EMPLOYMENT AGREEMENT
This Agreement is effective as of September 23, 1997 between CILCORP
Inc., an Illinois Corporation with offices at 000 Xxxxxxxx Xxxx., Xxxxx 000,
Xxxxxx, Xxxxxxxx 00000 (the "Company") and
XXXXXX X. XXXXX
whose address is: 00000 Xxxxxx Xxxx
Xxxxxx, XX 00000
(the "Officer")
W I T N E S S E T H
WHEREAS, the Officer is employed by the Company as an officer of the
Company with the title and salary current at the effective date of this
Agreement as set forth in this Agreement; and
WHEREAS, the Company wishes to attract and retain highly qualified
executives and to achieve this goal it is in the best interests of the Company
to secure the continued services of the Officer; and
WHEREAS, the Company is willing, in order to provide the Officer a
measure of security with respect to his employment with the Company and to
encourage the Officer to remain employed by the Company, to agree that
employment of the Officer shall be terminable only "for Cause" as that term is
hereinafter defined; and
WHEREAS, the public utility industry is experiencing increasing
uncertainty as deregulation occurs at state and federal levels and by
providing the Officer a measure of security with respect to employment with
the Company, the Officer will be better able to perform the Officer's duties
in a manner that is consistent with the best interests of the Company and its
shareholders without the Officer being unduly concerned about his personal
financial security.
NOW, THEREFORE, the Company and the Officer agree as follows:
Employment
1.1 Term. The Company shall employ the Officer as President and
Chief Executive Officer and the Officer shall remain in employment with the
Company for a period of three years from the effective date of this Agreement
(the "Term") unless terminated prior to the expiration of the Term pursuant to
Section 2. Prior to the annual anniversary of the Effective date, the Board
of Directors of the Company shall review the Officer's performance, and may,
in its discretion, resolve to extend the Term for one or more additional
years, provided that the years remaining in the Term after such extension
shall not exceed three years. All such extensions shall be in writing and
executed by a representative of the Board other than the Officer.
1.2 Compensation. As compensation for services provided to the
Company by the Officer pursuant to this Agreement, the Company shall pay the
Officer an annual base salary of $410,000 which salary may be increased from
time to time by the Company (hereinafter referred to as "Compensation"). The
Officer shall also be eligible to participate in any other compensation and
benefit plans (whether provided by the Company or any of its affiliates)
generally available to executive employees of the Company of like grade and
salary including, but not limited to, retirement plans, group life,
disability, accidental death and dismemberment, travel and accident, and
health and dental insurance plans, incentive compensation plans, stock or
stock based compensation plans, deferred compensation plans, supplemental
retirement plans and excess benefit plans, but excluding the plans referred to
in Section 2.9 of this Agreement. Such other compensation and benefit plans
are hereinafter referred to collectively as the "Compensation and Benefit
Plans".
1.3 Duties. The Officer shall perform such duties and functions as
are assigned to him by: (i) the bylaws of the Company, as amended or
restated, (ii) the Board of Directors of the Company, (iii) a duly authorized
committee of the Board of Directors of the Company, or (iv) an officer of more
senior rank than the Officer.
1.4 Duty of Loyalty. The Officer shall work full-time for the Company
only, provided that:
(a) with the consent of the Board of Directors, he
may serve as a director of other business organizations, or
engage in charitable, civic and other similar activities;
and
(b) he may make such investments and reinvestment in
business activities as shall not require a substantial
portion of his time.
1.5 Duty Not to Disclose Confidential Information. The Officer
acknowledges that his relationship with the Company is one of high trust and
confidence and that he has access to Confidential Information (as hereinafter
defined) of the Company. The Officer shall not, directly or indirectly,
communicate, deliver, exhibit or provide any Confidential Information to any
person, firm, partnership, corporation, organization or entity, except as
required in the normal course of the Officer's duties or as required by law.
The duties contained in this paragraph shall be binding upon the Officer
during the time that he is employed by the Company and following the
termination of such employment for a period of ten years, provided that any
disclosure thereafter does not violate the Officer's fiduciary duty to the
Company. Such duties will not apply to any such Confidential Information
which is or becomes in the public domain through no action on the part of the
Officer, is generally disclosed to third parties by the Company without
restriction on such third parties, or is approved for release by written
authorization of the Board of Directors of the Company. The term
"Confidential Information" shall mean any and all confidential, proprietary,
or secret information relating to the Company's business, services, customers,
business operations, strategies, or activities and any and all trade secrets,
products, methods of conducting business, information, skills, knowledge,
ideas, know-how or devices used in, developed by, or pertaining to the
Company's business and not generally known, in whole or in part, in any trade
or industry in which the Company is engaged.
Termination
2.1 Termination of Agreement. Unless sooner terminated in accordance
with the terms of this Section 2, this Agreement shall terminate at the
expiration of the Term, and all obligations of the Company hereunder shall
terminate except as specifically set forth in Section 2.5. The Officer may,
with the consent of the Company, continue in the employ of the Company after
the expiration of the Term on such terms and conditions as may be agreed upon
by the Company and the Officer.
2.2 Termination by the Officer. The Officer may voluntarily terminate
this Agreement by providing two weeks notice to the Company, in which event
the Company shall have no further obligation to the Officer hereunder from the
date of such termination (except the payment of any accrued benefits), and the
Officer shall have no further obligation to the Company hereunder except the
duty to not disclose Confidential Information in accordance with Section 1.5.
In the event the Officer's employment with the Company is terminated due to
the Officer's death, the Company shall have no further obligation to the
Officer, his heirs or legatees hereunder from the date of such termination,
except to pay any benefits due under the Compensation and Benefit Plans. In
the event the Officer's employment with the Company is terminated due to the
Officer's
Permanent Disability, the Company shall have no further obligation to the
Officer, except to pay any benefits due under the Compensation and Benefit
Plans.
For purposes of this Agreement, the term "Permanent Disability" means a
physical or mental condition of the Officer which, in the Company's
determination:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) renders the Officer incapable of adequately
performing his duties under Section 1.3 of this Agreement.
Prior to any final determination that the Officer has a Permanent
Disability, the Board shall provide reasonable notice to the Officer of its
intent to determine whether the Officer has a Permanent Disability and afford
the Officer, along with any counsel, the opportunity to address the Board.
2.3 Termination by the Company With Cause. The Company may
terminate this Agreement for Cause. For purposes of this Agreement, Cause
shall mean:
(a) the Officer's willful and material breach of the
provisions of this Agreement, other than such breach
resulting from incapacity due to physical or mental
disability, after the Board of Directors delivers a written
demand to cure such breach which specifically identifies the
manner in which the Board of Directors believes that the
Officer has not substantially performed his duties, and a 30-
day period has passed in which the breach has not been
cured, or
(b) the Officer willfully engages in illegal conduct
or gross misconduct which, in either case, injures the
Company.
For purposes of this determining whether "Cause" exists, no act or failure to
act, on the Officer's part shall be considered "willful," unless it is done,
or omitted to be done, by the Officer in bad faith or without reasonable
belief by the Officer that his action or omission was in the best interests of
the Company. Any act or failure to act, based upon authority given pursuant
to a resolution adopted by the Board of Directors shall be conclusively
presumed to be done, or omitted to be done, by the Officer in good faith and
in the best interests of the Company. The cessation of the Officer's
employment shall not be deemed for "Cause," unless and until the Officer
receives a copy of a resolution adopted by the affirmative vote of not less
than two-thirds of the membership of the Board of Directors, who are not
employees of the Company or a direct or indirect subsidiary of the Company, at
a meeting of the Board of Directors called and held for such purpose (after
reasonable notice is provided to the Officer, and the Officer is given the
opportunity, together with counsel, to be heard before the Board of
Directors), finding that, in the good faith opinion of the Board of Directors,
the Officer's termination is for Cause.
In the event of the Officer's termination for Cause, the Company will
have no further obligation to the Officer under the Agreement from the date of
such termination (except the payment of any accrued benefits).
2.4 Termination by the Company without Cause. If, prior to the
expiration of the Term,
(a) the Officer's employment hereunder is
terminated by the Company other than for Cause, as defined
in Section 2.3; or
(b) the Officer resigns from his employment
hereunder upon thirty days written notice given to the
Company within thirty days following
(i) a reduction in the compensation or a
material and substantial reduction in benefits
provided pursuant to this Agreement or the
Compensation and Benefit Plans, other than a reduction
in incentive compensation or benefits that are
generally applicable to senior officers of the
Company, or
(ii) notice to the Officer of a change of
the Officer's principal place of employment without
his consent to a city different from the city which is
the principal place of the Officer's employment,
then the Officer shall be entitled to receive the damage payments described in
Section 2.5. The date of the Officer's termination of employment under
subsection (a) or (b) shall be referred to in this Agreement as the
"Termination Date."
2.5 Damage Payments. Upon any of the events described in Section 2.4,
the Company shall, as damages for not honoring the terms of this Agreement,
pay the Officer Compensation and benefits for the three year period
immediately following the Termination Date (the "Continuation Period"), as
follows:
(a) during the Continuation Period, the Officer
shall (i) continue to receive Compensation under Section
1.2, and (ii) continue to participate in the Compensation
and Benefit Plans, except as otherwise provided below, that
he participated in as of the Termination Date as though he
continued in the employment of the Company, provided,
however, that any benefit to be provided by a Compensation
and Benefit Plan may be provided by the Company through cash
of equivalent value or through a nonqualified arrangement or
arrangements if, in the judgment of the Company, permitting
the Officer to participate in such plan after the
Termination Date would adversely affect the tax status of
such plan; and
(b) the Officer shall receive a payment which is
equal to: (i) the sum of the Officer's last three annual
incentive awards (expressed as a dollar value) under the
Company's EVA-Based Incentive Compensation Plan or similar
annual incentive compensation plan applicable to the
Officer, and (ii) the Officer's Award Bank balance, less any
amounts used to prime the Award Bank, from the Company's EVA
Based Incentive Compensation Plan. In the event that the
Officer has been covered by an annual incentive compensation
plan for less than three years, the amount of payment in
Section 2.5(b)(i) shall be the product of three and an
arithmetical average based on the actual amount of annual
awards received by the Officer divided by the number of
years the Officer was covered by the annual incentive
compensation plan.
To the extent damages to be provided pursuant to this Section 2.5 are
determined on the basis of the Officer's base salary, the base salary to be
used to determine such damages after the Officer's Termination Date shall be
the greater of the Officer's base salary used to determine such damages
immediately prior to any reduction in base salary following which the Officer
elected to terminate employment pursuant to Section 2. 4(b) of this Agreement,
or the Officer's base salary used to determine such damages immediately prior
to the Officer's Termination Date. To the extent damages payable pursuant to
this Section 2.5, including, not by way of limitation, retiree health care and
pension benefits, are determined by reference to the Officer's years of
service with the Company, such as the determination of the Officer's accrued
benefits under the Company's qualified or nonqualified retirement plans, such
years of service shall be determined by including years that occur during the
Continuation Period.
For purposes of determining an Officer's right under this Section 2.5 to
accrue benefits during the Continuation Period under the Central Illinois
Light Company Management, Office and Technical Employees' Retirement Plan (the
"Retirement Plan") or Benefit Replacement Plan, the Officer's accrued benefits
(including any early retirement subsidies, if applicable) shall be calculated
by taking into account the years of service that the Officer would have
accrued during the Continuation Period and the Officer's compensation, as such
term is defined in the Retirement Plan ("Retirement Compensation"), payable
for the Continuation Period.
2.6 Non-Compete Provisions. As consideration for the first year of
the three years of damage payments set forth in Section 2.5 of this Agreement,
the Officer agrees not to compete with the Company, its affiliates and
subsidiaries pursuant to the following terms and conditions. For a period
of one year following the Termination Date, the Officer shall not engage in
any employment activity or directly or indirectly own (except for passive
investments in which the Officer owns less than a 5% ownership interest),
manage, operate, control or be employed by, participate in or be connected in
any manner with the ownership, operation or control of any business that
engages in the sale, supply, transmission, or distribution of electricity,
natural gas, or other forms of energy, which are competitive with or
substantially similar to the services or products of the Company, its
subsidiaries and other affiliates, at any location in the State of Illinois.
If any court shall determine that the duration or geographical limit of any
restriction contained in this covenant not to compete (the "Covenant") is
unenforceable under applicable law, this Covenant shall not thereby be
terminated, but shall be deemed amended to the extent required to render it
valid and enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that has made such
determination.
Other than amendments that are deemed to be made pursuant to the
preceding paragraph of this Agreement, no change or modification of this
Covenant shall be valid unless the same be in writing and signed by the
Company and Officer.
Upon a breach by Officer of this Covenant, the Company shall be entitled
to recover, as liquidated damages, the first year of damage payments to be
made to the Officer pursuant to Section 2.5 of this Agreement. This amount
shall be deducted from the payments due to the Officer pursuant to Section 2.5
of this Agreement. In the event that all payments pursuant to Section 2.5
have been made to the Officer, the Officer shall pay the aforementioned amount
to the Company. The Company shall also be entitled to seek injunctive relief
to prevent the Officer's continued breach of this Covenant.
2.7 Timing of Payments. All salary payments to be made by the Company
pursuant to Section 2.5 shall be made in monthly installments during the
Continuation Period, according to the Company's regular payroll practices and
procedures. Any lump-sum payment to be made to the Officer shall be equal to
the present value of the payments otherwise payable to the Officer, using an
interest rate assumption equal to the annual, short-term, adjusted applicable
federal interest rate, as determined for the month during which the lump-sum
payment is made pursuant to Section 1274(d) of the Internal Revenue Code of
1986 (the "Code"), except that the lump-sum payment of any nonqualified
retirement benefit payable to the Officer shall be calculated pursuant to the
actuarial assumptions of the Retirement Plan in effect on the Termination
Date. The Company shall withhold any applicable taxes from any amounts
payable to the Officer pursuant to this Agreement, which the Company
determines, in good faith, it is required to withhold pursuant to applicable
law.
2.8 Officer's Costs of Enforcement. The Company shall pay all
expenses of the Officer, including but not limited to attorney fees, incurred
in enforcing the Company's obligations pursuant to this Agreement.
2.9 Waiver of Other Termination Benefits; Execution of Release and
Covenant Not To Xxx. By executing this Agreement, the Officer waives,
renounces, and forfeits any and all rights to participate in or receive
benefits from any employment severance plan or compensation protection plan
(including the CILCO, QST and CILCORP Compensation Protection Plans), whether
in existence at the time of execution or at any time thereafter. The Company
reserves the right to condition the payment of any amounts under this
Agreement on the Officer's execution of a Release and Covenant Not To Xxx.
2.10 Mitigation of Damages. If the Officer becomes entitled to
payments under Section 2.5 of this Agreement, the Officer shall make
reasonable efforts to mitigate damages by seeking other employment of
substantially equal dignity, importance and character as the highest position
which the Officer had held with the Company. The Officer also shall not be
required to accept any position which would involve competition with the
company or disclosure of company confidential information. The Officer also
shall not be required to accept any position outside of the State of Illinois.
To the extent that the Officer shall actually receive compensation or
benefits from such other employment described in this Section, the payments
made to the Officer under Section 2.5 of this Agreement shall be
correspondingly reduced, but not below the amount payable pursuant to Section
2.6 of this Agreement.
2.11 Additional Payments to Officer. In the event it shall be
determined that any payment by the Company (other than payments pursuant to
the terms of a retirement plan qualified under Section 401(a) of the Code in
which employees of the Company participate) to or for the benefit of the
Officer (whether paid or payable pursuant to the terms of this Agreement, but
determined without regard to any additional payments required by this Section
2.11) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Officer 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 Officer shall be entitled to receive an additional payment (an
"Additional Payment") in an amount such that after payment by the Officer of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Additional Payment, the Officer retains an amount of the Additional Payment
equal to the Excise Tax imposed upon the Payments. The amount of the
Additional Payment shall be determined as set forth in Exhibit "A" to this
Agreement.
Miscellaneous
3.1 Assignment of Officer's Rights The Officer may not assign, pledge
or otherwise transfer any of the benefits of this Agreement either before or
after termination of employment, and any purported assignment, pledge or
transfer of any payment to be made by the Company hereunder shall be void and
of no effect. No payment to be made to the Officer hereunder shall be subject
to the claims of creditors of the Officer.
3.2 Agreements Binding on Successors. This Agreement shall be binding
and inure to the benefit of the parties hereto and their respective
successors, assigns, personal representatives, heirs, legatees and
beneficiaries.
3.3 Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing and sent by first class mail to
the Officer or the Company at his or its address as set forth above, or to
such other address of which either the Officer or the Company shall notify the
other in writing.
3.4 Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either the Officer or the Company.
3.5 Entire Agreement. This Agreement contains the entire
understanding of the parties. Except as provided in Section 2.6 of this
Agreement, it may be modified or amended only by an agreement in writing
signed by the party against whom enforcement of any change or amendment is
sought.
3.6 Severability of Provisions. If for any reason any paragraph, term
or provision of this Agreement is held to be invalid or unenforceable, all
other valid provisions herein shall remain in full force and effect and all
paragraphs, terms and provisions of this Agreement shall be deemed to be
severable in nature.
3.7 Governing Law. This Agreement is made in, and shall be governed
by, the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
CILCORP INC.
Attest:
By:
Secretary
Its:
Chairman, Compensation Committee
of the Board of Directors
OFFICER
EXHIBIT "A"
Subject to the remaining provisions of this Exhibit A, all
determinations required to be made under Section 2.11, including whether and
when an Additional Payment is required and the amount of such Additional
Payment and the assumptions to be utilized in arriving at such determination,
shall by made by an accounting firm designated by the Company (the "Accounting
Firm"). All fees and expenses of the Accounting Firm shall be borne by the
Company. Any Additional Payment, as determined pursuant to this Exhibit A,
shall be paid by the Company to the Officer within thirty days of the receipt
of the Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Company and the Officer. As a result of
possible uncertainty in the application of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Additional Payments which will not have been made by the Company should have
been made (an "Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies pursuant
to provisions of this Exhibit A below, and the Officer thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the Officer.
The Officer shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Additional Payment or Underpayment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Officer is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Officer shall not pay such claim prior to the expiration of the
thirty day period following the date on which he gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Officer in
writing prior to the expiration of such period that it desires to contest such
claim, the Officer shall:
(a) give the Company any information reasonably
requested by the Company relating to such claim,
(b) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney selected by the Company,
(c) cooperate with the Company in good faith in
order to effectively contest such claim, and
(d) permit the Company to participate in any
proceedings relating to such claim,
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Officer harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing, the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Officer
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Officer agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Officer to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Officer, on an interest-free basis and shall indemnify and hold
the Officer harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Officer with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which an Additional Payment or Underpayment
would be payable hereunder and the Officer shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
If, after the receipt by the Officer of any amount advanced by the
Company pursuant to the preceding paragraph, the Officer becomes entitled to
receive any refund with respect to such claim, the Officer shall (subject to
the Company's complying with the requirements of the preceding paragraph)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Officer of an amount advanced by the Company pursuant to
the preceding paragraph, a determination is made that the Officer shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Officer in writing of its intent to contest such denial of refund
prior to the expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of the
Additional Payment or Underpayment required to be paid.
