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Exhibit 10.1
SEVERANCE COMPENSATION AGREEMENT
This Agreement is effective as of the date it is
signed by both AQUILA, INC., a Delaware corporation (the
"Company"), and Keith G. Stamm ("Executive").
WHEREAS, the Company's Board of Directors has
determined that it is appropriate to reinforce and encourage the
continued attention and dedication of members of the Company's
management, including Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from
the possibility of a Change of Control; and
WHEREAS, this Agreement sets forth the severance
compensation to which Executive will be entitled upon certain
conditions if Executive's employment with the Company terminates
following a Change of Control.
NOW, THEREFORE, IN CONSIDERATION of the mutual
premises, covenants and agreements set forth below, it is hereby
agreed as follows:
1. Term . This Agreement shall terminate, except to the
extent that any obligation of the Company hereunder remains unpaid
as of such time, upon the earliest of: (i) two (2) years from the
date hereof if a Change in Control has not occurred within such
2-year period; provided that the term of this Agreement shall be
automatically extended for an additional month upon each monthly
anniversary of the date hereof until a party provides notice to the
other party prior to the end of any month that such automatic
extension shall cease, in which case this Agreement shall terminate
at the end of the then existing 2-year term; (ii) the termination
of Executive's employment for any reason, including by reason of
death, Disability or Retirement, prior to a Change of Control;
(iii) the termination of Executive's employment for Cause following
a Change of Control; (iv) the termination of Executive's employment
for any reason other than for Good Reason following a Change of
Control; or (v) two (2) years from the date of a Change in
Control.
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2.
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Severance upon Termination of
Employment .
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(a)
Events Giving Rise to Benefits . Executive shall be entitled
to payments and other benefits as set forth in Sections 2(b) and
2(c) if within two (2) years following a Change in Control, the
Company shall terminate Executive's employment other than for
Disability, Retirement, or Cause, or, within such 2-year period,
Executive shall terminate his or her employment for Good Reason.
Except as specifically provided in this Section 2, Executive shall
have no right to receive compensation under this Agreement.
Termination of employment due to death shall not give rise to any
rights to compensation under this Agreement.
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(b)
Severance Pay . The Company shall pay a lump sum cash
amount, no later than the fifth (5 th ) business day
following Executive’s Date of Termination, equal 2.99 times
the sum of A plus B, where
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"A" equals Executive’s annual base salary
(including all amounts of such salary that are deferred under any
qualified and non-qualified plans of the Company) determined at the
greater of the rate in effect as of the date of such termination or
the highest rate in effect at any time during the 90 day period
prior to the Change of Control; and
"B" equals Executive’s target annual
incentive opportunity for the calendar year in which such Change in
Control occurs, or if greater, the average (50 th
percentile) target annual incentive opportunity for a select group
of comparable companies as determined by an independent consulting
firm selected by the Board of Directors of the Company.
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(c)
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Other Benefits . In
addition to compensation set forth in Section 2(b) hereof, and
subject to the provisions and limitations set forth below,
Executive shall be entitled to the following benefits:
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(i) Commencing on the Date of Termination and continuing for a
period of three (3) months thereafter, Executive may exercise all
stock options granted to Executive pursuant to the Company's equity
incentive plan(s). Such stock options shall be exercisable whether
or not: (i) a period of one year has elapsed from the date of grant
to the date of exercise; or (ii) any installment exercise terms as
stipulated in any agreement issued under such plan(s) have been
satisfied. However, in no event shall Executive exercise any stock
option after the expiration of the option period as stipulated in
an agreement issued under such plan(s).
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(ii) Effective
as of the Date of Termination, any restrictions relating to stock
awards granted under the Company's equity incentive plan(s) shall
lapse.
(iii) No
later than the fifth (5 th ) business day following
Executive’s Date of Termination, Executive shall receive a
lump sum cash amount equal to Executive’s target annual and
long-term incentive opportunity for the incentive period in which
Executive’s employment terminates times a fraction, the
numerator of which is the number of days in such incentive period
ending on the Date of Termination and the denominator of which is
the total number of days in such incentive period.
(iv)
Effective as of the Date of Termination and
continuing for a period of three years after the Date of
Termination, the Company will provide Executive with health
insurance coverage at the same cost to Executive and at materially
the same level of coverage for Executive as the coverage in effect
immediately prior to the Date of Termination. The Company shall, at
its option, contribute amounts it is required to contribute on
behalf of Executive pursuant to this paragraph either to: (A) plans
maintained for the Company's employees; or (B) private insurance
plans. The health insurance continuation benefits paid for
hereunder shall be deemed to be a part of Executive’s COBRA
coverage. All such health benefits shall be in addition to any
other benefits relating to health or medical care benefits that are
available under the Company's policies to Executive following
termination of employment; provided, however, that in the event
Executive becomes covered under substitute health plans of another
employer with materially the same level of coverage as that
provided by the Company during this period, subject to the
applicable requirement of COBRA, the Company will no longer provide
health coverage under this paragraph.
(v) Effective
as of the Date of Termination, Executive shall be entitled to the
services of a national executive outplacement firm, the aggregate
cost to the Company of which shall not exceed the outplacement
benefits comparable to the Aquila Workforce Transition Plan that is
in effect as of the date of termination.
(vi) Effective as of
the Date of Termination, Executive shall be entitled to three (3)
years of additional credit for both age and service under the
Company’s tax-qualified and non-qualified pension plans
(specifically excluding any account-based plan such as a 401(k) or
profit sharing plan); provided that if applicable provisions of the
Internal Revenue Code prevent payment in respect of such credit
under the Company’s tax-qualified pension plan, such payments
shall be made under the Company’s non-qualified pension
plan.
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(a) Gross-Up Payment . Notwithstanding Anything in this
Agreement to the contrary, in the event it shall be determined that
any payment or distribution to or for the benefit of Executive
whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement (other than any payment under this
Section 3) or otherwise would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") or a similar section (such payment, a "Change in
Control Payment" and such excise tax on all such Change in Control
Payments, together with any interest and penalties thereon,
collectively the "Excise Tax"), then Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount
determined by the Accounting Firm such that after payment by
Executive of any tax thereon, Executive retains an amount of the
Gross-Up Payment equal to
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the amount of the Excise Tax;
provided, however, that if the aggregate value (as determined under
Section 280G of the Code) of such Change in Control Payments
is less than 110% of the product of "3 times" the Executive’s
"base amount" (as defined in Section 280G(b)(3) of the Code)
(such product, the "Golden Parachute Threshold"), then Executive
shall not be entitled to any Gross-Up Payment and, instead, the
Change in Control Payments shall be reduced so that their aggregate
value (as so determined) is equal to $1.00 less than the Golden
Parachute Threshold.
For purposes of this Section 3,
Executive’s applicable Federal, state and local taxes shall
be computed at the maximum marginal rates, taking into account the
effect of any loss of personal exemptions resulting from receipt of
the Gross-Up Payment.
(b) Determinations . All determinations required to be made
under this Section 3, including whether a Gross-Up Payment is
required under Section 3(a), and the assumptions to be used in
determining the Gross-Up Payment, shall be made by such accounting
firm as the Company may designate in writing prior to a Change in
Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within
thirty (30) business days of the receipt of notice from Executive
that there has been a Change in Control, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the Person effecting the
Change in Control or is otherwise unavailable, Executive may
appoint another nationally recognized 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.
(c) Subsequent Redeterminations . Unless requested otherwise
by the Company, Executive agrees to use reasonable efforts to
contest in good faith any subsequent determination by the Internal
Revenue Service that Executive owes an amount of Excise Tax greater
than the amount determined pursuant to Section 3(b), provided
that Executive shall be entitled to reimbursement by the Company of
all fees and expenses reasonably incurred by Executive in
contesting such determination. In the event the Internal Revenue
Service or any court of competent jurisdiction determines that
Executive owes an amount of Excise Tax that is either greater or
less than the amount previously taken into account and paid under
this Section 3, the Company shall promptly reimburse
Executive, or Executive shall promptly reimburse the Company, as
the case may be, the amount of such excess or shortfall. In the
case of any payment that the Company is required to make to
Executive pursuant to the preceding sentence (a "Later Payment"),
the Company shall also reimburse Executive an additional amount
such that after payment by Executive of all of Executive’s
applicable Federal, state and local taxes, including any interest
and penalties assessed by any taxing authority, on such additional
amount, Executive will retain an amount equal to the total of
Executive’s applicable Federal, state and local taxes,
including any interest and penalties assessed by any taxing
authority, arising due to the Later Payment. In the case of any
reimbursement of Excise Tax that Executive is required to make to
the Company pursuant to the second sentence of this Section 3(c),
Executive shall also reimburse the Company at the amount of any
additional payment received by Executive from the Company in
respect of applicable Federal, state and local taxes on such repaid
Excise Tax, to the extent Executive is entitled to a refund of (or
has not yet paid) such Federal, state or local taxes.
4.
Definitions . As used in this Agreement, the following
capitalized terms shall have the meaning set forth below:
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(a)
"Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
(b)
"Benefit Plans" means any employee benefit plan or
arrangement providing retirement benefits or any health, life,
disability or similar welfare insurance. Executive perquisites are
specifically excluded from this definition.
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