Exhibit 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the ___ day of ____, 2000 by and
between Western Resources, Inc., a Kansas corporation (the "Company"), and
______________ ("Executive"). This Agreement amends and restates in its entirety
the Letter Agreement between the Company and Executive, dated ____________
199___.
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to secure Executive's
continued services; and
WHEREAS, the Company also recognizes that the possibility of a change
in control could arise which may result in the distraction of management to the
detriment of the Company and its shareholders. It is important that Executive be
able to advise the Board whether a proposed change in control would be in the
best interests of the Company and its shareholders and to take action regarding
such proposal as the Board directs, without being influenced by the
uncertainties of Executive's own situation.
WHEREAS, the Board has authorized the Company to enter into this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
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have the respective meanings set forth below:
(a) "Adjusted Base Salary" shall mean ninety percent (90%) of the
annual salary job value for the pay grade of Executive and other remuneration
for current services (but excluding all bonuses, stock based awards and other
incentive compensation) paid to or for the benefit of Executive.
(b) "Base Salary" shall mean all salary, cash compensation
and other remuneration for current services (but excluding all bonuses, stock
based awards and other incentive compensation) paid to, for the benefit of or
deferred by Executive, together (without duplication) with the compensation that
would have been payable in cash to Executive if such compensation had not been
converted into Restricted Share Units pursuant to the Western Resources, Inc.
Executive Stock for Compensation Program.
(c) "Board" means the Board of Directors of the Company.
(d) "Bonus Amount" means the greater of (a) the highest annual
incentive bonus (together with the bonus amount that would have been payable to
Executive if such bonus amount had not been converted into a split dollar life
insurance benefit pursuant to the Split Dollar Insurance Program) payable to or
for the benefit of or deferred by Executive from the Company (or its affiliates)
for the last three (3) completed fiscal years of the Company immediately
preceding Executive's Date of Termination (annualized in the event Executive was
not employed by the Company (or its affiliates) for the whole of any such fiscal
year), or (b) the Executive's target bonus amount for the year of termination of
employment.
(e) "Cause" means (i) the willful and continued failure of Executive to
perform substantially his duties with the Company (other than any such failure
resulting from Executive's incapacity due to physical or mental illness or any
such failure subsequent to Executive being delivered a Notice of Termination
without Cause by the Company or delivering a Notice of Termination for Good
Reason to the Company) after a written demand for substantial performance is
delivered to Executive by the Chairman of the Board which specifically
identifies the manner in which Executive has not substantially performed
Executive's duties, or (ii) the willful engaging by Executive in illegal conduct
which is demonstrably and materially injurious to the Company. For purposes of
this paragraph (e), no act or failure to act by Executive shall be considered
"willful" unless done or omitted to be done by Executive in bad faith and
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of the Company. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board, based
upon the advice of counsel for the Company or upon the instructions of the
Company's chief executive officer or another senior officer of the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. Executive's attention to matters
not directly related
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to the business of the Company shall not provide a basis for termination for
Cause if the Company has not objected to such activity in writing. Cause shall
not exist unless and until the Company has delivered to Executive a copy of a
resolution duly adopted by three-quarters (3/4) of the entire Board (excluding
Executive if Executive is a Board member) at a meeting of the Board called and
held for such purpose (after reasonable notice to Executive and an opportunity
for Executive, together with counsel, to be heard before the Board), finding
that in the good faith opinion of the Board an event set forth in clauses (i) or
(ii) has occurred and specifying the particulars thereof in detail.
(f) "Change in Control" means the occurrence of any one of the
following events:
(i) individuals who, on May 17, 2000, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to May 17, 2000, whose election or nomination for election
was approved by a vote of at least three-fourths of the Incumbent
Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as
a nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors
or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in
this paragraph (ii) shall not be deemed to be a Change in Control by
virtue of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan
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(or related trust) sponsored or maintained by the Company or any
Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), (E)
pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group
of persons including Executive);
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries (a "Business Combination"), unless
immediately following such Business Combination: (A) more than 60% of
the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or indirectly
has beneficial ownership of 100% of the voting securities eligible to
elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting
Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the
same proportion as the voting power of such Company Voting Securities
among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or
the Parent Corporation) is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) and
(C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be deemed to be
a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of
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complete liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
(g) "Date of Termination" means (i) if Executive's employment is to be
terminated for Disability, 30 days after Notice of Termination is given
(provided that Executive shall not have returned to the performance of
Executive's duties on a full-time basis during such 30 day period), (ii) if
Executive's employment is to be terminated by the Company for Cause or by
Executive for Good Reason, the date specified in the Notice of Termination,
(iii) if Executive's employment is to be terminated by the Company for any
reason other than Cause, the date specified in the Notice of Termination, which
shall be 90 days after the Notice of Termination is given, unless an earlier
date has been expressly agreed to by Executive in writing, (iv) if Executive's
employment terminates by reason of death, the date of death of Executive; or (v)
if Executive's employment is terminated by Executive other than for Good Reason,
the date specified in Executive's Notice of Termination, but not more than 30
days after the Notice of Termination is given, unless expressly agreed to by the
Company in writing.
(h) "Disability" means termination of Executive's employment by the
Company due to Executive's absence from Executive's duties with the Company on a
full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness, unless
within 30 days after Notice of Termination is given to Executive following such
absence Executive shall have returned to the full-time performance of
Executive's duties.
(i) "Good Reason" shall mean termination based on any of the following
events:
(i) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company
(including any adverse diminution of such duties or responsibilities)
or (B) the failure to reappoint or reelect Executive to any position
held by Executive without Executive's consent; provided, however, that
Good Reason shall not be deemed to occur upon a change in duties or
responsibilities (other than reporting responsibilities) that is solely
and directly a result of the Company no longer being a publicly traded
entity and does not involve any other event set forth in this
paragraph;
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(ii) a reduction by the Company in Executive's Base Salary,
annual target bonus opportunity or targeted long-term incentive value
(including any material and adverse change in the formula for such
annual bonus target or long-term incentive target) as in effect
immediately prior to the date hereof or as the same may be increased
from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be
required to relocate more than 30 miles from Executive's present place
of employment or (B) travel on Company business to an extent
substantially greater than the travel obligations of Executive
immediately prior to the date hereof;
(iv) the failure of the Company to (A) continue in effect any
employee benefit plan, welfare benefit plan or fringe benefit plan in
which Executive is participating immediately prior to the date hereof
or, if more favorable, which may be available from time to time
hereafter to Executive or other executives of the Company, or the
taking of any action by the Company which would materially and
adversely affect Executive's participation in or reduce Executive's
benefits under any such plan, unless Executive is permitted to
participate in other plans providing Executive with substantially
equivalent benefits (at no greater cost to Executive with respect to
welfare benefit plans), or (B) provide Executive with paid vacation and
sick leave in accordance with the most favorable policies of the
Company as in effect for Executive immediately prior to the date hereof
or, if more favorable, as may be available for Executive or other
executives of the Company after the date hereof; provided however, that
prior to a Change in Control, changes in any such plans which
constitute in the aggregate less than 10% of Executive's aggregate
benefits under such plans and which are applied to all employees of the
Company shall not constitute "Good Reason";
(v) any refusal by the Company to permit Executive to engage
in activities not directly related to the business of the Company which
Executive was, or other executives of the Company are, permitted to
engage in;
(vi) any purported termination of Executive's employment which
is not effectuated pursuant to Section 17(b) (and which will not
constitute a termination
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hereunder);
(vii) the failure of the Company to obtain the assumption
(and, if applicable, guarantee) agreement contemplated in Section
16(b); or
(viii) the Company's termination of this Agreement or the
failure of the Company to renew this Agreement as provided in Section 4
hereof.
For purposes of this Agreement, any good faith determination of Good
Reason by Executive shall be conclusive, provided however, that an isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Company within ten (10) days after receipt of notice thereof given by
Executive shall not constitute Good Reason. Executive's right to terminate
employment for Good Reason shall not be affected by Executive's incapacities due
to mental or physical illness and Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any event or
condition constituting Good Reason; provided, however, that Executive must
provide notice of termination of employment within one hundred eighty (180) days
following Executive's knowledge of an event constituting Good Reason or such
event shall not constitute Good Reason under this Agreement.
(j) "Notice of Termination" means a written notice of termination of
employment given by one party to the other party pursuant to Section 17(b).
(k) "Qualifying Termination" means a termination of Executive's
employment (i) by the Company other than for Cause; (ii) by Executive for Good
Reason; or (iii) by Executive during the 90 day period after a Change in
Control. Termination of Executive's employment on account of death, Disability
or Retirement shall not be treated as a Qualifying Termination. In addition, in
the event that Executive is offered employment with a subsidiary of the Company
in connection with any event which would constitute a Change in Control and in
which such subsidiary becomes a publicly traded Company and Executive accepts
such offer, Executive shall be deemed to have terminated employment with the
Company pursuant to a Qualifying Termination upon commencing such employment
with the subsidiary and shall be entitled to the benefits described in this
Agreement payable by reason of a Qualifying Termination.
(l) "Rabbi Trust" means a trust established by the Company
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with a trustee acceptable to Executive under a trust agreement pursuant to which
(i) the trustee will be required to pay the amounts payable to Executive in
connection with the split dollar insurance agreement in accordance with Section
6(a)(ix) and for the amounts payable to Executive for "relocation expenses" in
accordance with Section 6(a)(x) of this Agreement to the extent not otherwise
paid to Executive (to the extent the trust assets are sufficient), (ii) the
Company will be required to make any additional contributions to the trust that
may be necessary to assure the trust assets are sufficient to pay the amounts
described in (i) above, (iii) except as provided in (iv) below, no amounts held
in the trust may be returned to the Company or used for any purpose other than
the payment of the amounts described in (i) above or the payment of the fees of
the trustee and other expenses of the trust until there has been full payment of
the amounts described in (i) above, (iv) the assets of the trust shall be
subject to claims of creditors of the Company in the event of the Company's
insolvency, (v) the Company will promptly pay all of the fees of the trustee and
other expenses of the trust, and (vi) the trust assets shall be invested
exclusively in public debt securities of the United States, time or demand
deposits in a bank insured by an agency of the United States, cash and cash
equivalents.
(m) "Retirement" means Executive's termination on or after Executive's
normal retirement date under the terms of the Western Resources, Inc. Retirement
Plan, as in effect immediately prior to Executive's termination or a Change in
Control, whichever is earlier, or in accordance with any retirement arrangement
established with respect to Executive with Executive's written consent.
(n) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
2. Employment and Duties.
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(a) Term of Employment. The Company agrees to continue to employ
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Executive, and Executive agrees to remain in employment of the Company, in
accordance with the terms and provisions of this Agreement, for the Term of this
Agreement, unless such employment is sooner terminated by the Company or
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Executive.
(b) Duties. During the term of Executive's employment under this
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Agreement, Executive shall serve as of the Company. Executive shall devote
Executive's full business time and attention to the affairs of the Company and
his duties as its _________. Executive shall have such duties as are appropriate
to Executive's position as ________, and shall have such authority as required
to enable Executive to perform these duties. Consistent with the foregoing,
Executive shall comply with all reasonable instructions of the [Chief Executive
Officer of the Company] [Board of Directors of the Company]. Executive shall be
based at the headquarters of the Company in Topeka, Kansas and Executive's
services shall be rendered there except insofar as travel may be involved in
connection with Executive's regular duties. Executive shall report directly to
________.
3. Obligation of Executive. In the event of a tender or exchange offer,
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proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, Retirement or an
event which would constitute Good Reason, until the Change in Control occurs or,
if earlier, such tender or exchange offer, proxy contest, or agreement is
terminated or abandoned.
4. Term of Agreement. This Agreement shall continue for a period of
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three (3) years from the date hereof provided that on each anniversary of the
Agreement, the term shall automatically be extended for one year, unless at
least 90 days prior to such date, the Company or Executive shall have given
notice to cancel this Agreement at the end of its then term.
5. Salary and Benefits.
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(a) Salary. The Company shall pay Executive an annual salary
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at an initial rate equal to Executive's current Base Salary which shall be
reviewed annually by the Human Resources Committee of the Board for the purpose
of considering increases thereof. Executive's salary shall be paid in accordance
with the standard practices for other senior corporate executives of the
Company.
(b) Bonuses. Executive shall be eligible to receive annually
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or otherwise any bonus awards, whether payable in cash, shares of common stock
of the Company or otherwise, which the Company, the Human Resources Committee of
the Board or such other
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authorized committee of the Board determines to award or grant.
(c) Benefit Programs. Executive shall receive such benefits
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and awards, including without limitation stock options and restricted share unit
awards, as the Human Resources Committee of the Board shall determine and shall
be eligible to participate in all employee benefit plans and programs of the
Company from time to time in effect for the benefit of senior executives of the
Company, including, but not limited to, pension and other retirement plans,
401(k) plans, group life insurance, hospitalization and surgical and major
medical coverages, sick leave, salary continuation arrangements, vacations and
holidays, long-term disability, and such other benefits as are or may be made
available from time to time to senior executives of the Company.
(d) Business Expenses and Perquisites. Executive shall be
---------------------------------
reimbursed for all reasonable expenses incurred by Executive in connection with
the conduct of the business of the Company, provided Executive properly accounts
therefor in accordance with the Company's policies. Executive shall also be
entitled to such other perquisites as are customary for senior executives of the
Company.
(e) Office and Services Furnished. The Company shall furnish
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Executive with office space, secretarial assistance and such other facilities
and services as shall be suitable to Executive's position and adequate for the
performance of Executive's duties hereunder.
6. Payments Upon Termination of Employment.
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(a) Qualifying Termination. If during the Term of this Agreement the
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employment of Executive shall terminate pursuant to a Qualifying Termination,
then the Company shall provide to Executive:
(i) within five days following the Date of Termination a
lump-sum cash amount equal to the sum of (A) Executive's Base Salary
through the Date of Termination and any bonus amounts which have become
payable to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's annual bonus for the fiscal year in which
Executive's Date of Termination occurs in an amount at least equal to
(1) Executive's Bonus Amount, multiplied by (2) a fraction, the
numerator of which
10
is the number of days in the fiscal year in which the Date of
Termination occurs through the Date of Termination and the denominator
of which is three hundred sixty-five (365), and reduced by (3) any
amounts paid from the Company's annual incentive plan for the fiscal
year in which Executive's Date of Termination occurs, (C) any accrued
vacation pay, and (D) the cash equivalent of any accumulated sick
leave; in each case to the extent not theretofore paid;
(ii) within five days following the Date of Termination, a
lump-sum cash amount equal to the sum of (i) 2.99 times the higher of
Executive's highest annual rate of Base Salary during the 12-month
period immediately prior to Executive's Date of Termination and
Executive's Adjusted Base Salary, plus (ii) 2.99 times Executive's
Bonus Amount;
(iii) the Company shall continue to provide, for a period of
three (3) years following Executive's Date of Termination, Executive
(and Executive's dependents, if applicable) with the same level of
medical, dental, accident, disability and life insurance benefits and
following such three year period retiree medical and dental benefits
for the life of Executive and eligible dependents upon substantially
the same terms and conditions (including contributions required by
Executive for such benefits) as existed on the date hereof or, if more
favorable to the Executive, as may exist immediately prior to
Executive's Date of Termination; provided, that, if Executive cannot
continue to participate in the Company plans providing such benefits or
the Company shall modify or terminate any such plans, the Company shall
otherwise provide such benefits on the same after-tax basis as if
continued participation had been permitted. Notwithstanding the
foregoing, in the event Executive becomes reemployed with another
employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to
such benefits during the period of Executive's eligibility, but only to
the extent that the Company reimburses Executive for any increased cost
and provides any additional benefits necessary to give Executive the
benefits provided hereunder;
(iv) Executive shall be entitled to the provisions of the
Executive Salary Continuation Plan and, notwithstanding anything to the
contrary in such Plan, (i) shall be deemed to be sixty-five years of
age as of the Date of Termination for purposes of determining the
Retirement Benefit and commencement of payment thereof under Section
4.1 of the Plan (without regard to Executive's actual age or date of
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commencement of retirement benefit payments under the Western
Resources, Inc. Retirement Plan) and Vesting under Section 4.3 of the
Plan and (ii) Compensation for purposes of calculating the Retirement
Benefit thereunder shall be deemed to be the sum of (A) the higher of
Executive's Adjusted Base Salary and Executive's Base Salary, plus (B)
Executive's Bonus Amount;
(v) the cost of outplacement services of a nationally
recognized executive employment agency selected by Executive and
reasonably acceptable to the Company, or in lieu of such outplacement
services Executive may elect to receive a lump sum of $50,000;
(vi) continuation of the Company's executive financial and
legal counseling services program as in effect on the date hereof or if
more favorable to Executive, as may be available to Executive or other
comparable executives of the Company thereafter, for three (3) years
following Executive's Date of Termination;
(vii) continuation of participation in the Company's matching
gift program as in effect on the date hereof or if more favorable to
the Executive, as may be available to Executive or other comparable
executives of the Company thereafter, as if Executive continued as a
senior executive of the Company, for three (3) years following
Executive's Date of Termination;
(viii) if Executive has deferred compensation agreements or
deferred retention payments with the Company, or any of its
subsidiaries or affiliates that (i) have not fully vested or contain
any restriction on the payment of benefits thereunder (other than the
passage of time) [Certain Executives: other than the passage of time,
except that payment under Executive's Deferred Compensation agreements
with Kansas Gas and Electric Company shall commence upon a Qualifying
Termination] such benefits shall upon a Qualifying Termination become
fully vested and all such restrictions shall lapse, and/or (ii) provide
for variable interest rates thereon (which interest rates are
established by the Company, subsidiary or affiliate), such interest
rates shall be fixed for the duration of such deferral at the higher of
the contract rate and the prime rate established from time to time by
Chase Manhattan Bank, New York, New York ("Prime Rate");
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(ix) if the Executive is entitled to benefits under any split
dollar life insurance agreement, (A) the amount payable to Executive
thereunder shall be in accordance with the terms of the agreement, but
not less than the Base Amount (as defined in the split dollar insurance
agreement) under any such agreement, (B) upon a Change in Control the
maximum amount that could be payable to Executive under such split
dollar life insurance agreement shall be deposited in a Rabbi Trust
until paid to Executive and (C) following a Change in Control the total
shareholder return calculation under the split dollar agreement shall
include any consideration received in the Change in Control and any
distribution to shareholders of assets and/or securities at or about
the time of the Change in Control;
(x) Relocation Expenses;
"Relocation Expenses" shall mean the purchase of Executive's
principal residence by the Company at the request of Executive on or
before 18 months following Executive's Date of Termination. The price
to be paid by Company shall equal the higher of the appraised tax value
of the residence and the appraised value of such residence determined
by an appraiser selected by the Executive and the Company (but not less
than the purchase price of such residence plus all improvements
thereto) plus, in each case, the cost of any brokerage fees or other
costs and expenses incurred by Executive in connection with such sale.
If Executive and the Company cannot agree on an appraiser each shall
select an appraiser. Such appraisers shall select a third appraiser.
Each appraiser shall determine the fair value of the residence which
shall be averaged, provided that any appraisal that is more than 10%
deviation from the other two appraisals shall be omitted. The cost of
such appraisals shall be paid by the Company. Upon a Change in Control,
relocation expenses under this Section 6(a)(x) shall be estimated at
the higher of (i) the appraised value and (ii) the purchase price plus
all improvements of the applicable residence at the date of the Change
in Control, plus 17% of such amount and shall be deposited in a Rabbi
Trust until paid to Executive;
(xi) each stock option granted to Executive by the Company and
outstanding immediately prior to the Qualifying Termination shall be
fully exercisable and may be exercised by Executive (or Executive's
legal representatives, legatees or distributees) at prior to the
expiration date of the
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applicable option (determined without regard to any earlier termination
that would otherwise occur by reason of termination of employment) and
each related dividend equivalent shall become fully vested upon such
Qualifying Termination;
(xii) each restricted share granted to Executive by the
Company and still subject to restrictions immediately prior to the
Qualifying Termination shall become fully vested and all restrictions
shall lapse upon such Qualifying Termination;
(xiii) each restricted share unit granted to Executive by the
Company which has not vested prior to the Qualifying Termination shall
become fully vested upon such Qualifying Termination; and
(xiv) each other stock or stock equivalent grant granted to
Executive by the Company which has not vested prior to the Qualifying
Termination shall become fully vested and all restrictions shall lapse
upon such Qualifying Termination.
(b) If during the Term of this Agreement the employment of Executive
shall terminate other than by reason of a Qualifying Termination, then the
Company shall pay to Executive within ten (10) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (1) Executive's Base
Salary through the Date of Termination and any Bonus Amounts which have become
payable, to the extent not theretofore paid or deferred, and (2) any accrued
vacation pay and accumulated sick leave, in each case to the extent not
theretofore paid. The Company may make such additional payments, and provide
such additional benefits, to Executive as the Company and Executive may agree in
writing.
7. Gross-Up Provision.
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(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which effectuates a
change in ownership or control described in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or
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penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then 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 Excise Tax) imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of
(x) the Excise Tax imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-up Payment in
Executive's adjusted gross income and the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made. For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-up Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes and
(iii) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of the
Gross-up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 7(a), all determinations
required to be made under this Section 7, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment, and the assumptions to
be utilized in arriving at such determinations, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in ownership or control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in ownership or control, Executive may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the
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performance of the services hereunder. The Gross-up Payment under this Section 7
with respect to any Payments shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Executive thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code and any
penalties payable by Executive) shall be promptly paid by the Company to or for
the benefit of Executive. In the event the amount of the Gross-up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
8. Confidential Information. Executive acknowledges that: (i) the
------------------------
business of the Company and its subsidiaries and affiliates is intensely
competitive and that Executive's engagement by the Company requires that
Executive have access to and knowledge of confidential information of the
Company and its subsidiaries and affiliates, including, but not limited to, the
identity of customers, the identity of the representatives of customers with
whom the Company and its subsidiaries and affiliates have dealt, the kinds of
services provided by the Company and its subsidiaries and affiliates to
customers and offered to be performed for potential customers, the manner in
16
which such services are performed or offered to be performed, the service needs
of actual or prospective customers, pricing information, information concerning
the creation, acquisition or disposition of products and services, customer
maintenance listings, computer software applications and other programs,
personnel information and other trade secrets (the "Confidential Information");
(ii) the direct and indirect disclosure of such Confidential Information to
existing or potential competitors of the Company and its subsidiaries and
affiliates would place the Company and its subsidiaries and affiliates at a
competitive disadvantage and would do damage, monetary or otherwise, to the
business of the Company and its subsidiaries and affiliates; and (iii) the
engaging by Executive in any of the activities prohibited by this Section 8 may
constitute improper appropriation and/or use of such information and trade
secrets. Notwithstanding the foregoing, Confidential Information shall not
include information which (x) is or becomes part of the public domain through a
source other than Executive, (y) is or becomes available to Executive from a
source independent of the Company and its subsidiaries and affiliates, or (z)
constitutes general industry knowledge possessed by Executive by virtue of
Executive's employment with the Company. Executive expressly acknowledges the
trade secret status of the Confidential Information and that the Confidential
Information constitutes a protectable business interest of the Company and its
subsidiaries and affiliates. Accordingly, the Company and Executive agree as
follows:
(a) During the Term of this Agreement and for three years following
Executive's Date of Termination, Executive shall not, directly or indirectly,
whether individually, as a director, stockholder, owner, partner, employee,
principal or agent of any business, or in any other capacity, make known,
disclose, furnish, make available or use any of the Confidential Information,
other than in the proper performance of the duties contemplated herein or as
required by law or by a court of competent jurisdiction or other administrative
or legislative body; provided, however, that prior to disclosing any of the
Confidential Information to a court or other administrative or legislative body,
Executive shall promptly notify the Company so that the Company may seek a
protective order or other appropriate remedy.
(b) Executive agrees to return all Confidential Information, including
all photocopies, extracts and summaries thereof, and any such information stored
electronically on tapes, computer disks or in any other manner to the Company at
upon
17
request of the Company and upon the termination of Executive's employment for
any reason.
9. Nonsolicitation. During the Term of this Agreement and for a period
---------------
of two years after the Date of Termination Executive shall not, directly or
indirectly, solicit, interfere with, hire, offer to hire or induce any person
who is an employee of the Company or any of its subsidiaries or affiliates and
whose salary is in excess of $50,000 to discontinue his or her relationship with
the Company or any of its subsidiaries or affiliates and accept employment by,
or enter into a business relationship with, Executive or any other person or
entity.
10. Antidisparagement.
-----------------
(a) Unless otherwise required by a court of competent
jurisdiction or pursuant to any recognized subpoena power, Executive agrees and
promises that Executive shall not make any oral or written statements or reveal
any information to any person, company or agency which (i) is negative,
disparaging or damaging to the name, reputation or business of the Company or
any of its subsidiaries or affiliates, or any of their shareholders, directors,
officers or employees, or (ii) has or would have a negative financial impact,
whether directly or indirectly, on the Company or any of its subsidiaries and
affiliates, or any of their shareholders, directors, officers or employees.
(b) Unless otherwise required by a court of competent
jurisdiction or pursuant to any recognized subpoena power, the Company agrees
and promises that neither it nor any of its subsidiaries and affiliates shall
make any oral or written statements or reveal any information to any person,
company or agency which (i) is negative, disparaging or damaging to the name,
reputation or business of Executive or (ii) has or would have a negative
financial impact, whether directly or indirectly, on Executive.
11. Injunctive Relief.
-----------------
(a) Executive acknowledges that a breach of the undertakings
in Sections 8, 9 or 10(a) of this Agreement would cause irreparable damage to
the Company and its subsidiaries and affiliates, the exact amount of which shall
be difficult to ascertain, and that remedies at law for any such breach would be
inadequate. Executive agrees that, if Executive breaches or attempts or
threatens to breach any of the undertakings in Sections 8, 9 or 10(a) of this
Agreement, then the Company shall be entitled to injunctive relief without
posting bond or other
18
security, in addition to any other remedy or remedies available to the Company
at law or in equity.
(b) The Company acknowledges that a breach of the undertakings
in Section 10(b) of this Agreement would cause irreparable damage to Executive,
the exact amount of which shall be difficult to ascertain, and that remedies at
law for any such breach would be inadequate. The Company agrees that, if the
Company or any of its subsidiaries or affiliates breaches or attempts or
threatens to breach any of the undertakings in Section 10(b) of this Agreement,
then Executive shall be entitled to injunctive relief, without posting bond or
other security, in addition to any other remedy or remedies available to
Executive at law or in equity.
12. Withholding Taxes. The Company may withhold from all payments due
-----------------
to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
13. Indemnity. The Company shall hold harmless and indemnify Executive
---------
against any and all expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonably incurred by Executive in
connection with any threatened, pending, or completed action, suit, or
proceeding whether civil, criminal, administrative, or investigative (including
an action by or in the right of the corporation) to which Executive is, was, or
at becomes a party, or is threatened to be made a party, by reason of the fact
that Executive is, was, or at becomes a director, officer, employee, or agent of
Company, or is, or was serving, or at serves at the request of Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise; or otherwise to the fullest extent as may
be provided to Executive by Company under the nonexclusivity provisions of
Article XVIII of The Articles of Incorporation of Company and Kansas law.
14. Reimbursement of Expenses; Mitigation. (a) If any contest or
-------------------------------------
dispute shall arise under this Agreement involving termination of Executive's
employment with the Company or involving the failure or refusal of the Company
to perform fully in accordance with the terms hereof, the Company shall
reimburse Executive, on a current basis, for all legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute or
incurred by Executive in seeking advice with respect to any such matters
(regardless of the result thereof), together
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with interest in an amount equal to the prime rate of Chase Manhattan Bank from
time to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the date the
Company receives Executive's statement for such fees and expenses through the
date of payment thereof, regardless of whether or not Executive's claim is
upheld by an arbitration panel or court.
(b) Executive shall not be required to mitigate any payment
the Company becomes obligated to make to Executive under this Agreement.
15. Scope of Agreement. Nothing in this Agreement shall be deemed to
------------------
entitle Executive to continued employment with the Company or its Subsidiaries;
provided, however, that any termination of Executive's employment during the
Term of this Agreement shall be subject to all of the provisions of this
Agreement.
16. Successors; Binding Agreement. (a) This Agreement shall not be
-----------------------------
terminated by any sale, merger or other business combination. In the event of
any such sale, merger or other business combination, the provisions of this
Agreement shall be binding upon the surviving corporation, and such surviving
corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with the sale,
merger or other business combination, it will cause any successor entity to the
Company unconditionally to assume (and for any Parent Corporation in such
business combination to guarantee), by written instrument delivered to Executive
(or his beneficiary or estate), all of the obligations of the Company hereunder.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
17. Notice. (a) For purposes of this Agreement, all notices and other
------
communications required or permitted hereunder
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shall be in writing and shall be deemed to have been duly given when delivered
or five (5) days after deposit in the United States mail, certified and return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Western Resources, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and (iii) specify the Date of Termination. The failure by
Executive or the Company to set forth in such notice any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of Executive or the Company hereunder or preclude Executive or the Company from
asserting such fact or circumstance in enforcing Executive's or the Company's
rights hereunder.
18. Full Settlement; Resolution of Disputes. The Company's obligation
---------------------------------------
to make any payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall be in lieu and in full settlement of all other
severance payments to Executive under any other severance or employment
agreement between Executive and the Company, and any severance plan of the
Company. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and except as otherwise provided in Section
21
6(a)(iii), such amounts shall not be reduced whether or not Executive obtains
other employment. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Topeka, Kansas by
three arbitrators in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award in
any court having jurisdiction. The Company shall bear all costs and expenses
arising in connection with any arbitration proceeding pursuant to this Section.
19. Employment with Subsidiaries. Employment with the Company for
----------------------------
purposes of this Agreement shall include employment with any Subsidiary.
20. Survival. The respective obligations and benefits afforded to the
--------
Company and Executive as provided in Sections 6 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 7, 8, 9, 10, 11, 12, 13, 14, 16, 18, and 21 shall
survive the termination of this Agreement.
21. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
-----------------------
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF KANSAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. 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 OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
22. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
23. Miscellaneous. No provision of this Agreement may be modified or
-------------
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at 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. Failure by Executive or the Company
to insist upon strict compliance with any provision of this Agreement or to
assert any right Executive or the Company may have hereunder, including without
limitation, the right of Executive to terminate
22
employment for Good Reason, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
WESTERN RESOURCES, INC.
By: _____________________________
Title:___________________________
----------------------------
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