EXHIBIT 10.3
CHANGE IN CONTROL AGREEMENT
CHANGE IN CONTROL AGREEMENT (the "Agreement"), effective as of January 5,
2004 by and between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III (the "Employee") and DUKE ENERGY
FIELD SERVICES, LP ("Field Services"), a limited partnership with its principal
executive offices in Denver, Colorado.
WHEREAS, Field Services has determined that it is in the best interests of
Field Services, its parents, its affiliates and its partners to assure that
Field Services will have the continued undivided time, attention, loyalty and
dedication of the Employee, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined below);
WHEREAS, Field Services believes it is imperative to diminish the
inevitable distraction of the Employee by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Employee's full undivided time, attention, loyalty, and dedication
to Field Services currently and in the event of any pending or threatened Change
in Control; and
WHEREAS, it is Field Services' intention that the Employee be assured of
compensation and benefit arrangements if his employment terminates as a result
of a Change in Control which are competitive with those of similarly situated
Duke Energy Corporation peer business unit heads, such group specifically
excluding the Named Executive Officers appearing on the Summary Compensation
Table in the Duke Energy Corporation proxy statement, and the Employee is
willing to enter into an agreement to that end, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. TERM OF AGREEMENT.
The term of this Agreement (the "Agreement Term") shall commence on
January 5, 2004 and shall terminate on January 5, 2006 (the "Primary Term");
provided, however, in the event a Change in Control shall not have occurred by
the end of the Primary Term, the termination date shall be automatically
extended for consecutive one-month periods effective on the first day of each
month (each, a "Renewal Date") unless a Change in Control has subsequently
occurred or either party gives written notice to the other party not less than
ten (10) days prior to a Renewal Date of its intention to terminate the
Agreement at the end of the then-current Agreement Term. In the event a Change
in Control shall have occurred upon, or prior to, the end of the Agreement Term,
this Agreement will continue in force and effect until the satisfaction of all
of the parties' obligations hereunder.
2. COVERED TERMINATION.
(a) General. The Employee shall be treated as having incurred a "Covered
Termination" if during the period beginning on the date of a Change in Control
that occurs during the Agreement Term and ending on the close of the 24th full
calendar month following such Change in Control (the "Covered Period"), either
(i) Duke Energy Field Services Corporation, Duke Energy Field Services, LLC,
Duke Energy Field Services, LP or any of their respective subsidiaries (a "Field
Services' Affiliate") or Field Services terminates his employment other than for
Cause (as defined below)(so that the Employee is no longer employed by Field
Services or any Field Services' Affiliate) or (ii) the Employee terminates his
employment with Field Services and all Field Services' Affiliates for Good
Reason (as defined below). The Employee shall not be treated as having incurred
a Covered Termination if his employment shall terminate on account of his death,
disability, a termination by Field Services or any Field Services' Affiliate for
Cause, a termination by the Employee other than for Good Reason, or a
termination for any reason other than during the Covered Period, including a
termination by Field Services or any Field Services Affiliate in conjunction
with a offer of employment with any Field Services' parent or affiliated
company, specifically including but not limited to Duke Energy Corporation or
ConocoPhillips, or one of their respective affiliates.
(b) Cause. For purposes of this Agreement, "Cause" shall mean the
occurrence of any one of the following (provided the Employee receives written
notice from Field Services or a Field Services Affiliate identifying the acts or
omissions constituting Cause and is given a 30-day opportunity to cure, if such
acts or omissions are capable of cure): (A) a final conviction of a felony; (B)
an egregious act of dishonesty (including, without limitation, theft or
embezzlement), or a malicious action by the Employee toward the customers or
employees of Field Services or any Field Services' Affiliate; or (C) a material
failure to carry out, or malfeasance or gross insubordination in carrying out,
reasonably assigned duties or instructions consistent with his position
(provided that material failure to carry out reasonably assigned duties shall be
deemed to constitute Cause only after a finding by the Duke Energy Field
Services, LLC Board of Directors of material failure on the part of the
Employee).
(c) Good Reason. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of any one of the following, without the written consent of the
Employee, during the Covered Period (provided Field Services receives written
notice from the Employee, within 60 days of the occurrence of the event that
gives rise to Good Reason, which identifies the acts or omissions constituting
Good Reason and Field Services is given a 30-day opportunity to cure): (i) any
reduction in the Employee's Base Salary (as defined below) as in effect
immediately prior to the Change in Control; (ii) any reduction in the Employee's
annual bonus opportunity (as a percentage of Base Salary) from that which was in
effect immediately prior to the Change in Control under the applicable Bonus
Plan (as defined below); (iii) any failure by Field Services to provide Employee
a long-term incentive award opportunity at a time when Field Services is
providing such long-term incentive award opportunities to its senior executives
who directly report to Employee, unless consented to by the Employee in writing
(iv) any material diminution in the Employee's overall level of authority or
responsibility with Field Services and all Field Services' Affiliates (or their
successors) as in effect immediately prior to the Change in Control.
2
(d) Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred upon the first to occur of one of the
following events upon, or prior to, the end of the Agreement Term:
(i) an acquisition subsequent to the date hereof by any individual,
entity or group that results in direct or indirect voting control (greater
than 50 percent of the combined voting power) of Duke Energy Field
Services, LLC passing to any individual, entity or group other than a
group consisting of Duke Energy Corporation and/or its affiliates and/or
ConocoPhillips and/or its affiliates. For purposes of greater certainty,
any acquisition, merger, or similar business combination of or with Duke
Energy Corporation, or one of its affiliates, or, of or with
ConocoPhillips, or one of its affiliates, will not constitute a "change in
control" for purposes of this section; or
(ii) the approval by the Duke Energy Field Services, LLC Board of
Directors and consummation of (A) the sale or other disposition of all or
substantially all of the assets of Duke Energy Field Services, LLC or (B)
a complete liquidation or dissolution of Duke Energy Field Services, LLC.
3. Termination Benefits.
(a) General. In the event of a Covered Termination, the Employee shall be
entitled to the compensation and termination benefits set forth in Section 3(b)
hereof. Any lump-sum payments required under this Section 3 will be made by
Field Services within 10 business days after the effective date of the
Employee's Covered Termination. In the event of Employee's death following a
Covered Termination but prior to the payment of any lump-sums required under
this Section 3, any lump-sum payments required under this Section 3 will be made
by Field Services as soon as administratively feasible after the effective date
of the Employee's Covered Termination of employment to his estate. This
Agreement does not grant the Employee any right or entitlement to be retained by
Field Services or any Field Services' Affiliate or related company and shall not
affect or prejudice the right of Field Services or any Field Services' Affiliate
to terminate the employment of the Employee at any time for any reason, subject
to the termination payments described in this Section 3. In the event of the
termination of the Employee's employment with Field Services and all Field
Services' Affiliates, the Employee agrees to immediately resign all of his
positions as an officer or director of Field Services or any Field Services'
Affiliate.
(b) Covered Termination Payments and Benefits. In the event that the
Employee's employment hereunder is terminated on account of a Covered
Termination, the Employee will be paid and entitled to the following:
(i) any salary or compensation earned through the date of
termination and any rights or payments that have become vested or that are
otherwise due under any employee benefit, incentive or compensation plan
or arrangement maintained by Field Services or a Field Services' Affiliate
that the Employee participated in at the time of his termination of
employment;
3
(ii) a lump-sum payment equal to (A) the Employee's annual bonus
under any Bonus Plan (as defined below) payment earned for any completed
bonus year prior to termination of employment, if not previously paid,
plus (B) a pro-rata amount of the Employee's target bonus under any Bonus
Plan for the bonus year in which the termination occurs, determined as if
all program goals had been met at target (the "Target Bonus"), pro-rated
based on the number of days of service during the bonus year occurring
prior to termination of employment;
(iii) a lump-sum payment equal to the sum of the Employee's
then-current Base Salary and Target Bonus for each year of the Severance
Period (as defined below), including a pro-rata amount (determined on a
daily basis) for any partial years during this period;
(iv) a lump-sum payment in an amount equal to the aggregate cost of
coverage that would apply for the Severance Period (as defined below)
under the medical and dental (but not medical spending account or employee
assistance plan) and basic life insurance plans that the Employee
participated in at the time of his termination, or their equivalent, under
the same terms to the Employee as though the Employee had not terminated
employment, which cost shall be determined equal to the premium costs
being utilized for the provision of such medical and dental coverage to
former employees under COBRA at the time of the Employee's termination of
employment and Field Services' assumed costs for such basic life insurance
coverage for internal accounting purposes at the time of the Employee's
termination of employment;
(v) a lump-sum payment equal to the present value (determined based
on a six (6) percent interest rate assumption and, in the case of any
pension plan accrual, the applicable mortality table for calculating
optional forms of benefits under such plan) of any employer contribution
(other than a contribution under section 401(k) of the Internal Revenue
Code of 1986, as amended), benefit accrual or employer-financed account
allocation that would have been made or accrued during the Severance
Period under any qualified or non-qualified pension or savings plan
maintained by Field Services or any Field Services' Affiliate in which the
Employee participated at the time of his termination, determined using the
Employee's Base Salary and Target Bonus (if relevant) at the time of
termination and assuming the maximum elective deferral by the Employee
permitted by such plans, if applicable;
(vi) notwithstanding the terms of any award agreement or plan
document to the contrary, continued vesting for the duration of the
Severance Period of any long term incentive awards, including awards of
stock options held by the Employee at the time of his termination of
employment that are not vested or exercisable on such date, in accordance
with their terms, as if the Employee's employment had not terminated, with
any options or similar rights to remain exercisable (to the extent
exercisable at the end of the Severance Period) for a period of 90 days
following the close of the Severance Period, but not beyond the maximum
original term of such options or rights. Any award that is
4
designated by Duke Energy Corporation as a "Chairman's Award" and the
stock award provided to Employee pursuant to the February 1, 2004
Restricted Stock Award Agreement between Employee and Duke Energy
Corporation are specifically excluded from this Section and nothing in
this Section shall impact the terms of such awards; and
(vii) in the event that the Employee would have satisfied the
eligibility requirements of any retiree medical plan or program maintained
by Field Services or any Field Services' Affiliate generally for its
retirees (a "Retiree Plan") within two years after the date of his or her
termination of employment, the provision of such retiree medical benefits
to the Employee from and after the date he would have satisfied such
requirements (assuming continued employment) on a basis substantially
equivalent to the retiree medical benefits provided generally under the
Retiree Plan, subject to such terms and conditions and requirements for
participation as apply under the Retiree Plan from time to time and as
such Retiree Plan may be amended or terminated by Field Services or any
Field Services' Affiliate, as the case may be, at any time.
(c) Definitions. For purposes of this Agreement, the terms below shall
have the following definitions:
(1) "Bonus Plan" shall mean any bonus plan, program or arrangement
in which the Employee participates where bonus payments are based upon
achievement of performance targets by Duke Energy Corporation, Field
Services, Field Services' Affiliates, any business unit thereof or the
Employee.
(2) "Base Salary" shall mean the annualized amount of the Employee's
regular salary during any payroll period, prior to any reductions for
elective deferrals or salary reductions but excluding any overtime,
incentive or other special compensation.
(3) "Severance Period" shall be the period beginning on the date of
the Covered Termination and ending on the earlier of (i) the end of the
24th month following such Covered Termination or (ii) the Employee's
attainment of age 65 (with any fraction of a month to be rounded to the
nearest whole month).
(d) Other Termination Benefits. In the event of a termination of the
Employee's employment that does not constitute a Covered Termination, the
Employee will not be due any payments, rights or benefits under this Agreement
other than those provided for in Section 3(b)(i) hereof.
4. LAPSE OF RESTRICTIVE COVENANTS. Upon the occurrence of a Covered
Termination, the Employee will no longer be bound by any non-competition
restriction or other restrictive covenant to which he or she is a party with
respect to Field Services or any Field Services' Affiliate.
5. TAX WITHHOLDING. Field Services may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes or other
withholdings as shall be required to be withheld pursuant to any applicable law
or regulation.
5
6. NOTICE. Any notices to be given hereunder by either party to the other
may be effectuated either by personal delivery in writing or by mail, registered
or certified, postage prepaid, with return receipt requested. Mailed notices
shall be addressed to the parties at the following addresses:
If to Field Services or any other
Field Services' Affiliate: ▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Operating Officer
Duke Energy Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Cc: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Duke Energy Field Service - General Counsel
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
7. WAIVER OF BREACH. The waiver by any party to a breach of any provision
in this Agreement cannot operate or be construed as a waiver of any subsequent
breach by a party. Any waiver or consent from Field Services with respect to any
term or provision of this Agreement or any other aspect of the Employee's
conduct or employment shall be effective only in the specific instance and for
the specific purpose for which given and shall not be deemed, regardless of
frequency given, to be a further or continuing waiver or consent. The failure or
delay of Field Services at any time or times to require performance of, or to
exercise any of its powers, rights or remedies with respect to, any term or
provision of this Agreement or any other aspect of the Employee's conduct or
employment shall in no manner (except as otherwise expressly provided herein)
affect Field Services' right at a later time to enforce any such term or
provision.
8. SEVERABILITY. The validity or unenforceability of any particular
provision in this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
9. ENTIRE AGREEMENT. Except as otherwise provided herein, this Agreement
covers the entire understanding of the parties with respect to the subject
matter hereof, superseding all prior understandings and agreements. No
modifications or amendments of the terms and conditions herein shall be
effective unless in writing and signed by the parties or their respective duly
authorized agents.
10. APPLICABILITY OF EMPLOYEE SEVERANCE AGREEMENT. In the event of a
Covered Termination following a Change in Control, this Agreement will supersede
any "Employee Severance Agreement and Release" (or similar severance agreement)
to which the Employee is a party, but shall have no effect on any such agreement
in the event of a termination of employment that is not treated as a Covered
Termination under this Agreement.
6
11. GOVERNING LAW. This Agreement shall be interpreted, construed and
governed according to the laws of the State of Colorado, without reference to
conflicts of law principles thereof.
12. SUCCESSORS AND ASSIGNS. Neither this Agreement, nor any of the
parties' respective rights, powers, duties or obligations hereunder, may be
assigned by either party without the prior written consent of the other party.
This Agreement shall be binding upon and inure to the benefit of the Employee
and his heirs and legal representatives and Field Services and its successors.
Successors of Field Services shall include, without limitation, any company or
companies acquiring, directly or indirectly, all or substantially all of the
assets of Field Services, whether by merger, consolidation, purchase, lease or
otherwise, and such successor shall thereafter be deemed "Field Services" for
the purpose hereof.
13. FORUM SELECTION. The Employee agrees that any claim against Field
Services or any Field Services' Affiliate arising out of or relating in any way
to this Agreement or to the Employee's employment, or termination of employment,
with Field Services or any Field Services' Affiliate (including without
limitation any claim arising under the federal civil rights statutes) shall be
brought exclusively in the District Court for the City and County of Denver,
Colorado, or the United States District Court for the District of Colorado, and
in no other forum. The Employee hereby consents to the personal and subject
matter of jurisdiction of these courts for the purpose of adjudicating any
claims subject to this forum selection clause. The Employee also agrees that any
dispute of any kind arising out of or relating to this Agreement or to the
Employee's employment or termination of employment (including without limitation
any claim for compensation or claim arising under the federal or state civil
rights statutes) shall at the sole election or demand of Field Services or the
applicable Field Services' Affiliate be submitted to final, conclusive and
binding arbitration before and according to the rules then prevailing of the
American Arbitration Association in Denver, Colorado ("AAA"), which election or
demand may be made by Field Services or the applicable Field Services' Affiliate
at any time. The dispute shall be heard and determined by one mutually
acceptable arbitrator selected by the parties from a panel of seven arbitrators
provided to the parties by AAA. The parties shall select the arbitrator by
alternatively striking one name off the panel list until only one name remains
and that person shall be the arbitrator. The results of any such arbitration
proceeding shall be final and binding both upon Field Services or the applicable
Field Services' Affiliate and upon the Employee, and shall be subject to
judicial confirmation as provided by the Federal Arbitration Act or the Colorado
Uniform Arbitration Act, C.R.S. Section ▇▇-▇▇-▇▇▇, et. seq., which are
incorporated herein by reference.
14. LEGAL FEES. To provide the Employee with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of enforcement,
Field Services shall pay and be solely responsible for reasonable attorneys'
fees and expenses incurred by the Employee as a result of a claim that Field
Services has breached or otherwise failed to perform its obligations under this
Agreement or any provision hereof, regardless of which party, if any, prevails
in the contest; provided, however, that Field Services shall not be responsible
for such fees and expenses to the extent incurred in connection with a claim
made by the Employee that the trier of fact in any such contest finds to be
frivolous.
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
July 19, 2004.
DUKE ENERGY FIELD SERVICES, LP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Operating Officer
Duke Energy Corporation
EMPLOYEE
/s/ ▇. ▇. ▇▇▇▇▇▇ III
------------------------------------
8
