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EXHIBIT 10(u)
CHANGE OF CONTROL
SEVERANCE AGREEMENT
AGREEMENT between K N ENERGY, INC. , a Kansas corporation (the
"COMPANY"), and ________________________ (EXECUTIVE"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "BOARD") has
approved the Company entering into a severance agreement with Executive in
order to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other
benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
(b) "CHANGE IN DUTIES" shall mean the occurrence, within
two years after the date upon which a Change in Control occurs, of any one or
more of the following:
(i) A significant reduction in the nature, scope
of authority or duties of Executive from those applicable to him
immediately prior to the date on which a Change in Control occurs;
(ii) A substantial reduction in Executive's annual
base salary or bonus opportunity under any applicable bonus or
incentive compensation plan from that provided to him immediately
prior to the date on which a Change in Control occurs;
(iii) Receipt of employee benefits (including but
not limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A substantial change in the location of
Executive's principal place of employment by the Company by more than
50 miles from the location where he was principally employed
immediately prior to the date on which a Change in Control occurs.
(c) "CHANGE IN CONTROL" means the occurrence of one or
more of the following events:
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(i) any "person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company,
any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities; or
(ii) during any period of two consecutive years
(not including any period prior to the effective date of this
Agreement), individuals who at the beginning of such period constitute
the Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in (i), (iii) or (iv) of
this Paragraph) whose election by the Board of Directors or nomination
for election by the Company's shareholders was approved by a vote of
at least two-thirds (b) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason other than normal retirement, death or disability to constitute
at least a majority thereof; or
(iii) the shareholders of the Company approve a
merger or consolidation of the Company with any other person, other
than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being
converted into voting securities for the surviving entity) more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger in
which no "person" (as defined above) acquires more than thirty percent
(30%) 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 of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
(d) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "COMPANY'S INDUSTRY" shall mean (i) the energy
industry, including without limitation the acquisition, development,
transportation, distribution, and provision of electric and natural gas sources
and services; and (ii) any other nature or type of business or industry in
which, at the time of Executive=s termination, the Company is engaged or
involved or has plans to engage or become involved within one year thereafter.
(f) "COMPENSATION" shall mean the greater of:
(i) Executive's base salary immediately prior to
the date on which a Change in Control occurs plus the amount of any
cash incentive bonus to be paid to Executive pursuant to the Company's
annual incentive plan based on the maximum of the
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current year's target; or
(ii) Executive's base salary at the time of his
Involuntary Termination plus the amount of any cash incentive bonus to
be paid to Executive pursuant to the Company's annual incentive plan
based on the maximum of the current year=s target.
(g) "COMPENSATION COMMITTEE" shall mean the Compensation
Committee of the Board of Directors.
(h) "CONFIDENTIAL INFORMATION" shall include all
information relating to (i) the Company's Customers, Prospective Customers,
providers, suppliers, and other business affiliates; (ii) the Company's
policies, practices, operating information, financial information, business
plans, and market approaches; and (iii) other information, techniques or
approaches used by the Company and not generally known in the Company's
Industry. The Company believes that some or all of this information
constitutes trade secrets; however, the "Confidential Information" covered by
the Restrictive Covenants set forth in Paragraph 6 hereof need not satisfy the
legal definition or requirements of a "trade secret" to be protected from
disclosure thereunder.
(i) "CUSTOMER" shall include any person or entity to whom
electricity, natural gas, or services are sold by the Company, and any person
or entity with whom the Company has established strategic marketing, services
or other alliances.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(k) "INVOLUNTARY TERMINATION" shall mean any termination
of Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(k)); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which
Executive receives notice of a Change in Duties;
provided, however, the term "INVOLUNTARY TERMINATION" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term
disability plan, or Retirement.
(l) "PROSPECTIVE CUSTOMER" shall include any person or
entity toward whom the Company has directed efforts to establish a Customer
relationship or strategic alliance and with whom the Company has a reasonable
expectation of establishing such a relationship or alliance.
(m) "RETIREMENT" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
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(n) "SEVERANCE AMOUNT" shall mean an amount equal to [one
(1)/two (2)/three (3)] times Executive's Compensation.
(o) "TERMINATION FOR CAUSE" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
failure to perform his duties or (iii) willful engagement in conduct which is
injurious to the Company or its subsidiaries (monetarily or otherwise).
(p) "WELFARE BENEFIT COVERAGES" shall mean the medical,
dental, life insurance and accidental death and dismemberment coverages
provided by the Company to its active employees.
2. SERVICES. Executive agrees that he will render services to
the Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time,
efforts and dedication to his duties as heretofore devoted.
3. SEVERANCE BENEFITS. If Executive's employment by the Company
or any subsidiary thereof or successor thereto shall be subject to an
Involuntary Termination which occurs within two years after the date upon which
a Change in Control occurs, then Executive shall be entitled to receive, as
additional compensation for services rendered to the Company (including its
subsidiaries), the following severance benefits:
(a) A lump sum cash payment in an amount equal to
Executive's Severance Amount.
(b) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to [twelve (12)/twenty-four
(24)/thirty-six (36)] months. Such benefit rights shall apply only to those
Welfare Benefit Coverages which the Company has in effect from time to time for
active employees. Welfare Benefit Coverage(s) shall immediately end upon
Executive's obtainment of new employment and eligibility for reasonably
comparable Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible
dependents to health care continuation coverage as required pursuant to Part 6
of Title I of the Employee Retirement Income Security Act of 1974, as amended.
(c) The severance payments under this Agreement shall be
paid to an Executive on or before the 10th business day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant
to this Paragraph will be deemed to be a severance payment and not compensation
for purposes of determining benefits under the Company's qualified plans and
shall be subject to any required tax withholding.
(d) Notwithstanding anything to the contrary in this or
any other agreement, upon a Change in Control, Executive's stock options or
restricted stock granted and outstanding
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under all K N Energy, Inc. stock plans shall become immediately exercisable and
all restrictions thereon shall be removed.
4. INTEREST ON LATE BENEFIT PAYMENTS. If any payment provided
for in Paragraph 3(a) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by
Citibank, N.A. (or any successor thereto) at its principal office in New York,
New York and shall change when and as any such change in such prime or base
rate shall be announced by such bank.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding
anything to the contrary in this Agreement, in the event that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company shall
pay to Executive an additional payment (a "Gross-up Payment") in an amount such
that after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
on any Gross-up Payment, Executive retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payments. The Company and Executive
shall make an initial determination as to whether a Gross-up Payment is
required and the amount of any such Gross-up Payment. Executive shall notify
the Company immediately in writing of any claim by the Internal Revenue Service
which, if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by the
Company and Executive) within five days of the receipt of such claim. The
Company shall notify Executive in writing at least five days prior to the due
date of any response required with respect to such claim if it plans to contest
the claim. If the Company decides to contest such claim, Executive shall
cooperate fully with the Company in such action; provided, however, the Company
shall bear and pay directly or indirectly all costs and expenses (including
additional interest and penalties) incurred in connection with such action and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund of any
amount paid by the Company with respect to such claim, Executive shall promptly
pay such refund to the Company. If the Company fails to timely notify
Executive whether it will contest such claim or the Company determines not to
contest such claim, then the Company shall immediately pay to Executive the
portion of such claim, if any, which it has not previously paid to Executive.
6. RESTRICTIVE COVENANTS. Executive is a member of the Company's
executive and management personnel whose duties include the formulation,
administration, and execution of Company policies, and high-level contact with
and responsibility for the Company's Customers and Prospective Customers. In
addition, Executive is provided with extensive information regarding the
Company's policies, practices, operating information, financial information,
business plans, market approaches, and Customers. The Noncompetition and
Nondisclosure Covenants
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contained in this Paragraph 6 are each reasonable and necessary for the
protection of the Company's legitimate business interests, relations with
Customers and Prospective Customers, Confidential Information and trade secrets
in the event of Executive's separation from employment. These Restrictive
Covenants constitute material consideration to the Company for the rights and
benefits provided to Executive in this Agreement; and the availability of such
rights and benefits constitutes good and sufficient consideration to Executive
for his agreement to these Restrictive Covenants, regardless of whether such
rights are ever exercised or such benefits are ever realized by Executive.
(a) NONCOMPETITION COVENANT. During the time that
Executive is employed by the Company and for a period of one (1) year
thereafter, and within the states of Colorado, Kansas, Missouri, Nebraska,
Oklahoma, Texas, Utah and Wyoming, Executive shall not, directly or indirectly,
individually or as an employee, officer, director, independent contractor,
consultant, or agent, or as a venturer, partner, member, shareholder, or other
beneficial holder of any interest in any sole proprietorship, joint venture,
partnership, limited liability company, corporation, or other entity or
business organization: (i) engage in or be involved in any way in the
Company's Industry; or (ii) solicit the business of or seek to enter into a
business relationship with any Customer or Prospective Customer of the Company
in areas of the Company's Industry. However, this Noncompetition Covenant
shall not apply or be enforceable if Executive is terminated by the Company
without cause (as "cause" is defined in Paragraph 1(o) hereof) and if there has
not been a Change in Duties for Executive.
(b) NONDISCLOSURE COVENANT. During the time that
Executive is employed by the Company and for a period of two years thereafter
(regardless of the reason or cause for termination), Executive shall not,
directly or indirectly, (i) use or apply any Confidential Information, alone or
with any other person or entity; or (ii) disclose or provide any Confidential
Information to any person or entity not authorized by the Company to receive
such Confidential Information.
(c) REMEDIES. In the event of the breach or threatened
breach of any provision of these Restrictive Covenants by Executive, the
Company shall be entitled to all appropriate legal and equitable relief,
including without limitation temporary restraining orders, preliminary and
permanent injunctions, and monetary damages.
(d) SURVIVAL AND INDEPENDENCE. These Restrictive
Covenants shall be construed as independent of any other agreements between the
parties and, except as provided in Paragraph 6(a) hereof, shall survive the
termination of employment of Executive for any reason. The existence of any
claim or cause of action of Executive against the Company or its successors or
assigns, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such Covenants.
(e) SEVERABILITY. If any provision of these Restrictive
Covenants as applied to any party or to any circumstances is adjudged by a
court to be unreasonable, invalid or unenforceable as written, the parties
agree that the court making such a determination shall have the power to reduce
or alter the duration, area, nature or scope of the subject provision, and in
its reduced or altered form such provision will then be enforceable and will be
enforced.
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7. GENERAL. This Agreement shall supersede and replace any prior
agreement between the Company and Executive providing for severance benefits in
the event of a change in control of the Company.
(a) TERM. The effective date of this Agreement is
October 18, 1996. The initial term of this Agreement shall be the period
beginning on said effective date and ending on the one-year anniversary of said
effective date. Within sixty days after the expiration of the initial term
hereof and within sixty days after each successive one-year period of time
thereafter that this Agreement is in effect, the Company shall have the right
to review this Agreement, and in its sole discretion either continue and extend
this Agreement, terminate this Agreement, and/or offer Executive a different
agreement. The Compensation Committee (excluding any member of the
Compensation Committee who is covered by this Agreement or by a similar
agreement with the Company) will vote on whether to so extend, terminate,
and/or offer Executive a different agreement and will notify Executive of such
action within sixty days following the expiration of each one-year period of
time that this Agreement is in effect. This Agreement shall remain in effect
until so terminated and/or modified by the Company. Failure of the
Compensation Committee to take any action within sixty days following the
expiration of each one-year period of time that this Agreement is in effect
shall be considered as an extension of this Agreement for an additional
one-year period of time. Notwithstanding anything to the contrary contained in
this "SUNSET PROVISION," it is agreed that if a Change in Control occurs while
this Agreement is in effect, then this Agreement shall not be subject to
termination or modification under this "SUNSET PROVISION," and shall remain in
force for a period of two years after such Change in Control, and if within
said two years the contingency factors occur which would entitle Executive to
the benefits as provided herein, this Agreement shall remain in effect in
accordance with its terms. If, within such two years after a Change in
Control, the contingency factors that would entitle Executive to said benefits
do not occur, thereupon this one-year "SUNSET PROVISION" shall again be
applicable with the sixty-day time period for Compensation Committee action to
thereafter commence at the expiration of said two years after such Change in
Control and on each one-year anniversary date thereafter.
(b) INDEMNIFICATION. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained
herein, the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in
full, which interest shall be calculated at the prime or base rate of interest
announced by Citibank, N.A. (or any successor thereto) at its principal office
in New York, New York and shall change when and as any such change in such
prime or base rate shall be announced by such bank.
(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's
obligation to pay (or cause one of its subsidiaries to pay) Executive the
amounts and to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any cir-
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cumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company (including its
subsidiaries) may have against him or anyone else. All amounts payable by the
Company (including its subsidiaries hereunder) shall be paid without notice or
demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and, except as provided in Paragraph 3(b) hereof, the obtaining
of any such other employment shall in no event effect any reduction of the
Company's obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement. Notwithstanding
anything to the contrary in this Agreement, in the event the Company should
acquire knowledge of conduct of Executive that would be defined as "cause" in
Paragraph 1(o) hereof after Executive's termination of employment, but before
any severance payments are paid hereunder, the Company shall have the right to
withhold payment of all or a portion of such severance payments.
(d) SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. This Agreement shall also be binding upon and inure to the
benefit of Executive and his estate. If Executive shall die prior to full
payment of amounts accrued pursuant to this Agreement, such amounts shall be
payable pursuant to the terms of this Agreement to his estate.
(e) SEVERABILITY. Any provision in this Agreement which
is prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right
to pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) NOTICES. Any notices or other communications
provided for in this Agreement shall be sufficient if in writing. In the case
of Executive, such notices or communications shall be effectively delivered if
hand delivered to Executive at his principal place of employment or if sent by
registered or certified mail to Executive at the last address he has filed with
the Company. In the case of the Company, such notices or communications shall
be effectively delivered if sent by registered or certified mail to the Company
at its principal executive offices.
(h) CONTROLLING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Colorado.
(i) RELEASE. As a condition to the receipt of any
benefit under Paragraph 3 hereof, Executive shall first execute a release, in
the form established by the Company, releasing the Company, its shareholders,
partners, officers, directors, employees and agents from any and all claims and
from any and all causes of action of any kind or character, including but not
limited to all claims or causes of action arising out of Executive's employment
with the Company or the termination of such employment.
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(j) FULL SETTLEMENT. If Executive is entitled to and
receives the benefits provided hereunder, performance of the obligations of the
Company hereunder will constitute full settlement of all claims the Executive
might or could otherwise assert against the Company on account of his
employment or termination of employment.
(k) UNFUNDED OBLIGATION. The obligation to pay amounts
under this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall create a trust or be deemed to be
secured by any pledge or encumbrance on any property of the Company (including
its subsidiaries).
(l) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall
not be deemed to constitute a contract of employment, nor shall any provision
hereof affect (a) the right of the Company (or its subsidiaries) to discharge
Executive at will or (b) the terms and conditions of any other agreement
between the Company and Executive except as provided herein.
(m) NUMBER AND GENDER. Wherever appropriate herein,
words used in the singular shall include the plural and the plural shall
include the singular. The masculine gender where appearing herein shall be
deemed to include the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ______ day of ________________, 1996.
"EXECUTIVE"
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"COMPANY"
K N ENERGY, INC.
By:
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Name:
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Title:
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