Retention Agreement
This Retention Agreement ("Agreement") is made and effective as of
January 1, 2001, by and between Central Illinois Light Company, an
Illinois corporation (hereinafter referred to as the "Company") and
Xxxxxx X. Xxxxxxx (hereinafter referred to as the "Key Employee").
Whereas, the Company has determined it should enter into employment
retention agreements with certain key employees of the Company;
Whereas, Xxxxxx X. Xxxxxxx is a Key Employee of the Company;
Whereas, the Company is a subsidiary of CILCORP Inc.;
Whereas, should the possibility of a Change-in-Control of the Company
or CILCORP Inc. arise, the Company believes it to be in the best
interests of the Company to minimize concerns that the Key Employee
might be distracted by the personal uncertainties and risks created by
the possibility of a Change-in-Control;
Now therefore, to assure the Company that it will have the continued
service and dedication of the Key Employee notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of the
Company or CILCORP Inc., to induce the Key Employee to remain in the
employ of the Company, and for other good and valuable consideration,
the Company and the Key Employee agree as follows:
Section 1. Definitions.
1.1 Acquiring Company.
For purposes of this Agreement, the "Acquiring Company" shall mean:
(a) the surviving corporation if the Company or CILCORP Inc.
merges or consolidates with or into another corporation in a
transaction in which neither The AES Corporation nor any of its wholly-
owned subsidiaries is the surviving corporation; or
(b) the corporation, person, other entity or group (other than The
AES Corporation or any of its wholly-owned subsidiaries) who acquires
all or substantially all of the Company's assets or all or
substantially all of the Company's Energy Delivery Unit whether from
the Company or a wholly-owned subsidiary of the Company; or
(c) the surviving corporation if any wholly-owned subsidiary of
the Company to which the Company's Energy Delivery Unit has been
transferred, merges or consolidates with or into another corporation in
a transaction in which such wholly-owned subsidiary is not the
surviving corporation.
1.2 Agreement Period. For purposes of this Agreement, the Agreement
Period shall mean the time beginning on the Effective Date and ending
on the second anniversary of the date of a Change-in-Control, but in
all events no later than April 1, 2006
1.3 Change-in-Control. For purposes of this Agreement, a "Change-in-
Control" of the Company shall be deemed to have occurred:
(a) if the Company or CILCORP Inc. merges or consolidates with or
into another corporation in a transaction in which neither The AES
Corporation nor any of its wholly-owned subsidiaries is the surviving
corporation; or
(b) if the Company sells or otherwise disposes of all or
substantially all of the Company's assets to any corporation, person,
other entity or group (other than The AES Corporation or any of its
wholly-owned subsidiaries); or
(c) if any corporation, person, other entity or group (other than
The AES Corporation, or any of its wholly-owned subsidiaries) becomes,
directly or indirectly, the owner of 50% or more of the voting stock of
the Company or CILCORP Inc.; or
(d) if the Company sells or otherwise disposes of all or
substantially all of the Company's Energy Delivery Unit to any
corporation, person, other entity or group (other than The AES
Corporation or any of its wholly-owned subsidiaries); or
(e) if any wholly-owned subsidiary of the Company to which the
Company's Energy Delivery Unit has been transferred, merges or
consolidates with or into another corporation in a transaction in which
neither the AES Corporation nor any of its wholly-owned subsidiaries is
the surviving corporation; or
(f) if any wholly-owned subsidiary of the Company to which the
Company's Energy Delivery Unit has been transferred, sells or otherwise
disposes of all or substantially all of the Energy Delivery Unit's
assets to any corporation, person, other entity or group (other than
the AES Corporation or any of its wholly-owned subsidiaries); or
(g) if any corporation, person, other entity or group (other than
the AES Corporation or any of its wholly-owned subsidiaries) becomes,
directly or indirectly, the owner of 50% of the voting stock of any
wholly-owned subsidiary of the Company to which the Company's Energy
Delivery Unit has been transferred.
1.4 Effective Date. For purposes of this Agreement, the Effective
Date shall mean January 1, 2001.
Section 2. Termination of Employment.
2.1 Termination by the Company or the Acquiring Company with Cause.
For purposes of this Agreement, the Company or the Acquiring Company
may terminate the Key Employee's employment during the Agreement Period
for Cause. In the event of such termination, the Company or the
Acquiring Company shall give the Key Employee a Notice of Termination
in conformity with Section 4 herein. For purposes of this Agreement,
Cause shall mean:
(a) the Key Employee's continued failure to perform substantially
his/her duties with the Company or the Acquiring Company other than
such failure resulting from Disability (as hereinafter defined), as
determined by the Chief Executive Officer of the Company (the "CEO"),
after a written demand for substantial performance is delivered to the
Key Employee by the CEO which specifically identifies the manner in
which the CEO believes that the Key Employee has not substantially
performed his/her duties; or
(b) the Key Employee's engaging in illegal conduct or gross
misconduct which the CEO believes is materially and demonstrably
injurious to the Company or the Acquiring Company.
Any act or failure to act, on the instructions of the CEO or a senior
officer of the Company or Acquiring Company or based on the advice of
counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Key Employee in good faith and in the best
interests of the Company.
2.2 Termination by the Key Employee for Good Reason.
The Key Employee's employment with the Company or Acquiring Company
shall be deemed to be terminated by him/her for Good Reason if, during
the Agreement Period, the Key Employee terminates his/her employment
relationship with the Company or Acquiring Company for one of the
following events:
(a) there is a reduction by the Company or the Acquiring Company in
the Key Employee's Annual Compensation;
(b) there is a material reduction in his/her benefits; or
(c) the Company or the Acquiring Company notifies the Key Employee
that he/she will be required to change the Key Employee's principal
place of employment during the Agreement Period to a location that is
more than 50 miles from the Key Employee's principal place of
employment immediately prior to the Effective Date; or
(d) the Company or the Acquiring Company requires the Key Employee
to travel on business to a substantially greater extent than required
immediately prior to the Effective Date.
In the event the Key Employee terminates his/her employment for Good
Reason, the Key Employee shall notify the Company in accordance with
Section 4 within 30 days of the date following the first occurrence of
an event described herein. If the Key Employee fails to notify the
Company within 30 days of the date following the occurrence of an event
described herein, then the Key Employee shall be deemed to have
accepted the event and shall be deemed to have waived his/her right to
terminate for Good Reason for that event. For purposes of this
Agreement, Annual Compensation shall include Base Salary as defined in
Section 3.2, plus the annual target level of any bonus established for
the Key Employee for the fiscal year in which a Change-in-Control
occurs, assuming an achievement level of 100% of any target award
established under an incentive compensation or bonus or stock option
plan of the Company in which the Key Employee participates.
2.3 Termination by Retirement or Death.
For purposes of this Agreement, termination of the Key Employee's
employment based on Retirement during the Agreement Period shall mean
voluntary termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to the
Company's salaried employees. The Key Employee's death during the
Agreement Period shall automatically terminate his/her employment. In
either the event of retirement or death, the Company shall pay the Key
Employee or the Key Employee's beneficiary(ies) any unpaid Base Salary,
as defined in Section 3.2, and pay for any accrued, unused vacation
through the Date of Termination, at the salary rate then in effect,
plus all other amounts to which the Key Employee or the Key Employee's
beneficiary(ies) are entitled under any retirement, survivor's
benefits, insurance, and other applicable programs of the Company then
in effect, and the Company shall have no further obligations to the Key
Employee and the Key Employee's beneficiary(ies) under this Agreement.
2.4 Termination by Disability.
If the Company determines in good faith that the Key Employee's
Disability has occurred during the Agreement Period (pursuant to the
definition of Disability as set forth in the Company's Long-Term
Disability Plan then in effect), it may give the Key Employee written
notice, in accordance with Section 4 herein, of its intention to
terminate the Key Employee's employment. In such event, the Key
Employee's employment with the Company will terminate within 30 days
after written Notice of Termination is received by the Key Employee
("Disability Effective Date") and provided that within 30 days after
receiving such notice, the Key Employee has not returned to the full-
time performance of his/her duties. The Key Employee shall receive
his/her unpaid Base Salary, as defined in Section 3.2, through the
Disability Effective Date at which point the Key Employee's
compensation and benefits, if any, shall be determined in accordance
with the Company's retirement, insurance, and other applicable plans
and programs in effect on the Disability Effective Date, and the
Company shall have no further obligations to the Key Employee under
this Agreement.
Section 3. Obligations of the Company following the Effective Date.
3.1 No Retention Payment.
If, during the Agreement Period, the Key Employee voluntarily
terminates his/her employment with the Company, no payments under this
Agreement will be made.
3.2 Salary Continuation Payment and COBRA Payment upon Termination.
If, during the Agreement Period, the Company or Acquiring Company
terminates the Key Employee's employment for any reason other than for
Cause, Death, Disability or Retirement or if the Key Employee
terminates employment for Good Reason, the Key Employee shall receive,
in addition to any salary, benefit or compensation due the Key Employee
as of the Termination Date, (a) an amount equal to three times the Key
Employee's Base Salary if the Termination Date of the Key Employee
falls within the period commencing on the Effective Date and ending 12
months following the date of a Change-in-Control, and two times the Key
Employee's Base Salary if the Termination Date of the Key Employee
falls within the period commencing with the first day following the
anniversary of the date of a Change-in-Control, but before the
expiration of the Agreement Period (collectively "Salary Continuation
Payment"); and (b) an amount equal to 18 times the monthly premium
charged to a terminated Key Employee who selects continuation of
coverage under the Company's comprehensive hospital and medical
insurance plan (commonly known as "COBRA payments"). The Company shall
also provide the Key Employee with years of service and compensation
credits, along with commensurate additional benefits, if any, the Key
Employee would have accrued during the Agreement Period, but for the
termination, in any qualified or non-qualified pension, retirement,
supplemental benefit or compensation deferral plan in effect on the
Termination Date. For purposes of this Agreement, Base Salary shall
only include the annual base salary payable to the Key Employee (the
greater of annual base pay rate in effect during the month immediately
preceding the Termination Date or the annual base pay rate in effect
during the month immediately prior to a Change-in-Control), and shall
not include the amount of any bonuses or stock options payable to the
Key Employee. For purposes of this section, COBRA payments shall be
that amount necessary to provide either family or individual
comprehensive hospital or medical insurance coverage as had been
elected by the Key Employee in the month immediately preceding the
Termination Date.
3.3 Timing of Payments.
All payments made by the Company pursuant to Section 3.2 shall be paid
within 30 days of the Termination Date. As a precondition to receiving
the "Salary Continuation Payment," the Key Employee shall execute a
release of all claims in favor of the Company or Acquiring Company in a
form satisfactory to it.
3.4 Stock Options.
Within one hundred eighty (180) days of the date of a Change-in-
Control, the Key Employee shall elect, in writing, between the
following two (2) alternatives with respect to his/her vested AES
Corporation stock options (i) exercise the vested AES Corporation stock
options in accordance with the terms of the Stock Option Agreement; or
(ii) return the vested AES Corporation stock options to the Company for
cash in an amount equal to multiplying the number of option shares
times the Black Scholes value of the shares at the time of the original
option grant, plus an eight percent (8%) annual return for the time the
stock options were held to the date of the Change-in-Control. Within
one hundred eighty (180) days of the date of a Change-in-Control, the
Company shall redeem all unvested AES Corporations stock options from
the Key Employee for cash in an amount determined in alternative (ii)
above.
3.5 Tax Indemnity.
In the event it shall ultimately be determined by a court or the
Internal Revenue Service that any payment by the Company to or for the
benefit of the Key Employee (whether paid or payable pursuant to the
terms of this Agreement) would be subject to the excise tax (including
penalties and interest) imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended, (the "Code"), then the Key Employee shall be
entitled to receive a lump sum cash payment sufficient to place the Key
Employee in the same net after-tax position as if the excise tax had
not been imposed (a "gross up" payment). The determination of the
maximum gross up amount payable to the Key Employee shall be made by an
accounting firm designated by the Company and shall be paid to the Key
Employee within 30 days of such determination.
Section 4. Notice of Termination.
Any termination by the Company or Acquiring Company for Cause or
Disability or by the Key Employee for Good Reason shall be communicated
by a written notice of termination ("Notice of Termination") to the
other party hereto and shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon by the
party, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Key Employee's
employment under the provision indicated, and shall set forth the date
of termination ("Termination Date"). The failure by the Company or
Acquiring Company, or Key Employee to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of
Cause or Good Reason shall not waive any right of the Company or the
Key Employee, respectively, from asserting such fact or circumstance in
enforcing the Key Employee's or the Company's rights hereunder.
Section 5. Not a Contract of Employment.
The employment-at-will relationship between the Key Employee and the
Company shall continue except as modified by this Agreement.
Section 6. Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
Section 7. Successors and Assigns.
This Agreement shall be binding on the Company and any assignee or
successor in interest to the Company and of the Key Employee and
his/her heirs, assigns or legatees.
Section 8. Arbitration and Legal Fees.
The Key Employee and the Company agree to have any dispute or
controversy arising under or in connection with this Agreement settled
by arbitration using an Arbitration Panel. For the purposes of this
Agreement, the term "Arbitration Panel" shall mean three independent
arbitrators, one of whom shall be selected by the Company, one by the
Key Employee and the third shall be selected by the two other
arbitrators. In the event that agreement cannot be reached on the
selection of the third arbitrator, such arbitrator shall be selected by
the American Arbitration Association. All arbitrators shall be
selected from a list provided by the American Arbitration Association,
and all matters presented to the Arbitration Panel shall be decided by
majority vote. The Key Employee and the Company agree that any
decision rendered in any such arbitration proceeding shall be final and
binding and that each of the parties waives their rights to seek
remedies in court, including the right to jury trial. All expenses of
such arbitration, including the fees and expenses of the counsel for
the Key Employee and the Company shall be borne by the Company and/or
the Key Employee in the amount determined by the arbitrator. Any such
arbitration shall be held in the City of Peoria, Illinois, unless the
Company and Key Employee mutually agree on another location.
Section 9. Term of Agreement.
The Agreement shall continue until, and terminate, upon the expiration
of the Agreement Period.
Section 10. Management Continuity Agreement.
CILCORP Inc. and the Key Employee are parties to a certain Management
Continuity Agreement dated April 22, 1998 ("Management Continuity
Agreement'). Simultaneously with the execution of this Agreement,
CILCORP Inc. and the Key Employee have entered into a Termination
Agreement whereby the Management Continuity Agreement is dissolved,
rescinded, cancelled and terminated, and shall be, as of Effective
Date, of no further force and effect.
Section 11. Notice.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed
to have been duly given when hand delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, provided
that all notices to the Company be addressed to:
Central Illinois Light Company
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: President
or to the Corporate Secretary of any successor company at its principal
place of business;
and if to the Key Employee:
Xxxxxx X. Xxxxxxx
000 X. Xxxxxxxx Xx.
Xxxxxx, Xxxxxxxx 00000
Section 12. Non-exclusive Rights.
Nothing in this Agreement shall prevent or limit the Key Employee's
continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its subsidiaries for which
the Key Employee may qualify, nor shall it affect such rights as the
Key Employee may have under any contract or agreement with the Company
or any of its subsidiaries. The foregoing notwithstanding, should the
Key Employee be entitled to or paid any of the amounts set forth in
Section 3.2, then the Key Employee shall not be eligible for or paid
any severance pay or comprehensive hospital and medical insurance
coverage, payment or benefits except to the extent that such
comprehensive hospital and medical insurance coverage must be offered
under federal COBRA laws.
Section 13. Amendment of Agreement.
During the Agreement Period, this Agreement may not be terminated, or
amended in any manner, which has a significant adverse effect on the
Key Employee's rights hereunder without the Key Employee's written
consent. Notwithstanding any other provision hereof, the Agreement may
be amended after a Change-in-Control occurs to the extent necessary in
order to obtain or maintain the status of the Company's retirement
plans as qualified plans under Section 401(a) of the Code.
Section 14. Entire Agreement.
This Agreement constitutes the entire agreement between the parties and
supercedes all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto, including
the Company's predecessors, with respect to the subject matter hereof.
KEY EMPLOYEE: COMPANY:
CENTRAL ILLINOIS LIGHT COMPANY
________________________________ By:__________________________________
Xxxxxx X. Xxxxxxx Xxxx X. Xxxxxxx, President
