EXHIBIT 10.2
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 29th day of March, 1999
by and between Interstate Energy Corporation (d/b/a Alliant Energy Corporation),
a Wisconsin corporation (hereinafter referred to as the "Company"), and
Xxxxxx X. Xxxxx, Xx. (hereinafter referred to as "Executive").
W I T N E S S E T H
WHEREAS, the Executive is employed by the Company and/or a subsidiary of
the Company (hereinafter referred to collectively as the "Employer") in a key
executive capacity and the Executive's services are valuable to the conduct of
the business of the Company;
WHEREAS, the Company desires to continue to attract and retain dedicated
and skilled management employees in a period of industry consolidation,
consistent with achieving the best possible value for its shareowners in any
change in control of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which a
change in control of the Company occurs, through acquisition or otherwise,
thereby causing a potential conflict of interest between the Company's needs for
the Executive to remain focused on the Company's business and for the necessary
continuity in management prior to and following a change in control, and the
Executive's reasonable personal concerns regarding future employment with the
Employer and economic protection in the event of loss of employment as a
consequence of a change in control;
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WHEREAS, the Company and the Executive are desirous that any proposal
for a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareowners;
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable economic
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company and has acquired certain confidential information and
data with respect to the Company; and
WHEREAS, the Company desires to insure, insofar as possible, that it
will continue to have the benefit of the Executive's services and to protect its
confidential information and goodwill.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. Definitions.
(a) Act. For purposes of this Agreement, the term "Act" means the
Securities Exchange Act of 1934, as amended.
(b) Affiliate and Associate. For purposes of this Agreement, the terms
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule l2b-2 of the General Rules and Regulations under the Act.
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(c) Beneficial Owner. For purposes of this Agreement, a Person shall be
deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, (A) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase, or (B) securities
issuable upon exercise of Rights issued pursuant to the terms of the
Company's Rights Agreement, dated as of January 20, 1999, between
Interstate Energy Corporation and Firstar Bank Milwaukee, N.A., as
amended from time to time (or any successor to such Rights Agreement),
at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule l3d-3
of the General Rules and Regulations under the Act), including pursuant
to any agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security under this Subsection 1 (c) as a result of an
agreement, arrangement or understanding to vote such security if the
agreement, arrangement
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or understanding: (A) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations under the Act and (B) is not also then reportable
on a Schedule l3D under the Act (or any comparable or successor report);
or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in Subsection 1(c) (ii) above) or disposing
of any voting securities of the Company.
(d) Cause. "Cause" for termination by the Employer of the Executive's
employment in connection with a Change in Control of the Company shall, for
purposes of this Agreement, be limited to (i) the engaging by the Executive in
intentional conduct not taken in good faith which has caused demonstrable and
serious financial injury to the Employer, as evidenced by a determination in a
binding and final judgment, order or decree of a court or administrative agency
of competent jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative; (ii) conviction of a felony (as evidenced by
binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion of all rights of appeal) which
substantially impairs the Executive's ability to perform his duties or
responsibilities; and (iii) continuing willful and unreasonable refusal by the
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Executive to perform the Executive's duties or responsibilities (unless
significantly changed without the Executive's consent).
(e) Change in Control of the Company. A "Change in Control of the
Company" shall be deemed to have occurred if an event set forth in any one of
the following paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under
any employee benefit plan of the Company or any of its subsidiaries, (C)
an underwriter temporarily holding securities pursuant to an offering of
such securities or (D) a corporation owned, directly or indirectly, by
the shareowners of the Company in substantially the same proportions as
their ownership of stock in the Company ("Excluded Persons")) is or
becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
Affiliates after November 18, 1998, pursuant to express authorization by
the Board that refers to this exception) representing 20% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding voting
securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors of the Company then
serving: (A) individuals who, on November 18, 1998, constituted the
Board and (B) any new director (other than a director whose initial
assumption of
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office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Act) whose appointment or election by
the Board or nomination for election by the Company's shareowners was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on November 18, 1998, or whose
appointment, election or nomination for election was previously so
approved (collectively the "Continuing Directors"); provided, however,
that individuals who are appointed to the Board pursuant to or in
accordance with the terms of an agreement relating to a merger,
consolidation, or share exchange involving the Company (or any direct or
indirect subsidiary of the Company) shall not be Continuing Directors
for purposes of this Agreement until after such individuals are first
nominated for election by a vote of at least two-thirds (2/3) of the
then Continuing Directors and are thereafter elected as directors by the
shareowners of the Company at a meeting of shareowners held following
consummation of such merger, consolidation, or share exchange; and,
provided further, that in the event the failure of any such persons
appointed to the Board to be Continuing Directors results in a Change in
Control of the Company, the subsequent qualification of such persons as
Continuing Directors shall not alter the fact that a Change in Control
of the Company occurred; or
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(iii) the shareowners of the Company approve a merger,
consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the Company
in connection with a merger, consolidation or share exchange of the
Company (or any direct or indirect subsidiary of the Company) pursuant
to applicable stock exchange requirements, other than (A) a merger,
consolidation or share exchange which would result in the voting
securities of the Company outstanding immediately prior to such merger,
consolidation or share exchange continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 50% of the combined
voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger,
consolidation or share exchange, or (B) a merger, consolidation or share
exchange effected to implement a recapitalization of the Company (or
similar transaction) in which no Person (other than an Excluded Person)
is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company
or its Affiliates after November 18, 1998, pursuant to express
authorization by the Board that refers to this exception) representing
20% or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then outstanding
voting securities; or
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(iv) the shareowners of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets (in one transaction or a series of related transactions
within any period of 24 consecutive months), other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity at least 75% of the combined voting power of the
voting securities of which are owned by Persons in substantially the
same proportions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, no "Change in Control of the Company" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to own, directly or indirectly, in the same proportions as
their ownership in the Company, an entity that owns all or substantially all of
the assets or voting securities of the Company immediately following such
transaction or series of transactions.
(f) Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof.
(g) Covered Termination. Subject to Subsection 2(b) hereof, for purposes
of this Agreement, the term "Covered Termination" means any termination of the
Executive's employment during the Employment Period where the Notice of
Termination is delivered on or the Termination Date is any date prior to the end
of the Employment Period.
(h) Employment Period. Subject to Subsection 2(b) hereof, for purposes
of this Agreement, the term "Employment Period" means a period commencing on the
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date of a Change in Control of the Company, and ending at 11:59 p.m. Central
Time on the earlier of the third anniversary of such date or the Executive's
Normal Retirement Date.
(i) Good Reason. For purposes of this Agreement, the Executive shall
have "Good Reason" for termination of employment in connection with a Change in
Control of the Company in the event of:
(i) any breach of this Agreement by the Employer, including
specifically any breach by the Employer of the agreements contained in
Sections 4, 5, and 6 hereof, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith that the Employer
remedies promptly after receipt of notice thereof given by the
Executive;
(ii) any reduction in the Executive's base salary, percentage of
base salary available as incentive compensation or bonus opportunity or
benefits, in each case relative to those most favorable to the Executive
in effect at any time during the 180-day period prior to the Change in
Control or, to the extent more favorable to the Executive, those in
effect at any time during the Employment Period;
(iii) the removal of the Executive from, or any failure to
reelect or reappoint the Executive to, any of the positions held with
the Employer on the date of the Change in Control of the Company or any
other positions with the Employer to which the Executive shall
thereafter be elected, appointed or assigned, except in the event that
such removal or failure to reelect or reappoint relates to the
termination by the Employer of
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the Executive's employment for Cause or by reason of disability pursuant to
Section 12 hereof;
(iv) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written
consent, in the Executive's working conditions or status with the
Employer relative to the most favorable working conditions or status in
effect during the 180-day period prior to the Change in Control of the
Company, or, to the extent more favorable to the Executive, those in
effect at any time during the Employment Period, including but not
limited to (A) a significant change in the nature or scope of the
Executive's authority, powers, functions, duties or responsibilities, or
(B) a significant reduction in the level of support services, staff,
secretarial and other assistance, office space and accoutrements but
excluding for this purpose an isolated, insubstantial and inadvertent
event not occurring in bad faith that the Employer remedies promptly
after receipt of notice thereof given by the Executive;
(v) failure by the Company to obtain the Agreement referred to
in Section 17(a) hereof as provided therein; or
(vi) any voluntary termination of employment by the Executive
where the Notice of Termination is delivered during the 30 days
following the first anniversary of the Change in Control of the Company.
(j) Normal Retirement Date. For purposes of this Agreement, the term
"Normal Retirement Date" means "Normal Retirement Date" as defined in the
primary qualified defined benefit pension
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plan applicable to the Executive, or any successor plan, as in effect on the
date of the Change in Control of the Company.
(k) Person. For purposes of this Agreement, the term "Person" shall mean
any individual, firm, partnership, corporation or other entity, including any
successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
(l) Termination Date. For purposes of this Agreement, except as
otherwise provided in Subsection 2(b), Subsection 10(b), and Subsection 17(a)
hereof, the term "Termination Date" means (i) if the Executive's employment is
terminated by the Executive's death, the date of death; (ii) if the Executive's
employment is terminated by reason of voluntary early retirement, as agreed in
writing by the Employer and the Executive, the date of such early retirement
which is set forth in such written agreement; (iii) if the Executive's
employment is terminated for purposes of this Agreement by reason of disability
pursuant to Section 12 hereof, the earlier of thirty days after the Notice of
Termination is given or one day prior to the end of the Employment Period; (iv)
if the Executive's employment is terminated by the Executive voluntarily (other
than for Good Reason), the date the Notice of Termination is given; and (v) if
the Executive's employment is terminated by the Employer (other than by reason
of disability pursuant to Section 12 hereof) or by the Executive for Good
Reason, the earlier of thirty days after the Notice of Termination is given or
one day prior to the end of the Employment Period. Notwithstanding the
foregoing,
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(1) If termination is for Cause pursuant to Subsection 1(d)(iii)
of this Agreement and if the Executive has cured the conduct constituting
such Cause as described by the Employer in its Notice of Termination
within such thirty-day or shorter period, then the Executive's employment
hereunder shall continue as if the Employer had not delivered its Notice
of Termination.
(2) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Employer notifies the Executive that
a dispute exists concerning the termination within the fifteen-day
period following receipt thereof, then the Executive may elect to
continue his or her employment during such dispute and the Termination
Date shall be determined under this paragraph. If the Executive so
elects and it is thereafter determined that Good Reason did exist, the
Termination Date shall be the earliest of (i) the date on which the
dispute is finally determined, either (x) by mutual written agreement of
the parties or (y) in accordance with Section 22 hereof, (ii) the date
of the Executive's death or (iii) one day prior to the end of the
Employment Period. If the Executive so elects and it is thereafter
determined that Good Reason did not exist, then the employment of the
Executive hereunder shall continue after such determination as if the
Executive had not delivered the Notice of Termination asserting Good
Reason and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the Termination
Date, if any, as if the Executive had not delivered the Notice of
Termination except that, if it is finally determined that Good Reason
did exist, the Executive shall in no case be denied the benefits
described in Subsection 8(b) and Section 9 hereof (including a
Termination
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Payment) based on events occurring after the Executive delivered his
Notice of Termination.
(3) Except as provided in Subsection 1(l)(2) above, if the party
receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the appropriate period
following receipt thereof and it is finally determined that the reason
asserted in such Notice of Termination did not exist, then (i) if such
Notice was delivered by the Executive, the Executive will be deemed to
have voluntarily terminated his employment and the Termination Date
shall be the earlier of the date fifteen days after the Notice of
Termination is given or one day prior to the end of the Employment
Period and (ii) if delivered by the Company, the Company will be deemed
to have terminated the Executive other than by reason of death,
disability or Cause.
2. Termination or Cancellation Prior to Change in Control.
(a) Subject to Subsection 2(b) hereof, the Employer and the Executive
shall each retain the right to terminate the employment of the Executive at any
time prior to a Change in Control of the Company. Subject to Subsection 2(b)
hereof, in the event the Executive's employment is terminated prior to a Change
in Control of the Company, this Agreement shall be terminated and cancelled and
of no further force and effect, and any and all rights and obligations of the
parties hereunder shall cease.
(b) Anything in this Agreement to the contrary notwithstanding, if a
Change in Control of the Company occurs and if the Executive's employment with
the Employer is terminated (other than a termination due to the Executive's
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death or as a result of the Executive's disability) during the period of 180
days prior to the date on which the Change in Control of the Company occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control of the Company or (ii)
otherwise arose in connection with or in anticipation of a Change in Control of
the Company, then for all purposes of this Agreement such termination of
employment shall be deemed a "Covered Termination," "Notice of Termination"
shall be deemed to have been given, and the "Employment Period" shall be deemed
to have begun on the date of such termination which shall be deemed to be the
"Termination Date" and the date of the Change of Control of the Company for
purposes of this Agreement.
3. Employment Period. If a Change in Control of the Company occurs when
the Executive is employed by the Employer, the Employer will continue thereafter
to employ the Executive during the Employment Period, and the Executive will
remain in the employ of the Employer in accordance with and subject to the terms
and provisions of this Agreement. Any termination of the Executive's employment
during the Employment Period, whether by the Company or the Employer, shall be
deemed a termination by the Company for purposes of this Agreement.
4. Duties. During the Employment Period,
the Executive shall, in the same capacities and positions held by the Executive
at the time of the Change in Control of the Company or in such other capacities
and positions as may be agreed to by the Employer and the Executive in writing,
devote the Executive's best efforts and all of the Executive's business time,
attention and skill to the business and affairs of the Employer, as such
business and affairs now exist and as they may hereafter be conducted. The
services which are to be performed by the Executive hereunder are to be rendered
in the same metropolitan area in which the Executive was employed at the date
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of such Change in Control of the Company, or in such other place or places as
shall be mutually agreed upon in writing by the Executive and the Employer from
time to time. Without the Executive's consent, the Executive shall not be
required to be absent from such metropolitan area more than 45 days in any
fiscal year of the Company.
5. Compensation. During the Employment Period, the Executive shall be
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Change in Control of the Company, an annual base
salary in cash equivalent of not less than twelve times the Executive's highest
monthly base salary for the twelve-month period immediately preceding the month
in which the Change in Control of the Company occurs or, if higher, annual base
salary at the rate in effect immediately prior to the Change in Control of the
Company (which base salary shall, unless otherwise agreed in writing by the
Executive, include the current receipt by the Executive of any amounts which,
prior to the Change in Control of the Company, the Executive had elected to
defer, whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to adjustment as hereinafter provided in Section 6 (such
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in value
to the highest value of such benefits provided for the Executive at any time
during the 180-day period immediately prior to the Change in Control of the
Company or, if more favorable to the Executive, those provided generally at any
time during the Employment Period to any executives of the Employer of
comparable status and position to the Executive; and shall be reimbursed, at
such intervals and in accordance with
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such standard policies that are most favorable to the Executive that were in
effect at any time during the 180-day period immediately prior to the Change in
Control of the Company, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer, including travel expenses.
(c) The Executive and/or the Executive's family, as the case may be,
shall be included, to the extent eligible thereunder (which eligibility shall
not be conditioned on the Executive's salary grade or on any other requirement
which excludes persons of comparable status to the Executive unless such
exclusion was in effect for such plan or an equivalent plan at any time during
the 180-day period immediately prior to the Change in Control of the Company),
in any and all plans providing benefits for the Employer's salaried employees in
general, including but not limited to group life insurance, hospitalization,
medical, dental, profit sharing and stock bonus plans; provided, that, (i) in no
event shall the aggregate level of benefits under such plans in which the
Executive is included be less than the aggregate level of benefits under plans
of the Employer of the type referred to in this Subsection 5(c) in which the
Executive was participating at any time during the 180-day period immediately
prior to the Change in Control of the Company and (ii) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level of
benefits under plans of the type referred to in this Subsection 5(c) provided at
any time after the Change in Control of the Company to any executive of the
Employer of comparable status and position to the Executive.
(d) The Executive shall annually be entitled to not less than the amount
of paid vacation and not fewer than the highest number of paid holidays to which
the Executive was entitled annually at any time during the 180-day period
immediately prior to the Change in Control
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of the Company or such greater amount of paid vacation and number of paid
holidays as may be made available annually to other executives of the Employer
of comparable status and position to the Executive at any time during the
Employment Period.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Employer of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus and similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the highest aggregate
level of benefits under plans of the Employer of the type referred to in this
Subsection 5(e) in which the Executive was participating at any time during the
180-day period immediately prior to the Change in Control of the Company; (ii)
in no event shall the aggregate level of benefits under such plans be less than
the aggregate levels of benefits under plans of the type referred to in this
Subsection 5(e) provided at any time after the Change in Control of the Company
to any executive of the Employer comparable in status and position to the
Executive; and (iii) the Employer's obligation to include the Executive in bonus
or incentive compensation plans shall be determined by Subsection 5(f) hereof.
(f) To assure that the Executive will have an opportunity to earn
incentive compensation after a Change in Control of the Company, the Executive
shall be included in a bonus plan of the Employer which shall satisfy the
standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus
Plan shall be payable with respect to achieving such financial or other goals
reasonably related to the business of the Employer as the Employer shall
establish (the "Goals"), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the most attainable goals under the
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Employer's bonus plan or plans as in effect at any time during the 180-day
period immediately prior to the Change in Control of the Company (whether one or
more, the "Company Bonus Plan") and in view of the Employer's existing and
projected financial and business circumstances applicable at the time. The
amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn
under the Bonus Plan shall be no less than the amount of the Executive's maximum
award provided in such Company Bonus Plan (such bonus amount herein referred to
as the "Targeted Bonus"), and in the event the Goals are not achieved such that
the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a
payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably
related to that portion of the Goals which were achieved. Payment of the Bonus
Amount shall not be affected by any circumstance occurring subsequent to the end
of the Employment Period, including termination of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period, the
Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Company, and in accordance with the Company's practice prior to the Change
in Control of the Company, due consideration shall be given to the upward
adjustment of the Executive's Annual Base Salary, at least annually, (i)
commensurate with increases generally given to other executives of the Company
of comparable status and position to the Executive, and (ii) as the scope of the
Company's operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive's voluntarily terminating his or
her employment other than for Good Reason (any such terminations to be subject
to the procedures set forth in
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Section 13 hereof), then the Executive shall be entitled to receive only Accrued
Benefits pursuant to Section 9(a) hereof.
8. Termination Giving Rise to a Termination Payment. (a) If there is a
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or
(iii) Cause (any such terminations to be subject to the procedures set forth in
Section 13 hereof), then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base salary
for periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Subsection 14(a) hereof, the Termination Payment pursuant to Subsection 9(b)
hereof.
(b) If there is a Covered Termination and the Executive is entitled to
Accrued Benefits and the Termination Payment, then the Company shall provide to
the Executive the following additional benefits:
(i) The Executive shall receive, at the expense of the Company,
outplacement services, on an individualized basis at a level of service
commensurate with the Executive's status with the Company immediately
prior to the date of the Change in Control of the Company (or, if
higher, immediately prior to the termination of the Executive's
employment), provided by a nationally recognized executive placement
firm selected by the Company; provided that the cost to the Company of
such services shall not exceed 10% of the Executive's Annual Base
Salary.
(ii) Until the earlier of the end of the Employment Period or
such time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
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following benefits, the Executive shall continue to be covered, at the expense
of the Company, by the same or equivalent life insurance, hospitalization,
medical and dental coverage as was required hereunder with respect to the
Executive immediately prior to the date the Notice of Termination is given.
(iii) The Company shall cause the Executive to be fully and immediately vested
in his accrued benefit under any supplemental executive retirement plan of the
Employer providing benefits for the Executive (the "SERP") and in any defined
contribution retirement plan of the Employer. In addition, the Company shall
cause the Executive to be deemed to have satisfied any minimum years of service
requirement under the SERP for subsidized early retirement benefits regardless
of the Executive's age and service at the Termination Date; provided, however,
that SERP benefits will be based on service to date with no additional credit
for service or age beyond such Termination Date.
(iv) The Company shall cause all restrictions on restricted
stock awards made to the Executive to lapse such that the Executive is
fully and immediately vested in his or her restricted stock.
(v) The Company shall cause all stock options granted to the
Executive pursuant to the Company's stock option plan(s) to be fully
vested.
(vi) The Company shall cause all performance plan awards granted
to the Executive pursuant to any long-term incentive plan
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maintained by the Company to be paid out at target, as if all
performance requirements had been satisfied, on a pro rata basis based
on the completed portion of each award cycle; provided, however, no
payment of plan awards will occur from any award cycle that has been in
effect less than six (6) months.
(vii) The Company shall reimburse the Executive for up to
$15,000 in tax preparation assistance fees for the tax year in which the
Termination Payment is made.
9. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all base salary for the time period ending with the Termination
Date; (ii) reimbursement for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer for the time period ending with the
Termination Date; (iii) any and all other cash earned through the Termination
Date and deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) a lump sum payment of the bonus or
incentive compensation otherwise payable to the Executive with respect to the
year in which termination occurs under all bonus or incentive compensation plan
or plans in which the Executive is a participant; and (v) all other payments and
benefits to which the Executive (or in the event of the Executive's death, the
Executive's surviving spouse or other beneficiary) may be entitled as
compensatory fringe benefits or under the terms of the Employment Agreement
dated as of March 29, 1999 between the Company and the Executive or any benefit
plan of the Employer, excluding severance payments under any Employer severance
policy, practice or
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agreement in effect immediately prior to the Change in Control of the Company.
Payment of Accrued Benefits shall be made promptly in accordance with the
Company's prevailing practice with respect to Subsections 9(a)(i) and (ii) or,
with respect to Subsections 9(a)(iii), (iv) and (v), pursuant to the terms of
the benefit plan or practice establishing such benefits.
(b) Termination Payment.
(i) The Termination Payment shall be an amount equal to (A) the
Executive's Annual Base Salary (determined as of the time of the Change
in Control of the Company or, if higher, immediately prior to the date
the Notice of Termination is given) plus (B) an amount equal to the
greater of the Executive's target bonus for the year in which the
Termination Date occurs or the bonus the Executive received in the year
prior to the Change in Control of the Company (the aggregate amount set
forth in (A) and (B) hereof shall hereafter be referred to as "Annual
Cash Compensation"), times (C) the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date; provided, however, that such amount shall not be less
than the greater of (i) the amount of the Executive's Annual Cash
Compensation or (ii) the severance benefits to which the Executive would
have been entitled under the Company's severance policies and practices
in effect immediately prior to the Change in Control of the Company. The
Termination Payment shall be paid to the Executive in cash equivalent
ten (10) business days after the Termination Date. Such lump sum payment
shall not be reduced by any present value or similar factor, and the
Executive shall not be required to
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mitigate the amount of the Termination Payment by securing other
employment or otherwise, nor will such Termination Payment be reduced by
reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in lieu of, and acceptance by
the Executive of the Termination Payment shall constitute the
Executive's release of any rights of Executive to, any other severance
payments under any Company severance policy, practice or agreement. The
Company shall bear up to $10,000 in the aggregate of fees and expenses
of consultants and/or legal or accounting advisors engaged by the
Executive to advise the Executive as to matters relating to the
computation of benefits due and payable under this Subsection 9(b).
(ii) Notwithstanding any other provision of this Agreement, if
any portion of any payment under this Agreement, or under any other
agreement with or plan of the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," the Company
shall pay Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by Executive after deduction of any excise
tax imposed under Section 4999 of the Code, any interest charges or
penalties in respect of the imposition of such excise tax (but not any
federal, state or local income tax, or employment tax) on the Total
Payments, and any federal, state and local income tax, employment tax,
and excise tax upon the payment provided for by this Subsection
9(b)(ii), shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up
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Payment, Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive's domicile for
income tax purposes on the date the Gross-Up Payment is made, net of the
maximum reduction in federal income taxes that may be obtained from the
deduction of such state and local taxes.
(iii) For purposes of this Agreement, the terms "excess
parachute payment" and "parachute payments" shall have the meanings
assigned to them in Section 280G of the Code and such "parachute
payments" shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in accordance with
Section 1274(b)(2) of the Code (or any successor provision). Promptly
following a Covered Termination or notice by the Company to the
Executive of its belief that there is a payment or benefit due the
Executive which will result in an excess parachute payment as defined in
Section 280G of the Code, the Executive and the Company, at the
Company's expense, shall obtain the opinion (which need not be
unqualified) of nationally recognized tax counsel ("National Tax
Counsel") selected by the Company's independent auditors and reasonably
acceptable to the Executive (which may be regular outside counsel to the
Company), which opinion sets forth (i) the amount of the Base Period
Income, (ii) the amount and present value of Total Payments,
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(iii) the amount and present value of any excess parachute payments, and
(iv) the amount of any Gross-Up Payment. As used in this Agreement, the
term "Base Period Income" means an amount equal to the Executive's
"annualized includible compensation for the base period" as defined in
Section 280G(d)(1) of the Code. For purposes of such opinion, the value
of any noncash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be addressed to the Company and the Executive
and shall be binding upon the Company and the Executive. If such
National Tax Counsel so requests in connection with the opinion required
by this Subsection 9(b) of Section 9, the Executive and the Company
shall obtain, at the Company's expense, and the National Tax Counsel may
rely on, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be
received by the Executive solely with respect to its status under
Section 280G of the Code and the regulations thereunder. Within five (5)
days after the National Tax Counsel's opinion is received by the Company
and the Executive, the Company shall pay (or cause to be paid) or
distribute (or cause to be distributed) to or for the benefit of
Executive such amounts as are then due to Executive under this
Agreement.
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(iv) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total Payments
or Gross-Up Payment, a change is finally determined to be required in
the amount of taxes paid by Executive, appropriate adjustments shall be
made under this Agreement such that the net amount which is payable to
the Executive after taking into account the provisions of Section 4999
of the Code shall reflect the intent of the parties as expressed in this
Section 9, in the manner determined by the National Tax Counsel.
(v) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any
and all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Subsection 9(b), except for claims,
damages or expenses resulting from the gross negligence or willful
misconduct of such firm.
10. Death. (a) Except as provided in Subsection 10(b) hereof, in the
event of a Covered Termination due to the Executive's death, the Executive's
estate, heirs and beneficiaries shall receive all the Executive's Accrued
Benefits through the Termination Date.
(b) In the event the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Subsection 10(a) hereof and, subject to the provisions of this
Agreement, to such Termination Payment as the Executive would have been entitled
to had the Executive lived. For purposes of this Subsection 10(b), the
Termination Date shall be the earlier of thirty days following the giving of the
Notice of Termination, subject to
-26-
extension pursuant to Subsection 1(l) hereof, or one day prior to the end of the
Employment Period.
11. Retirement. If, during the Employment Period, the Executive and the
Employer shall execute an agreement providing for the early retirement of the
Executive from the Employer, or the Executive shall otherwise give notice that
he is voluntarily choosing to retire early from the Employer, the Executive
shall receive Accrued Benefits through the Termination Date; provided, that if
the Executive's employment is terminated by the Executive for Good Reason or by
the Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Subsection 8(a) hereof.
12. Termination for Disability. If, during the Employment Period, as a
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of six consecutive months and, within thirty days after the
Company notifies the Executive in writing that it intends to terminate the
Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 13 hereof.
If the Executive's employment is terminated on account of the Executive's
disability in accordance with this Section, the Executive shall receive Accrued
Benefits in accordance with Subsection 9(a) hereof and shall remain eligible for
all benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
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13. Termination Notice and Procedure. Any Covered Termination by the
Company or the Executive (other than a termination of the Executive's employment
that is a Covered Termination by virtue of Subsection 2(b) hereof) shall be
communicated by a written notice of termination ("Notice of Termination") to the
Executive, if such Notice is given by the Company, and to the Company, if such
Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 23 hereof:
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
(c) If the Notice is given by the Executive for Good Reason, the
Executive may cease performing his duties hereunder on or after the date fifteen
days after the delivery of Notice of Termination and shall in any event cease
employment on the Termination Date. If the Notice is given by the Company, then
the Executive may cease performing his duties hereunder on the date of receipt
of the Notice of Termination, subject to the Executive's rights hereunder.
(d) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to Subsection 1(d) (iii) hereof.
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(e) The recipient of any Notice of Termination shall personally deliver
or mail in accordance with Section 23 hereof written notice of any dispute
relating to such Notice of Termination to the party giving such Notice within
fifteen days after receipt thereof; provided, however, that if the Executive's
conduct or act alleged to provide grounds for termination by the Company for
Cause is curable, then such period shall be thirty days. After the expiration of
such period, the contents of the Notice of Termination shall become final and
not subject to dispute.
14. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event of any Covered
Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, for a period expiring one year
after the Termination Date, without the prior written approval of the Company's
Board of Directors, participate in the management of, be employed by or own any
business enterprise at a location within the United States that engages in
substantial competition with the Company or its subsidiaries, where such
enterprise's revenues from any competitive activities amount to 10% or more of
such enterprise's net revenues and sales for its most recently completed fiscal
year; provided, however, that nothing in this Subsection 14(a) shall prohibit
the Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor.
(b) Confidentiality. During the Executive's employment by the Company
and for a period of five (5) years thereafter, the Executive shall hold in
confidence and not directly or indirectly disclose or use or copy or make lists
of any confidential information or proprietary data of the Company (including
that of the Employer), except to the extent authorized in writing by the Board
of Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably
-29-
necessary or appropriate in connection with the performance by the Executive of
duties as an executive of the Company. Confidential information shall not
include any information known generally to the public or any information of a
type not otherwise considered confidential by persons engaged in the same
business or a business similar to that of the Company. All records, files,
documents and materials, or copies thereof, relating to the business of the
Company which the Executive shall prepare, or use, or come into contact with,
shall be and remain the sole property of the Company and shall be promptly
returned to the Company upon termination of employment with the Company.
15. Expenses and Interest. If, after a Change in Control of the Company,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement or (ii) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, in either case so long as, and to the extent that,
the Executive prevails in such proceeding, the Executive shall recover from the
Company the reasonable attorneys' fees and necessary costs and disbursements
incurred as a result of the dispute, legal or arbitration proceeding as to which
the Executive has prevailed ("Expenses"), and prejudgment interest on any money
judgment or arbitration award obtained by the Executive calculated at the rate
of interest announced by Firstar Bank Milwaukee, N.A., Milwaukee, Wisconsin,
from time to time at its prime or base lending rate from the date that payments
to him or her should have been made under this Agreement. Any dispute as to the
reasonableness of the Expenses incurred, or the extent to which the Executive
has prevailed, shall be resolved by the presiding officer (arbitrator or judge)
in the forum in which the substantive issues are finally resolved.
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16. Payment Obligations Absolute. The Company's obligation during and
after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
15 of this Agreement, all amounts payable by the Company hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the Company
shall be final, and the Company will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled thereto, for any
reason whatsoever.
17. Successors. (a) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason" hereunder, except that for
purposes of implementing the foregoing the date upon which such Sale of Business
becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as
used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 17 or which
otherwise
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becomes bound by all the terms and provisions of this Agreement by operation of
law, and this Agreement shall inure to the benefit of, and be enforceable by,
such Person. The Executive shall, in his or her discretion, be entitled to
proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company and the Company (as so defined) in any action to
enforce any rights of the Executive hereunder. Except as provided in this
Subsection 17(a), this Agreement shall not be assignable by the Company. This
Agreement shall not be terminated by the voluntary or involuntary dissolution of
the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 hereof if the
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms are in effect on the date of the Change in Control of
the Company, that expressly govern benefits under such plan in the event of the
Executive's death.
18. Severability. The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
19. Contents of Agreement; Waiver of Rights; Amendment. Except for the
Employment Agreement dated as of March 29, 1999 between the Company and the
Executive, this Agreement sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and shall supersede in
all respects, and the Executive hereby waives all rights under, any prior or
other agreement or understanding
-32-
between the parties with respect to such subject matter, including, but not
limited to the Key Executive Employment and Severance Agreement dated as of June
25, 1994 between the Company and the Executive. This Agreement may not be
amended or modified at any time except by written instrument executed by the
Company and the Executive.
20. Withholding. The Company shall be entitled to withhold from amounts
to be paid to the Executive hereunder any federal, state or local withholding or
other taxes or charges which it is from time to time required to withhold;
provided, that the amount so withheld shall not exceed the minimum amount
required to be withheld by law. The Company shall be entitled to rely on an
opinion of the National Tax Counsel if any question as to the amount or
requirement of any such withholding shall arise.
21. Certain Rules of Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying any
rule construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
22. Governing Law; Resolution of Disputes. This Agreement and the rights
and obligations hereunder shall be governed by and construed in accordance with
the laws of the State of Wisconsin. Any dispute arising out of this Agreement
shall, at the Executive's election, be determined by arbitration under the rules
of the American Arbitration Association then in effect (in which case both
parties shall be bound by the arbitration award) or by litigation. Whether the
dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be
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Xxxxxxx, Xxxxxxxxx or, at the Executive's election, if the Executive is not then
residing or working in the Madison, Wisconsin metropolitan area, in the judicial
district encompassing the city in which the Executive resides; provided, that,
if the Executive is not then residing in the United States, the election of the
Executive with respect to such venue shall be either Madison, Wisconsin or in
the judicial district encompassing that city in the United States among the
thirty cities having the largest population (as determined by the most recent
United States Census data available at the Termination Date) which is closest to
the Executive's residence. The parties consent to personal jurisdiction in each
trial court in the selected venue having subject matter jurisdiction
notwithstanding their residence or situs, and each party irrevocably consents to
service of process in the manner provided hereunder for the giving of notices.
23. Notice. Notices given pursuant to this Agreement shall be in writing
and, except as otherwise provided by Subsection 13(d) hereof, shall be deemed
given when actually received by the Executive or actually received by the
Company's Corporate Secretary or any officer of the Company other than the
Executive. If mailed, such notices shall be mailed by United States registered
or certified mail, return receipt requested, addressee only, postage prepaid, if
to the Company, to Interstate Energy Corporation (d/b/a Alliant Energy
Corporation), Attention: Corporate Secretary (or President, if the Executive is
then Corporate Secretary), 000 Xxxx Xxxxxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxx,
Xxxxxxxxx 00000-0000, or if to the Executive, at the address set forth below the
Executive's signature to this Agreement, or to such other address as the party
to be notified shall have theretofore given to the other party in writing.
24. No Waiver. No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed
-34-
by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or any prior or subsequent time.
25. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INTERSTATE ENERGY CORPORATION
By:
Its:
Attest:
Its:
EXECUTIVE:
/s/Xxxxxx X. Xxxxx, Xx. (SEAL)
Address:
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