CHANGE IN CONTROL AGREEMENT
AGREEMENT between CENTRAL AND SOUTH WEST CORPORATION (the
"Company"), and E. R. BROOKS ("EXECUTIVE"),
W I T N E S S E T H:
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "BOARD") has
approved the Company entering into a severance agreement with Executive in order
to encourage his/her continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "CHANGE IN DUTIES" shall mean the occurrence, within
three years after the date upon which a Change in Control
occurs, of any one or more of the following:
(i) A significant reduction in the duties or
responsibilities of Executive from those
applicable to him/her immediately prior to the
date on which a Change of Control occurs;
(ii) A reduction in Executive's total remuneration
(including salary, bonus, qualified retirement
benefits, nonqualified retirement benefits,
welfare benefits and any other employee benefits)
from that provided to him/her immediately prior to
the date on which a Change of Control occurs;
(iii) A change in the location of Executive's principal
place of employment by the Company by more than 35
miles from the location where he was principally
employed immediately prior to the date on which a
Change of Control occurs; or
(iv) A failure by the Company to provide directors and
officers liability insurance covering Executive
comparable to that
provided to him/her immediately prior to the date
on which a Change of Control occurs.
(b) "CHANGE OF CONTROL" means the occurrence of one of the
following events:
(i) Any person or entity, including a "GROUP" as
contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, acquires or
gains ownership or control (including, without
limitation, power to vote) of 25% or more of the
outstanding shares of the Company's voting stock
(based upon voting power); or
(ii) A period of twenty-four consecutive months during
which two-thirds of the individuals who are
directors of the Company at the beginning of such
period cease to be directors of the Company for
any reason; or
(iii) The Closing of any merger, acquisition, or
consolidation following which the shareholders of
the Company own less than 75% of the surviving
entity; or
(iv) The Closing of a sale or disposition (other than
to a subsidiary) of more than 85% of the Company's
assets.
(c) "CLOSING" shall mean a meeting at which all documents
necessary to consummate a transaction are executed and
delivered; provided that a transaction shall not be
considered Closed for purposes of this Agreement until
all conditions precedent to the consummation of the
transaction, including but not limited to, all required
regulatory approvals, have been fulfilled.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "COMPENSATION" shall mean the greater of (i) or (ii),
where:
(i) equals the Executive's annual salary plus Target
Bonus immediately prior to the date on which a
Change of Control occurs; and
(ii) equals the Executive's annual salary plus Target
Bonus at the time of his Covered Termination.
(f) "COVERED TERMINATION" shall mean an Involuntary
Termination within three years after the date upon which
a Change of Control occurs or a Voluntary Termination
during the thirteenth month after the date upon which a
Change of Control occurs.
(g) "DCP" shall mean the Central and South West Corporation
Executive Deferred Compensation Plan, as amended from
time to time.
(h) "INVOLUNTARY TERMINATION" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii)
of this subparagraph (h)); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date
upon which Executive receives notice of a Change
in Duties;
(iii) provided, however, the term "INVOLUNTARY
TERMINATION" shall not include a Termination for
Cause or any termination as a result of death,
disability under circumstances entitling Executive
to benefits under the Company's long-term
disability plan, or Retirement.
(i) "PENSION PLAN" shall mean the Central and South West
System Pension Plan, as amended from time to time.
(j) "RETIREMENT" shall mean Executive's termination of
employment on or after the date he reaches age
sixty-five.
(k) "SERP" shall mean the Central and South West System
Special Executive Retirement Plan, as amended from time
to time.
(l) "SEVERANCE AMOUNT" shall mean an amount equal to 4 times
Executive's Compensation.
(m) "TARGET BONUS" shall mean Executive's target incentive
opportunity under the Central and South West Corporation
Annual Incentive Plan in effect for the year with respect
to which such award is being determined, if any, or for
the last year in which such a plan was in effect,
expressed as a dollar amount based upon Executive's
annual salary for the year of such determination.
(n) "TERMINATION FOR CAUSE" shall mean termination of
Executive's employment by the Company (or its
subsidiaries) by reason of Executive's (i) gross
negligence in the performance of his duties,
(ii) willful and continued failure to perform his duties,
(iii) willful engagement in conduct which is materially
injurous to the Company or its subsidiaries (monetarily
or otherwise) or (iv) conviction of a felony or a
misdemeanor involving moral turpitude.
(o) "VOLUNTARY TERMINATION" shall mean any termination of
Executive's employment with the Company which results
from a resignation by Executive; provided, however, the
term "VOLUNTARY TERMINATION" shall not include an
Involuntary Termination, a Termination for Cause, or any
termination as a result of death, disability under
circumstances entitling Executive to benefits under the
Company's long-term disability plan, or Retirement.
(p) "WELFARE BENEFIT COVERAGES" shall mean the medical,
dental and life insurance coverages provided by the
Company to its active employees.
2. SERVICES. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto)
during the period of his employment to the best of his ability
and in a prudent and businesslike manner and that he will devote
substantially the same time, efforts and dedication to his duties
as heretofore devoted.
3. SEVERANCE BENEFITS. If Executive's employment by the Company or
any subsidiary thereof or successor thereto shall be subject to a
Covered Termination, then Executive shall be entitled to receive,
as additional compensation for services rendered to the Company
(including its subsidiaries), the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment Actuarially Equivalent (as such
term is defined in the Pension Plan) to Executive's
unreduced projected supplemental monthly benefit at age
sixty-two under the SERP if Executive has attained age
fifty-five or older as of the date of his Covered
Termination, or to Executive's accrued supplemental
monthly benefit under the SERP, plus three years of
Credited Service (as such term is defined in the SERP) if
Executive has not attained age fifty-five as of the date
of his Covered Termination.
(c) A lump sum cash payment Actuarially Equivalent (as such
term is defined in the Pension Plan) to Executive's
projected normal retirement benefit under the DCP.
(d) If Executive is not eligible for retiree medical coverage
as of the date of his Covered Termination, Executive
shall be entitled to continue the Welfare Benefit
Coverages for himself/herself and,
where applicable, his eligible dependents for up to
thirty-six months following the date of his Covered
Termination. Such benefit rights shall apply only to
those Welfare Benefit Coverages which the Company has in
effect from time to time for active employees. Welfare
Benefit Coverage(s) shall immediately end upon
Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive
being obligated hereunder to promptly report such
eligibility to the Company). If Executive is eligible for
retiree medical coverage as of the date of his Covered
Termination, Executive shall receive earned retiree
benefits as long as Executive continues to pay the
required premiums for such benefits. Notwithstanding the
foregoing, if any of the Welfare Benefit Coverages cannot
be continued during a period when Executive is not an
employee of the Company, the Company shall pay to
Executive a lump sum cash payment in amount equal to the
economic value of such benefit.
(e) Executive shall be entitled to receive reimbursements for
out-placement services in connection with obtaining new
employment incurred within twelve months of the date of
his Covered Termination, up to a maximum amount equal to
15% of his annual salary as of the date of his Covered
Termination.
(f) Executive shall have the option to purchase his company
vehicle for an amount equal to its depreciated book value
as of the date of his Covered Termination.
(g) If Executive relocates his primary residence in
connection with obtaining new employment and such
relocation occurs within thirty-six months of the date of
his Covered Termination, upon providing documentation of
such relocation acceptable to the Company, Executive
shall be entitled to receive a lump sum cash payment in
an amount equal to 25% of his annual salary on the date
of his Covered Termination.
(h) The Company shall cause the SERP and DCP to be amended to
reflect the severance benefits payable pursuant to this
Paragraph. Further, any severance benefits paid pursuant
to this Paragraph will be deemed to be a severance
payment and not compensation for purposes of determining
benefits under the Company's qualified retirement plans
and shall be subject to any required tax withholding.
(i) Notwithstanding anything to the contrary in this
Agreement, upon a Change of Control, Executive shall be
entitled to receive the benefits provided under the
Central and South West Corporation 1992 Long-Term
Incentive Plan or any subsequent similar plan that may be
implemented in the future.
(j) Executive shall be entitled to continued access, for the
remainder of the calendar year in which a Covered
Termination occurs, to the financial planning services
available to executive employees of the Company at the
time of the Change of Control upon which such Covered
Termination is based.
4. INTEREST ON LATE BENEFIT PAYMENTS. If any payment provided for in
Paragraph 3 hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such
payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at the prime
or base rate of interest announced by Mellon Bank (or any
successor thereto) at its principal office in Pittsburgh, PA, and
shall change when and as any such change in such prime or base
rate shall be announced by such bank.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding
anything to the contrary in the Agreement, in the event that any
payment or distribution by the Company to or for the benefit of
Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with
any such interest or penalties, are hereinafter collectively
referred to as the "Excise Tax"), the Company shall pay to
Executive an additional payment (a "Gross-up Payment") in an
amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payments. The Company
and Executive shall make an initial determination as to whether
a Gross-up Payment is required and the amount of any such
Gross-up Payment. Executive shall notify the Company immediately
in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any,
initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify
Executive in writing at least five days prior to the due date of
any response required with respect to such claim if it plans to
contest the claim. If the Company decides to contest such claim,
Executive shall cooperate fully with the Company in such action;
provided, however, the Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall
indemnify and hold Executive 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 the
Company's action. If, as a result of the Company's action with
respect to a claim, Executive receives a refund of any amount
paid by the Company with respect to such claim, Executive shall
promptly pay such
refund to the Company. If the Company fails to timely notify
Executive whether it will contest such claim or the Company
determines not to contest such claim, then the Company shall
immediately pay to Executive the portion of such claim, if any,
which it has not previously paid to Executive.
6. GENERAL.
(a) TERM. The effective date of this Agreement is \
November 1, 1996. The term of this Agreement shall be
for a period of three years after such effective date.
Further, beginning on the day immediately following
such effective date and continuing on each subsequent
day, the term of this Agreement shall be extended
automatically one day, so that at no time shall the
term of this Agreement be less than three years, until
such time as the Company shall give written notice to
Executive that no such automatic extension shall occur
and then this Agreement shall terminate as of the last
day of the applicable three-year term.
(b) INDEMNIFICATION. If Executive shall obtain an money
judgment or otherwise prevail with respect to any
litigation brought by Executive or the Company to
enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by
applicable law, hereby indemnifies Executive for his
reasonable attorneys' fees and disbursements incurred
in such litigation and hereby agree (i) to pay in full
all such fees and disbursements and (ii) to pay
prejudgment interest on any money judgment obtained by
Executive from the earliest date that payment to
him/her should have been made under this Agreement
until such judgment shall have been paid in full, which
interest shall be calculated at the prime or base rate
of interest announced by Mellon Bank (or any successor
thereto) at its principal office in Pittsburgh, PA, and
shall change when and as any such change in such prime
or base rate shall be announced by such bank.
Notwithstanding the foregoing, in lieu of litigation to
enforce or interpret any provision of this Agreement,
Executive may request by written notice to the Company
that any controversy regarding the enforcement or
interpretation of any provision contained herein be
submitted to arbitration pursuant to the labor
arbitration rules of the American Arbitration
Association. The Company, to the fullest extent
permitted by applicable law, hereby indemnifies
Executive for his reasonable attorneys' fees and
disbursements incurred in such arbitration and hereby
agrees to pay in full all such fees and disbursements.
If any controversy regarding this Agreement is
submitted to arbitration, Executive and the Company
agree that the arbitrator's decision shall be final and
legally binding on both parties. The arbitration
provisions of this Paragraph shall be governed by the
provisions of the Federal Arbitration Act.
(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive
the amounts and to make the arrangements provided herein
shall be absolute and unconditional and shall not be
affected by any circumstances, including, without
limitation, any set-off, counter-claim, recoupment,
defense or other right which the Company (including its
subsidiaries) may have against him/her or anyone else.
All amounts payable by the Company (including its
subsidiaries hereunder) shall be paid without notice or
demand. Executive shall not be obligated to sign an
agreement not to compete with the Company or to seek
other employment in mitigation of the amounts payable
or arrangements made under any provision of this
Agreement, and, except as provided in Paragraph 3
hereof, the obtaining of any other employment shall in
no event effect any reduction of the Company's
obligations to make (or cause to be made) the payments
and arrangements required to be made under this
Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of
the Company, by merger or otherwise. This Agreement shall
also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to
full payment of amounts due pursuant to this Agreement,
such amounts shall be payable pursuant to the terms of
this Agreement to his estate.
(e) SEVERABILITY. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason
of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other
jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement
or the rights hereunder, except by will or the laws of
descent and distribution.
(g) NOTICES. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In
the case of Executive, such notices or communications
shall be effectively delivered if hand delivered to
Executive at his principal place of employment or if sent
by registered or certified mail to Executive at the last
address he has filed with the Company. In the case of the
Company, such notices or communications shall be
effectively delivered if sent by registered or certified
mail to the Company at its principal executive offices.
(h) CONTROLLING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Texas. Further, Executive agrees that any legal
proceeding to enforce the provisions of this Agreement
shall be brought in Dallas, Dallas County, Texas, and
hereby waives his right to any pleas regarding subject
matter or personal jurisdiction and venue.
(i) RELEASE. As a condition to the receipt of any benefit
under Paragraph 3 hereof, unless such requirement is
waived by the Board in its sole discretion, Executive
shall first execute a release, in the form established
by the Company, releasing the Company, its
shareholders, partners, officers, directors, employees
and agents from any and all claims and from any and all
causes of action of any kind or character, including
but not limited to all claims or causes of action
arising out of Executive's employment with the Company
or the termination of such employment.
(j) FULL SETTLEMENT. If Executive is entitled to and receives
the benefits provided hereunder, performance of the
obligations of the Company hereunder will constitute full
settlement of all claims that Executive might otherwise
assert against the Company on account of his termination
of employment.
(k) UNFUNDED OBLIGATION. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company
(including its subsidiaries), and no such obligation
shall create a trust or be deemed to be secured by any
pledge or encumbrance on any property of the Company
(including its subsidiaries).
(l) NOT A CONTRACT OF EMPLOYMENT. The Agreement shall not be
deemed to constitute a contract of employment, nor shall
any provision hereof affect (i) the right of the Company
(or its subsidiaries) to discharge Executive at will or
(ii) the terms and conditions of any other agreement
between the Company and Executive except as provided
herein.
(m) NUMBER AND GENDER. Wherever appropriate herein, words
used in the singular shall include the plural and the
plural shall include the singular. The masculine gender
where appearing herein shall be deemed to include the
feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 30TH day of DECEMBER, 1996.
"EXECUTIVE"
E. R. BROOKS
"COMPANY"
CENTRAL AND SOUTH WEST CORPORATION
BY: T. V. SHOCKLEY, III
NAME: THOMAS V. SHOCKLEY, III
TITLE: EXECUTIVE VICE PRESIDENT