November 29, 1999
SETTLEMENT AGREEMENT
Xxxxxx X. Xxxxxxx (the "Employee") and Illinova Corporation (the
"Company") have entered into a "Retention Agreement" dated January 18, 1999. For
greater certainty as to certain compensation, payments, and benefits which may
be provided under the Retention Agreement, the parties to the Retention
Agreement wish to specifically identify such compensation, payments, and
benefits at this time. Accordingly, the Employee and the Company agree that,
effective December 6, 1999 (the "Effective Date"), the terms of this Settlement
Agreement will apply, and the current section 1 of the Retention Agreement shall
be without effect:
1. SUBSTITUTE PAYMENT PROVISIONS. The Employee agrees that the
compensation, payments, and benefits as described in Supplement A (the "Benefits
Schedule") which is attached to and forms a part of this Settlement Agreement
are in lieu of any and all compensation, payments, and benefits under section 1
of the Retention Agreement. (For purposes of this Settlement Agreement, the term
"Settlement Agreement" shall include the Benefits Schedule.) By execution of
this Settlement Agreement, the Employee waives any and all rights to the amounts
that would have been payable under section 1 of the Retention Agreement absent
this Settlement Agreement. The Employee acknowledges that the amounts payable to
the Employee under this Settlement Agreement, and under the Retention Agreement
as modified by this Settlement Agreement, are in excess of the amounts which
would have been payable to the Employee under the Retention Agreement absent
modification by this Settlement Agreement.
2. ACCELERATION AUTHORIZED. The Employee authorizes the Company to
accelerate, into calendar year 1999, payments that may otherwise have been
payable after 1999 under Company compensation arrangements, including, without
limitation, the Illinova Executive Incentive Compensation Plan, Illinova Long
Term Incentive Compensation Plan, and the Illinova Corporation Supplemental
Pension Plan applicable to the Employee (the "Supplemental Plan"), but not
including the Company's health, life, or disability plans (which would not be
accelerated), in accordance with determinations made by the Company. In
addition, the Company may, in its sole discretion, accelerate severance payments
that may otherwise be due to the Employee upon termination of employment under
any agreement with the Company or any plan or arrangement maintained by the
Company. The Company may, in its discretion, limit the amount accelerated on
behalf of the Employee to the extent it determines that the acceleration would
result in payments that would not be tax deductible by reason of section 162(m)
of the Internal Revenue Code (relating to the $1 million limit on deductible
compensation). If any payment otherwise due (or which may become due) to the
Employee in a later year under the Retention Agreement, this Settlement
Agreement, or any other Company compensation arrangement is accelerated into
1999 under this Settlement Agreement, there shall be a corresponding reduction
in the Company's obligation to make payments
to the Employee under that agreement or arrangement in the later year. As
soon as practicable after such acceleration occurs, the Company will provide
the Employee with a schedule of the amount of the acceleration and the
specific compensation, benefits, and payments that were canceled as a result
of the acceleration. Any obligation that is accelerated under any agreement
or arrangement will be subject to a present value adjustment, and any
obligation that is accelerated under the Supplemental Plan will be subject to
an actuarial adjustment to reflect such acceleration.
3. RESTRICTIONS ON ACCELERATION. If approved by the Board of Directors
of the Company, the Company will endeavor to accelerate amounts into calendar
year 1999 so that the Employee's benefits will not be reduced in accordance with
the provisions of section 9 of the Retention Agreement, to the extent that the
Company determines that such amounts would otherwise become due to the Employee
in a later year. However, the Company and the Employee agree that the provisions
of section 9 of the Retention Agreement shall continue to apply, notwithstanding
the provisions of this Settlement Agreement.
4. GOOD REASON. The Employee acknowledges that (i) entering into this
Settlement Agreement does not constitute a change in compensation, perquisites,
or benefits, does not constitute a change in the nature or scope of the
Employee's authority, and does not otherwise constitute a basis for "Good
Reason" under the Retention Agreement (as in effect both prior to and after
amendment by this Settlement Agreement), and (ii) the amendment of the Retention
Agreement by this Settlement Agreement does not constitute an amendment of the
Retention Agreement (as in effect both prior to and after amendment by this
Settlement Agreement) by the Company that adversely affects the Employee's
rights under the Retention Agreement, and hereby waives any and all rights to
assert the contrary.
5. OTHER EMPLOYMENT. The Employee shall not be required to mitigate
damages by seeking other employment or otherwise. Except as specifically
provided in section A-1(b) of the Benefits Schedule with respect to termination
of health coverage, life insurance coverage, and disability coverage upon the
Employee's coverage under a plan or arrangement of the Employee's employer, the
Company's obligations under this Settlement Agreement shall not be reduced in
any way by reason of any compensation received by the Employee from sources
other than the Company or the Affiliates after termination of Employee's
employment with the Company. For purposes of this Settlement Agreement, the term
"Affiliate" shall mean any "affiliate" of the Company as that term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934.
6. OTHER COMPENSATION. Except for the covenants and agreements set
forth in this Settlement Agreement, the Employee has received and will receive
no additional compensation or any other type of remuneration from the Company in
consideration of the elections and waivers made pursuant to this Settlement
Agreement. Notwithstanding any provision of this Settlement Agreement or the
Retention Agreement to the contrary, the benefits payable to the Employee under
this Settlement Agreement shall be in lieu of,
and not in addition to, any benefits to which the Employee might otherwise be
entitled under any other severance plan or arrangement maintained by the
Company. The acceleration of compensation under sections 2 and 3 will be
disregarded for purposes of the Illinois Power Company Retirement Income Plan
for Salaried Employees, the Supplemental Plan, and all other plans and
arrangements, and will not increase the Employee's benefits under any such
plan or arrangement. The Employee acknowledges that he or she will have no
control over what the Company may do with the amounts, if any, waived
pursuant to this Settlement Agreement.
7. TAX RETURNS. The Employee agrees to employ PricewaterhouseCoopers to
prepare his or her personal income tax returns for calendar years 1999 and 2000.
The Company will reimburse the Employee for the cost of such preparation.
8. RIGHT OF REVOCATION.
(a) The Employee may revoke this Settlement Agreement by filing, prior to
the Effective Date, with Xxx X. Xxxxxxxx, Vice President, a written
revocation signed by the Employee stating "I revoke my acceptance of
the Settlement Agreement that would otherwise become effective December
6, 1999." Unless the Employee has revoked this Settlement Agreement by
the Effective Date, and except as otherwise provided in section 8(b),
this Settlement Agreement will become irrevocable on the Effective
Date.
(b) If the Company does not accelerate in accordance with sections 2 and 3,
then, for a period of 14 days following the date written notice is
provided to the Employee (by mailing to the Employee's last residence
address indicated in the Company's records) of the Company's
determination not to accelerate, the Employee shall be entitled to
revoke this Settlement Agreement by filing, prior to the 15th day
following provision by the Company of such written notice a written
revocation signed by the Employee stating "I revoke my acceptance of
the Settlement Agreement that became effective December 6, 1999."
/s/ XX Xxxxxxx Xxxxxx X. Xxxxxxx 12/3/99
------------------ --------------------- ---------
SIGNATURE PRINT NAME DATE
THIS FORM MUST BE RETURNED TO THE ILLINOIS POWER COMPANY, XXX X. XXXXXXXX, VICE
PRESIDENT, AT 000 XXXXX 00 XXXXXX, XXXXXXX, XXXXXXXX 00000, BY 5:00 P.M. ON
DECEMBER 6, 1999 AND SHALL BECOME IRREVOCABLE AT THAT TIME.
Supplement A
BENEFITS SCHEDULE
This Benefits Schedule is attached to and is a part of the Settlement
Agreement between Xxxxxx X. Xxxxxxx (the "Employee") and Illinova Corporation
(the "Company") dated November 29, 1999, and sets forth certain rights to
compensation, benefits, and payments under the Retention Agreement between the
Employee and the Company dated January 18, 1999 (the "Retention Agreement"). The
compensation, benefits, and payments under the Settlement Agreement (including
this Benefits Schedule) shall be in lieu of any compensation, benefits,
payments, or rights that would otherwise be provided under section 1 of the
Retention Agreement in the absence of this Settlement Agreement.
A-1. SEVERANCE BENEFITS. If a Termination Event (as defined in the
Retention Agreement) occurs, the Employee shall be entitled to the
Severance Benefits described in this section A-1:
(a) LUMP SUM PAYMENT. The Company shall, within 30 days after a
Termination Event, make a lump sum cash payment to the Employee equal
to the sum of:
(i) thirty-six (36) months' salary at the greater of (I) the
Employee's salary rate in effect on the date of the Change in
Control, or (II) the Employee's salary rate in effect on the
date Employee's employment with the Company terminates; PLUS
(ii) three times the amount of the Employee's annual award under
the Illinova Executive Incentive Compensation Plan for
calendar year 1999 (which ordinarily would be paid in March,
2000, but may be paid in December 1999).
(b) WELFARE PLAN CONTINUATION. The Employee and his or her dependents
shall be eligible for coverage under the health (including medical and
dental) plan, life insurance plan, and disability plan (if any)
provided to full-time employees of Illinois Power Company (or its
successor) from time to time, subject to the same requirements and
limitations as are applicable to full-time employees (including,
without limitation, any requirement for employee contributions to pay
premiums for such coverage). Eligibility for each of such health
coverage, life insurance coverage, and disability coverage,
respectively, shall continue until the earliest of:
(i) The first day the Employee becomes eligible for health
coverage, life insurance coverage, or disability coverage,
respectively, under a plan or arrangement of the Employee's
new employer.
(ii) In the case of health coverage and life insurance coverage, if
the Employee has attained age 50 but has not attained age 52
on the date of termination,
the Employee's 55th birthday; and if the Employee has not
attained age 50, or is older than age 52 on the date of
termination, the three-year anniversary of the Employee's
Termination Event. In the case of disability coverage, the
three-year anniversary of the Employee's Termination Event.
(iii) The date the Employee attains age 65.
Medical coverage provided under this section A-1(b) shall be counted
towards the Company's obligation to provide coverage under the
provisions of section 4980B of the Internal Revenue Code and section
601 of the Employee Retirement Income Security Act (sometimes referred
to as "COBRA coverage").
(c) RETIREE WELFARE BENEFITS. If, either: (a) the Employee has attained
age 50 but has not attained age 55 on the date of termination of
employment, and the Employee's medical and life coverage under section
A-1(b) of this Benefits Schedule are continued until the Employee
attains age 55, or (b) the Employee has attained age 55 on or before
the date of termination of employment, then the Employee and his or her
dependents, if any, shall be eligible to participate in any benefit
plans of the Company which provide health and life or similar benefits
coverage as are then extended to employees of the Company electing
early retirement at age 55 on the same terms and subject to the same
conditions as are applicable to such employees; provided that such
coverage shall not be furnished if the Employee waives coverage by
giving written notice of waiver to the Company. Nothing in the
Settlement Agreement (including this Benefits Schedule) shall be
construed to limit the right which the Company otherwise has to amend
or termination any health, life or other plan covering the Company's
employees (or their dependents).
(d) PROMISSORY NOTE. Notwithstanding any provision in the promissory
note or the tax letter to the contrary, any obligation of the Employee
for payment of principal and interest otherwise due under the
promissory note shall be forgiven, and the Employee shall be entitled
to the tax gross-up payment as described in the tax letter with respect
to such forgiven interest (but not with respect to the forgiven
principal). For purposes of this paragraph (d), the term "promissory
note" shall mean the promissory note dated January 18, 1999 with
respect to the borrowing of $250,000 by the Employee from the Company,
and the term "tax letter" shall mean the letter from the Company to the
Employee dated January 18, 1999 providing for the tax gross-up with
respect to the forgiveness of interest under the promissory note.
(e) SUPPLEMENTAL PENSION. Notwithstanding any provision in the
Supplemental Pension Plan to the contrary, the Employee's Accrued
Vested Benefit under the Supplemental Pension Plan shall be equal to
40% of the Employee's Final Average Earnings (as defined under the
Supplemental Pension Plan) as of the date of his termination of
employment with the Company.
(f) OPTION EXERCISE PERIOD. Notwithstanding any provision of the
applicable stock option agreement to the contrary, any stock option or
portion thereof that is exercisable on the date of the Employee's
Termination Event (as that term is used in the Retention Agreement)
shall not be forfeited on the date of such Termination Event, but shall
instead remain exercisable for the one-year period following the
Termination Event; provided that, in no event shall such the option be
exercisable after the date on which the option would otherwise expire
if the Employee had continued in the employ of the Company.
(g) OPTION VESTING. If the Employee is employed by the Company on the
date of a Change in Control then, with respect to any stock option
granted to the Employee by the Company prior to the Change in Control
that is outstanding on the date of the Change in Control, that option
shall be exercisable on and after the date of the Change in Control.
Except as otherwise provided in the preceding sentence with respect to
exercisability of options, the options shall remain subject to the
expiration provisions and other terms of the option awards without
regard to the preceding sentence; and the preceding sentence shall not
apply to any stock option to the extent that the terms governing such
option expressly reference this Agreement and expressly provide that
the provisions of such sentence are inapplicable.
A-2. LONG-TERM INCENTIVE PAYMENT. If the Employee is employed through
December 31, 1999 or the Employee's employment is terminated prior to
that date by the Company without Cause (as defined in the Retention
Agreement), and if the Employee is participating in the Illinova Long
Term Incentive Compensation Plan (the "Long-Term Incentive Plan"), the
Company shall provide the Employee with an award for each of the three
performance periods currently in effect (January 1, 1999 through
December 31, 1999; January 1, 1999 through December 31, 2000; and
January 1, 1999 through December 31, 2001). The determination of the
performance for the periods will be determined near the end of 1999,
and will be equal to the performance figures available as of the date
of such determination, with such performance deemed to have continued
through the end of the performance periods, as determined by the
Compensation Committee of the Board of Directors of the Company. The
amount of the benefit payable under this section A-2 to the Employee
for each of these performance periods shall be equal to the amount that
would be payable on such performance for the entire period, but subject
to a pro-rata reduction to reflect the portion of the performance
period after December 31, 1999, in accordance with the following
schedule:
--------------------------------------------------------------------------------------------------------------------
For the Performance Period: The following percent of the total award that is
determined to be payable by the Company for the
Performance Period shall be:
--------------------------------------------------------------------------------------------------------------------
January 1, 1999 through December 31, 1999 100%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
January 1, 1999 through December 31, 2000 50%
--------------------------------------------------------------------------------------------------------------------
January 1, 1999 through December 31, 2001 33%
--------------------------------------------------------------------------------------------------------------------
Except as provided in this section A-2, the Employee shall not be
entitled to any amounts with respect to the Long-Term Incentive Plan
for any period.
A-3. COMPENSATION CESSATION. Except as otherwise specifically provided in this
Settlement Agreement, or the provisions of Retention Agreement (excluding
section 1 as in effect prior to amendment by this Settlement Agreement), the
Employee shall not be eligible for any compensation or benefits for periods
after the Employee's date of termination. Nothing in this Settlement Agreement
or the Retention Plan shall be construed to give the Employee any right to be
reemployed by the Company or an Affiliate after such termination of employment.
However, the Employee, if reemployed, shall be eligible for such compensation
and benefits, and shall be eligible for participation in such benefit plans and
arrangements, with respect to any such reemployment as may be agreed upon by the
Employee and the employer, and shall be subject to the terms that may be
applicable to the Employee under any such plan or arrangement.
