be amended,
restated or supplemented only by the written agreement of Transporter
and Shipper.
14
<PAGE> 15
19.03 No waiver by either party of any default by the other party in the
performance of any provision, condition or requirement herein shall be
deemed to be a waiver of, or in any manner release the other party
from, performance of any other provision, condition or requirement
herein, nor shall such waiver be deemed to be a waiver of, or in any
manner a release of, the other party from future performance of the
same provision, condition or requirement. Any delay or omission of
either party to exercise any right hereunder shall not impair the
exercise of any such right, or any like right, accruing to it
thereafter. No waiver of a right created by this Agreement by one party
shall constitute a waiver of such right by the other party except as
may otherwise be required by law with respect to persons not parties
hereto. The failure of one party to perform its obligations hereunder
shall not release the other party from the performance of such
obligations.
19.04 This Agreement may be assigned by Shipper without the prior consent of
Transporter provided that Shipper remains responsible for any and all
obligations under this Agreement.
19.05 This Agreement and the obligations of the parties hereunder are subject
to all applicable laws, rules, orders and regulations of any
governmental authorities having jurisdiction, and to the extent of
conflict, such laws, rules, orders and regulations of governmental
authorities having jurisdiction shall control.
19.06 Any provision of this Agreement that is prohibited or unenforceable
shall be ineffective to the extent of that prohibition or
unenforceability without invalidating the remaining provisions hereof
or affecting the validity or enforceability of that provision in any
other jurisdiction.
19.07 This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument.
19.08 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. EXCLUDING, HOWEVER, ANY
CONFLICT OF LAWS RULES OR PRINCIPLES WHICH MIGHT REFER THE CONSTRUCTION
OR OPERATION OF THE TERMS OF THIS AGREEMENT TO THE LAWS OF ANOTHER
STATE.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
CARDINAL OPERATING COMPANY,
as Operator of
Cardinal Extension Company, LLC
By: /s/ Frank J. Ferazzi
--------------------
Frank J. Ferazzi
Vice President
PIEDMONT NATURAL GAS COMPANY, INC.
By: /s/ Thomas E. Skains
--------------------
Thomas E. Skains
Senior Vice President
Gas Supply and Services
16
<PAGE> 1
Exhibit 12
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
For Fiscal Years Ended October 31, 1995 through 1999
(in thousands except ratio amounts)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Net income from continuing
operations $ 58,207 $ 60,313 $ 54,074 $ 48,562 $ 40,310
Income taxes 37,645 38,807 34,650 30,928 25,442
Fixed charges 37,978 38,415 39,263 37,009 35,651
-------- -------- -------- -------- --------
Total Adjusted Earnings $133,830 $137,535 $127,987 $116,499 $101,403
======== ======== ======== ======== ========
Fixed Charges:
Interest $ 35,911 $ 36,453 $ 36,949 $ 34,511 $ 33,224
Amortization of debt expense 323 304 346 345 336
One-third of rental expense 1,744 1,658 1,968 2,153 2,091
-------- -------- -------- -------- --------
Total Fixed Charges $ 37,978 $ 38,415 $ 39,263 $ 37,009 $ 35,651
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 3.52 3.58 3.26 3.15 2.84
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Piedmont Natural Gas Company, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 3
to Registration Statement No. 2-67478 on Form S-8, in Post-Effective Amendment
No. 2 to Registration Statement No. 33-3815 on Form S-8, in Registration
Statement No. 333-01855 on Form S-3, in Registration Statement No. 33-61093 on
Form S-8, in Registration Statement No. 333-26161 on Form S-3, in Registration
Statement No. 333-34433 on Form S-8, in Registration Statement No. 333-34435 on
Form S-8, in Registration Statement No. 333-35213 on Form S-3, and in
Registration Statement No. 333-86263 on Form S-3 of our report dated December
17, 1999, appearing in the Annual Report on Form 10-K of Piedmont Natural Gas
Company, Inc. for the year ended October 31, 1999.
/s/ DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 24, 2000
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,021,182
<OTHER-PROPERTY-AND-INVEST> 25,793
<TOTAL-CURRENT-ASSETS> 198,395
<TOTAL-DEFERRED-CHARGES> 43,287
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,288,657
<COMMON> 297,149
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 194,598
<TOTAL-COMMON-STOCKHOLDERS-EQ> 491,747
0
0
<LONG-TERM-DEBT-NET> 423,000
<SHORT-TERM-NOTES> 79,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 292,410
<TOT-CAPITALIZATION-AND-LIAB> 1,288,657
<GROSS-OPERATING-REVENUE> 686,470
<INCOME-TAX-EXPENSE> 38,365
<OTHER-OPERATING-EXPENSES> 556,383
<TOTAL-OPERATING-EXPENSES> 594,748
<OPERATING-INCOME-LOSS> 91,722
<OTHER-INCOME-NET> (1,144)
<INCOME-BEFORE-INTEREST-EXPEN> 90,578
<TOTAL-INTEREST-EXPENSE> 32,371
<NET-INCOME> 58,207
0
<EARNINGS-AVAILABLE-FOR-COMM> 58,207
<COMMON-STOCK-DIVIDENDS> 42,168
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 31,601
<EPS-BASIC> 1.88
<EPS-DILUTED> 1.86
</TABLE>
<PAGE> 1
Exhibit 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------
FORM 11-K
-------------------
For Annual Reports of
Employee Stock Purchase, Savings and Similar Plans
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended October 31, 1999
Commission file number 1-6196
A. Full title of the plans and address of the plans, if different from that of
the issuer named below:
Piedmont Natural Gas Company Employee Stock Purchase Plan
Piedmont Natural Gas Company Employee Stock Ownership Plan
B. Name of issuer of the securities held pursuant to the plans and the address
of its principal executive office:
Piedmont Natural Gas Company, Inc.
1915 Rexford Road
Charlotte, North Carolina 28211
<PAGE> 2
Piedmont Natural Gas Company Employee Stock Purchase Plan
The Employee Stock Purchase Plan (ESPP) was first adopted in 1986,
effective as of July 1, 1985. The purpose of the ESPP is to encourage employees
to purchase Piedmont Common Stock, thereby promoting increased interest in the
Company, and to encourage employees to remain employed. Participants elect to
have a portion of their pay withheld each pay period for periodic purchases at
90% of the average market prices for the month during which the purchase takes
place.
The following significant changes were made in the ESPP during the year
ended October 31, 1999:
- - The plan year was changed from a calendar year to a fiscal year ending
October 31.
- - Purchase dates were changed from semi-annual, June 30 and December 31,
to quarterly, January 31, April 30, July 31 and October 31.
- - Employees are now eligible to participate at the beginning of the
purchase quarter following their hire date. Previously employees had to
be employed six months before beginning participation at a purchase
period beginning January 1 or July 1.
- - Purchased shares are now deposited in the participant's account in
Piedmont's Dividend Reinvestment and Stock Purchase Plan (DRIP). Stock
certificates will only be issued from the DRIP upon the request of the
participant. Previously stock certificates were issued to participants
at the time of purchase.
There are no financial statements for the ESPP. Amounts withheld from
participants are recorded as a general liability on Piedmont's books until the
purchase date. At that time, the liability is reduced to zero and shares are
issued to the DRIP as indicated above. We furnish a quarterly statement to
participants showing the number of shares purchased, the purchase price and the
balance in the account. At October 31, 1999, 546 employees were participating in
the ESPP.
1
<PAGE> 3
Piedmont Natural Gas Company Employee Stock Ownership Plan
Statements Of Net Assets Available For Benefits
October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Assets:
Investment in Common Stock of Piedmont Natural
Gas Company, Inc., at fair value - 210,511
and 217,298 shares (cost $2,782,697 and
$2,781,669) at 1999 and 1998, respectively $6,736,352 $7,551,106
Receivable on sale of stock 198 117
Short-term investment fund, at cost which
approximates fair value 1,516 1,067
Other 57 49
---------- ----------
Net Assets Available for Benefits $6,738,123 $7,552,339
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE> 4
Piedmont Natural Gas Company Employee Stock Ownership Plan
Statements Of Changes In Net Assets Available For Benefits
For the Years Ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Dividend and interest income $ 287,859 $ 288,089 $ 281,528
Gain (Loss) on sale of assets (Note 3) (55,838) 22,398 44,876
Net appreciation (depreciation) in
fair value of investment
in Common Stock (528,700) 1,486,211 764,046
Withdrawals by participants (517,537) (812,499) (413,866)
----------- ----------- -----------
Net increase (decrease) (814,216) 984,199 676,584
Net assets available for benefits:
Beginning of year 7,552,339 6,568,140 5,891,556
----------- ----------- -----------
End of year $ 6,738,123 $ 7,552,339 $ 6,568,140
=========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE> 5
Piedmont Natural Gas Company Employee Stock Ownership Plan
Notes To Financial Statements
1. Description of the Plan
The Piedmont Natural Gas Company Employee Stock Ownership Plan (ESOP)
was established to enable employees to acquire Piedmont Common Stock.
Through 1986, we contributed to the ESOP amounts equal to a tax credit
based on aggregate compensation paid or accrued to all employees under
the ESOP. The Tax Reform Act of 1986 eliminated the tax credit
allowance, and we have not made contributions since 1987.
The ESOP is administered by an Administration Committee approved by our
Board of Directors. We pay the administrative expenses of the ESOP. The
Trust Client Services department of Wachovia Bank, N.A., serves as
trustee and custodian. The ESOP is subject to the provisions of the
Employee Retirement Income Security Act of 1974.
A participant in the ESOP is defined as an active eligible employee
with a balance in his or her ESOP account. An employee is eligible to
participate following the later of the date of completion of at least
1,000 hours of service during a period of 12 consecutive months or
attainment of age 21. However, employees who reached eligibility after
we stopped making contributions are not considered participants and no
previous contributions have been credited to them.
Separate accounts are maintained for each participant to reflect the
allocation of contributions and subsequent dividend and investment
income. Any income credited to participants is reinvested in Common
Stock. The ESOP provides for immediate vesting.
Distributions are made either at early retirement (age 55 and 10 years
of service), at normal retirement (age 65), at actual retirement for a
participant who remains employed after attaining normal retirement age,
at permanent disability or at death of the participant. The
Administration Committee may direct an earlier distribution following a
participant's termination of employment, and this has been the
practice.
A participant who has reached age 55 and completed ten years of
participation has the right to diversify a portion of his or her
account balance each year during the qualified election period.
4
<PAGE> 6
We may terminate the ESOP at any time and may either continue
operations until the trustee has distributed all benefits or cause the
assets to be liquidated and distributed.
2. Basis of Accounting
The financial statements are presented on the accrual basis of
accounting.
We make estimates and assumptions when preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from estimates.
The investment in Common Stock is valued at fair value as determined by
quoted market prices on the New York Stock Exchange on October 31, 1999
and 1998. Dividend income is accrued on the ex-dividend date. Purchases
and sales of securities are recorded on a trade-date basis. Realized
gains and losses from security transactions are reported on the average
cost method.
3. Gain (Loss) on Sale of Assets
The gain (loss) on sale of assets for the years ended October 31, 1999,
1998 and 1997, was computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Gross proceeds $ 386,600 $ 184,200 $ 448,975
Historical cost 442,438 161,802 404,099
--------- --------- ---------
Gain (Loss) $ (55,838) $ 22,398 $ 44,876
========= ========= =========
</TABLE>
5
<PAGE> 7
4. Net Assets Available for Benefits
Net assets available for benefits adjusted for the payable to
participants for withdrawals at October 31, 1999, 1998 and 1997, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net assets available for
benefits at end of year $6,738,123 $7,552,339 $6,568,140
Payable to participants
for withdrawals 17,289 114,003 205,919
---------- ---------- ----------
Net assets available for
benefits adjusted for the
payable to participants
for withdrawals $6,720,834 $7,438,336 $6,362,221
========== ========== ==========
</TABLE>
5. Tax Status
The ESOP is qualified under Sections 401 and 409 of the Internal
Revenue Code of 1986, as amended (the Tax Code). The Internal Revenue
Service has informed us by letter that the ESOP, as designed, is
qualified and the trust established under the ESOP is exempt from
income taxes under Section 501(a) of the Tax Code. The ESOP has been
amended since receiving the determination letter; however, we believe
the ESOP is currently designed and being operated in compliance with
applicable requirements of the Tax Code.
Distributions are taxed to recipients as ordinary income, with the
taxable amount that applies to Common Stock being the lesser of cost or
fair market value on the date of distribution. Any increase in the
value of Common Stock is not taxed during the period that the stock is
held by the trust nor upon its distribution to the participant. If
stock is sold after distribution, the sale is subject to capital gain
or loss treatment, depending on the sales price of the stock.
6
<PAGE> 8
Independent Auditors' Report
Piedmont Natural Gas Company
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for benefits
of the Piedmont Natural Gas Company Employee Stock Ownership Plan (the Plan) as
of October 31, 1999 and 1998, and the related statements of changes in net
assets available for benefits for each of the three years in the period ended
October 31, 1999. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
October 31, 1999 and 1998, and the changes in net assets available for benefits
for each of the three years in the period ended October 31, 1999 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 18, 2000
7
