Exhibit 10.05
MANAGEMENT CONTINUITY AGREEMENT
This MANAGEMENT CONTINUITY AGREEMENT (this "Agreement"),
effective as of February 7, 1995, by and between CIPSCO
INCORPORATED (the "Company"), and the officer identified on the
signature page hereof (the "Executive");
WITNESSETH:
WHEREAS, the Executive is a senior executive of the
Company and/or a Subsidiary (as hereinafter defined) and has made
and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for
most publicly held companies, the possibility of a Change in
Control (as that term is hereafter defined) exists;
WHEREAS, the Company desires to assure itself of both
present and future continuity of management in the event of a
Change in Control and desires to establish certain minimum
compensation rights of its key senior executive officers,
including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior
executives are not practically disabled from discharging their
duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter
materially the compensation and benefits which the Executive could
reasonably expect to receive from the Company and/or Subsidiaries
absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become
operative only upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to
the Company and/or Subsidiaries on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. Operation of Agreement.
(a) This Agreement shall be effective and binding
immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement shall not be
operative unless and until there shall have occurred a Change
94
in Control. For purposes of this Agreement, a "Change in Control"
shall have occurred if at any time during the Term (as that term
is hereafter defined) any of the following events shall occur:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal
person, and immediately after such merger, consolidation or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation
or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as that term is
hereafter defined) of the Company immediately prior to such
transaction;
(ii) Central Illinois Public Service Company
("CIPS ) is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately
after such merger, consolidation or reorganization less than
a majority of the combined voting power of the then-
outstanding securities of such corporation or person
immediately after such transaction are held by the Company or
held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such transaction;
(iii) The Company sells all or substantially all of
its assets to any other corporation or other legal person and
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such sale are held in the aggregate by the
holders of Voting Stock of the Company immediately prior to
such sale;
(iv) CIPS sells all or substantially all of its
assets to any other corporation or other legal person, less
than a majority of the combined voting power of the then-
outstanding securities of such corporation or person
immediately after such sale are held by the Company or held
in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale;
(v) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined
under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities
representing 20% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock");
95
(vi) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Exchange Act, disclosing
that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) other than
the Company has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding securities entitled to
vote generally in the election of directors of CIPS ("CIPS
Voting Stock");
(vii) The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule
14A (or any successor schedule, form or report or item
therein) that a change in control of the Company has or may
have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction;
(viii) CIPS files a report or proxy statement with
the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule
14A (or any successor schedule, form or report or item
therein) that a change in control of CIPS has or may have
occurred or will or may occur in the future pursuant to any
then-existing contract or transaction;
(ix) If during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the Directors of the Company cease for any reason
to constitute at least a majority thereof, provided, however,
that for purposes of this clause (ix), each Director who is
first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two-thirds of
the Directors of the Company (or a committee thereof) then
still in office who were Directors of the Company at the
beginning of any such period will be deemed to have been a
Director of the Company at the beginning of such period; or
(x) If during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the Directors of CIPS cease for any reason to
constitute at least a majority thereof, provided, however,
that for purposes of this clause (x), each Director who is
first elected, or first nominated for election by CIPS'
stockholders, by a vote of at least two-thirds of the
Directors of CIPS (or a committee thereof) then still in
office who were Directors of CIPS at the beginning of any
such period will be deemed to have been a Director of CIPS at
the beginning of such period.
Notwithstanding the foregoing provisions of Section l(a)(v),
96
l(a)(vi), l(a)(vii) or l(a)(viii) hereof, unless otherwise
determined in a specific case by majority vote of the Board of
Directors of the Company (the "Board"), a "Change in Control"
shall not be deemed to have occurred for purposes of this
Agreement solely because (i) the Company, (ii) an entity in which
the Company directly or indirectly beneficially owns 50% or more
of the voting securities (a "Subsidiary"), or (iii) any Company or
Subsidiary-sponsored employee stock ownership plan or any other
employee benefit plan of the Company or a Subsidiary, either files
or becomes obligated to file a report or a proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item
therein) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or CIPS Voting Stock, whether in
excess of 20% or otherwise, or because the Company or a Subsidiary
reports that a change in control of the Company or CIPS has or may
have occurred or will or may occur in the future by reason of such
beneficial ownership.
(b) Upon the occurrence of a Change in Control at any
time during the Term, this Agreement shall become immediately
operative.
(c) The period during which this Agreement shall be in
effect (the "Term") shall commence as of the date hereof and shall
expire as of the later of (i) the close of business on December
31, 1998, provided, however, that commencing on January 1, 1996
and each January 1 thereafter, such date shall automatically be
extended for an additional year unless, not later than September
30 of the immediately preceding year, the Company or the Executive
shall have given notice that it or he, as the case may be, does
not wish to have such date extended, and (ii) the expiration of
the Period of Employment (as that term is hereinafter defined).
Notwithstanding the foregoing and subject to Section 10 hereof,
if, prior to a Change in Control, the Executive ceases for any
reason to be an employee of the Company and its Subsidiaries,
thereupon the Term shall be deemed to have expired and this
Agreement shall immediately terminate and be of no further effect.
97
2. Employment; Period of Employment:
(a) Subject to the terms and conditions of this
Agreement, upon the occurrence of a Change in Control, the Company
and/or any Subsidiary shall continue the Executive in its employ
and the Executive shall remain in the employ of the Company and/or
any Subsidiary, as the case may be, for the period set forth in
Section 2(b) hereof (the "Period of Employment"), in the position
and with substantially the same duties and responsibilities that
he had immediately prior to the Change in Control, or to which the
Company and the Executive may hereafter mutually agree in writing.
Throughout the Period of Employment, the Executive shall
devote substantially all of his time during normal business hours
(subject to vacations, sick leave and other absences in accordance
with the policies of the Company or the applicable Subsidiary as
in effect for senior executives immediately prior to the Change in
Control) to the business and affairs of the Company and/or any
Subsidiary, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods of time during normal
business hours to (i) serving as a director, trustee or member of
or participant in any organization or business so long as such
activity would not constitute Competitive Activity (as that term
is hereafter defined) if conducted by the Executive after the
Executive s Termination Date (as that term is hereafter defined),
(ii) engaging in charitable and community activities, or(iii)
managing his personal investments.
(b) The Period of Employment shall commence on the date
of an occurrence of a Change in Control and, subject only to the
provisions of Section 4 hereof, shall continue until the earliest
of (i) the expiration of the third anniversary of the occurrence
of the Change in Control, (ii) the Executive s death, or (iii) the
Executive s attainment of age 65.
3. Compensation During Period of Employment:
(a) Upon the occurrence of a Change in Control, the
Executive shall receive during the Period of Employment (i) annual
base salary at a rate not less than the Executive s annual fixed
or base compensation from the Company and any Subsidiary (payable
monthly or otherwise as in effect for senior executives
immediately prior to the occurrence of a Change in Control) or
such higher rate as may be determined from time to time by the
Board or the Compensation Committee thereof (or board or committee
of the applicable Subsidiary)(which base salary at such rate is
herein referred to as "Base Pay") and (ii) an annual amount equal
to not less than the highest aggregate annual bonus, incentive or
other payments of cash compensation in addition to the amounts
referred to in clause (i) above made or to be made in regard to
services rendered in any calendar year during the three calendar
years immediately preceding the year in which the Change in
Control occurred pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan,
98
program or arrangement (whether or not funded) of the Company or
the applicable Subsidiary or any successor thereto providing
benefits at least as great as the benefits payable thereunder
prior to a Change in Control ("Incentive Pay"); provided, however,
that (A) with the prior written consent of the Executive, nothing
herein shall preclude a change in the mix between Base Pay and
Incentive Pay so long as that the aggregate cash compensation
received by the Executive in any one calendar year is not reduced
in connection therewith or as a result thereof, (B) in no event
shall any increase in the Executive s aggregate cash compensation
or any portion thereof in any way diminish any other obligation of
the Company or the applicable Subsidiary under this Agreement, and
(C) no duplicate payment hereunder will be made in respect of any
amount actually paid to the Executive pursuant to any such
agreement, policy, plan, program or arrangement.
(b) For his service pursuant to Section 2(a) hereof,
during the Period of Employment the Executive shall be a full
participant in, and shall be entitled to the perquisites, benefits
and service credit for benefits as provided under, any and all
employee retirement income and welfare benefit policies, plans,
programs or arrangements in which senior executives of the Company
or the applicable Subsidiary participate, including without
limitation any stock option, stock purchase, stock appreciation,
savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, deferred compensation,
incentive compensation, group and/or executive life, health,
medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company or the applicable
Subsidiary), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs
or arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be adopted
hereafter by the Company or the applicable Subsidiary providing
perquisites, benefits and service credit for benefits at least as
great as are payable thereunder prior to a Change in Control
(collectively, "Employee Benefits"); provided, however, that
except as expressly provided in, and subject to the terms of,
Section 3(a) hereof, the Executive s rights thereunder shall be
governed by the terms thereof and shall not be enlarged hereunder
or otherwise affected hereby. If and to the extent such
perquisites, benefits or service credit for benefits are not
payable or provided under any such policy, plan, program or
arrangement as a result of the amendment or termination thereof,
then the Company shall itself pay or provide therefor. Nothing in
this Agreement shall preclude improvement or enhancement of any
such Employee Benefits, provided that no such improvement shall in
any way diminish any other obligation of the Company under this
Agreement.
99
4. Termination Following a Change in Control:
(a) In the event of the occurrence of a change in
Control, the Executive s employment with the Company and each
Subsidiary may be terminated by the Company (or the applicable
Subsidiary) during the Period of Employment and the Executive
shall not be entitled to the benefits provided by Sections 5 and 6
hereof only upon the occurrence of one or more of the following
events:
(i) The Executive's death;
(ii) If the Executive shall become permanently disabled
within the meaning of, and begins actually to
receive disability benefits pursuant to, the long-
term disability plan in effect for senior
executives of the Company or the applicable
Subsidiary immediately prior to the Change in
Control; or
(iii) "Cause," which for purposes of this Agreement shall
mean that, prior to any termination pursuant to
Section 4(b) hereof, the Executive shall have
committed:
(A) an intentional act of fraud, embezzlement or
theft in connection with his duties or in
the course of his employment with the
Company and/or any subsidiary;
(B) intentional wrongful damage to property of
the Company and/or any Subsidiary;
(C) intentional wrongful disclosure of secret
processes or confidential information of the
Company and/or any Subsidiary; or
(D) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to the Company
and/or any Subsidiary. For purposes of this Agreement, no act, or
failure to act, on the part of the Executive shall be deemed
"intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done, or
omitted to be done, by the Executive not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company or the applicable Subsidiary.
Notwithstanding the foregoing, the Executive shall not be deemed
to have been terminated for "Cause" hereunder unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board then in office at a meeting of the
100
Board called and held for such purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with
his counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive had committed an
act set forth above in Section 4(a)(iii) and specifying the
particulars thereof in detail. Nothing herein shall limit the
right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(b) In the event of the occurrence of a Change in
Control, this Agreement may be terminated by the Executive during
the Period of Employment with the right to severance compensation
as provided in Sections 5 and 6 hereof upon the occurrence of one
or more of the following events (regardless of whether any other
reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation
other employment):
(i) Any termination by the Company and Subsidiaries of
the employment of the Executive prior to the date upon which
the Executive shall have attained age 65, which termination
shall be for any reason other than for Cause or as a result
of the death of the Executive or by reason of the Executive s
disability and the actual receipt of disability benefits in
accordance with Section 4(a)(ii) hereof; or
(ii) Termination by the Executive of his employment with
the Company and Subsidiaries during the Period of Employment
upon the occurrence of any of the following events:
(A) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or
a substantially equivalent office or position, of or
with the Company and/or Subsidiaries which the Executive
held immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company
and/or Subsidiaries (or any successor thereto) if the
Executive shall have been a Director of the Company
and/or Subsidiaries immediately prior to the Change in
Control;
(B) A significant adverse change in the nature or
scope of the authorities, powers, functions,
responsibilities or duties attached to the position with
the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, a reduction
in the aggregate of the Executive s Base Pay and
Incentive Pay received from the Company and
Subsidiaries, or the termination or denial of the
Executive s rights to Employee Benefits as herein
provided, any of which is not remedied within 10
calendar days after receipt by the Company of written
notice from the Executive of such change, reduction or
101
termination, as the case may be;
(C) A determination by the Executive made in good
faith that as a result of a Change in Control and a
change in circumstances thereafter significantly
affecting his position, including without limitation a
change in the scope of the business or other activities
for which he was responsible immediately prior to a
Change in Control, he has been rendered substantially
unable to carry out, has been substantially hindered in
the performance of, or has suffered a substantial
reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held
by the Executive immediately prior to the Change in
Control, which situation is not remedied within 10
calendar days after written notice to the Company from
the Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or the
Subsidiary which is the employer of the Executive or
transfer of all or a significant portion of its business
and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization or
otherwise) to which all or a significant portion of its
business and/or assets have been transferred (directly
or by operation of law) shall have assumed all duties
and obligations of the Company under this Agreement
pursuant to Section 12 hereof;
(E) The Company shall relocate its principal
executive offices, or require the Executive to have his
principal location of work changed, to any location
which is in excess of 25 miles from the location thereof
immediately prior to the Change of Control or to travel
away from his office in the course of discharging his
responsibilities or duties hereunder significantly more
(in terms of either consecutive days or aggregate days
in any calendar year) than was required of him prior to
the Change of Control without, in either case, his prior
written consent; or
(F) Without limiting the generality or effect of
the foregoing, any material breach of this Agreement by
the Company or any successor thereto.
(c) A termination pursuant to Section 4(a) hereof or by
the Executive pursuant to Section 4(b) hereof shall not affect any
rights which the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company or the
applicable Subsidiary providing Employee Benefits (except as
provided in Section 5(a)(ii) hereof), which rights shall be
governed by the terms thereof. If this Agreement or the
employment of the Executive is terminated under circumstances in
102
which the Executive is not entitled to any payments under Sections
3, 5 or 6 hereof, the Executive shall have no further obligation
or liability to the Company hereunder with respect to his prior or
any future employment by the Company.
5. Severance Compensation:
(a) If, following the occurrence of a Change in
Control, the Company and every Subsidiary shall terminate the
Executive s employment during the Period of Employment other than
pursuant to Section 4(a) hereof, or if the Executive shall
terminate his employment pursuant to Section 4(b) hereof, the
Company shall continue to provide (or cause a Subsidiary to
continue to provide) the following benefits and shall further pay
to the Executive the following amounts within five business days
after the date (the "Termination Date") that the Executive s
employment is terminated (the effective date of which shall be the
date of termination, or such other date that may be specified by
the Executive if the termination is pursuant to Section 4(b)
hereof):
(i) In lieu of any further payments to the Executive for
periods subsequent to the Termination Date, but without
affecting the rights of the Executive referred to in Section
5(b) hereof, a lump sum payment (the "Severance Payment") in
an amount equal to the present value (using a discount rate
required to be utilized for purposes of computations under
Section 28OG of the Code or any successor provision thereto
or, if no such rate is so required to be used, a rate equal
to the then-applicable interest rate prescribed by the
Pension Benefit Guaranty Corporation for benefit valuations
in connection with non-multiemployer pension plan
terminations assuming the immediate commencement of benefit
payments (the "Discount Rate") ) of the sum of (A) the
aggregate Base Pay (at the highest rate in effect for any
period prior to the Termination Date) for each remaining year
or partial year of the Period of Employment which the
Executive would have received had such termination or breach
not occurred, plus (B) the aggregate Incentive Pay
(determined in accordance with the standards set forth in
Section 3(a)(ii) hereof), which the Executive would have
received pursuant to this Agreement or any agreement, policy,
plan, program or arrangement referred to therein during the
remainder of the Period of Employment had his employment
continued for the remainder of the Period of Employment (in
which event the Executive will no longer be entitled to
Incentive Pay under any such agreement, policy, plan, program
or arrangement except for Incentive Pay to which he was
entitled for service prior to the Termination Date).
(ii) For the remainder of the Period of Employment, the
Company shall arrange (or cause a Subsidiary to arrange) to
provide the Executive with Employee Benefits that are welfare
103
benefits, but not stock option, stock purchase, stock
appreciation, or similar compensatory benefits, substantially
similar to those which the Executive was receiving or
entitled to receive immediately prior to the Termination Date
(and if and to the extent that such benefits shall not or
cannot be paid or provided under any policy, plan, program or
arrangement of the Company or Subsidiary, then the Company
shall itself pay or provide (or cause a Subsidiary to pay or
provide) for the payment to the Executive, his dependents and
beneficiaries, such Employee Benefits). Without otherwise
limiting the purposes or effect of Section 7 hereof, Employee
Benefits otherwise receivable by the Executive pursuant to
the first sentence of this Section 5(a)(ii) shall be reduced
to the extent comparable welfare benefits are actually
received by the Executive from another employer during such
period following the Executive s Termination Date, and any
such benefits actually received by the Executive shall be
reported by the Executive to the Company. Notwithstanding
the foregoing, the remainder of the Period of Employment
shall be considered service with the Company and/or
Subsidiaries for the purpose of determining service credits
and benefits due and payable to the Executive under the
retirement income, supplemental executive retirement and
other benefit plans of the Company and/or Subsidiaries
applicable to the Executive or his beneficiaries immediately
prior to the Termination Date.
(b) Upon written notice given by the Executive to the
Company prior to the occurrence of a Change in Control, the
Executive, at his sole option, without reduction to reflect the
present value of such amounts as aforesaid, may elect to have all
or any of the Severance Payment payable pursuant to Section 5(a)
(i) hereof paid to him on a quarterly or monthly basis during the
remainder of the Period of Employment.
(c) There shall be no right of set-off or counterclaim
in respect of any claim, debt or obligation against any payment to
or benefit for the Executive provided for in this Agreement,
except as expressly provided in Section 5(a)(ii) hereof.
(d) Without limiting the rights of the Executive at law
or in equity, if the Company or Subsidiary fails to make any
payment required to be made hereunder on a timely basis, the
Company shall pay interest on the amount thereof at an annualized
rate of interest equal to the then-applicable Discount Rate.
(e) Notwithstanding any other provision hereof, the
parties respective rights and obligations under this Section 5
will survive any termination or expiration of this Agreement or
the termination of the Executive s employment for any reason
whatsoever.
104
6. Certain Additional Payments by the Company:
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement shall become
operative and it shall be determined (as hereafter provided) that
any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar
right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (individually
and collectively a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision
thereto) by reason of being considered "contingent on a change in
ownership or control" of the Company or CIPS, within the meaning
of Section 28OG of the Code (or any successor provision thereto),
or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, being
hereafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment or
payments (individually and collectively, a "Gross-Up Payment").
The Gross-Up Payment shall be in an amount such that, after
payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of section 6(e) hereof,
all determinations required to be made under this Section 6,
including whether an Excise Tax is payable by the Executive and
the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm")selected by the
Executive in his sole discretion. The Executive shall direct the
Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and the Executive
within 30 calendar days after the Determination Date, if
applicable, and any such other time or times as may be requested
by the Company or the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. The
federal tax returns filed by the Executive shall be prepared and
filed on a consistent basis with the determination of the
Accounting Firm with respect to the Excise Tax payable by the
Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it
makes such determination, furnish the company and the Executive an
opinion that the Executive has substantial authority not to report
105
any Excise Tax on his federal income tax return. As a result of
the uncertainty in the application of Section 4999 of the Code (or
any successor provision thereto) at the time of any determination
by the Accounting Firm hereunder, it is possible that Gross-Up
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 or fails to pursue its remedies pursuant to Section 6(e)
hereof and the Executive thereafter is required to make a payment
of any Excise Tax, the Executive shall direct the Accounting Firm
to determine the amount of the Underpayment that has occurred and
to submit its determination and detailed supporting calculations
to both the Company and the Executive as promptly as possible.
Any such Underpayment shall be promptly paid by the Company to,
or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide
the Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as
the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with
the preparation and issuance of the determinations and
calculations contemplated by Section 6(b) hereof.
(d) The fees and expenses of the Accounting Firm for
its services in connection with the determinations and
calculations contemplated by Section 6(b) hereof shall be borne by
the Company. If such fees and expenses are initially paid by the
Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five business days after
receipt from the Executive of a statement therefor and reasonable
evidence of his payment thereof.
(e) The Executive 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 a Gross-Up Payment.
Such notification shall be given as promptly as practicable but
no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the
extent known by the Executive). The Executive shall not pay such
claim prior to the earlier of (i) the expiration of the 30-
calendar-day period following the date on which he gives such
notice to the Company and (ii) the date that any payment of amount
with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
106
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) 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 interest and penalties) incurred in connection with
such contest and shall indemnify and hold harmless the Executive,
on an after-tax basis, for and against 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 limiting the foregoing provisions of this
Section 6(e), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this
Section 6(e) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided,
however, that the Executive may participate therein at his own
cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive 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 Executive to
pay the tax claimed and sue for a refund, the Company shall
advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive
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; and provided further, however, that
any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
the contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of any
such contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive 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.
(f) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(e) hereof, the
Executive receives any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 6(e) hereof) promptly pay to the Company
the amount of such refund (together with any interest paid or
107
credited thereon after any taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company
pursuant to Section 6(e) hereof, a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Executive pursuant to this Section 6.
7. No Mitigation Obligation: The Company hereby
acknowledges that it will be difficult, and may be impossible, for
the Executive to find reasonably comparable employment following
the Termination Date and that the noncompetition covenant
contained in Section 8 hereof will further limit the employment
opportunities for the Executive. Accordingly, the parties hereto
expressly agree that the payment of the severance compensation by
the Company to the Executive in accordance with the terms of this
Agreement will be liquidated damages, and that the Executive shall
not be required to mitigate the amount of any payment provided for
in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any
other obligation on the part of the Executive hereunder or
otherwise, except as expressly provided in Section 5(a)(ii)
hereof.
8. Competitive Activity: During a period ending one year
following the Termination Date, if the Executive shall have
received or shall be receiving benefits under Section 5 hereof
and, if applicable, Section 6 hereof, the Executive shall not,
without the prior written consent of the Company, which consent
shall not be unreasonably withheld, engage in any Competitive
Activity. For purposes of this Agreement, the term "Competitive
Activity" shall mean the Executive s participation, without the
written consent of an officer of the Company, in the management of
any business enterprise if such enterprise engages in substantial
and direct competition with the Company or its Subsidiaries and
such enterprise s sales of any product or service competitive with
any product or service of the Company or such Subsidiary amounted
to 25% of such enterprise s net sales for its most recently
completed fiscal year and if the Company's or such Subsidiary's
net sales of said product or service amounted to 25% of the
Company's or such Subsidiary's net sales for its most recently
completed fiscal year. "Competitive activity" shall not include
(i) the mere ownership of securities in any such enterprise and
exercise of rights appurtenant thereto or (ii) participation in
management of any such enterprise other than in connection with
the competitive operations of such enterprise.
108
9. Legal Fees and Expenses:
(a) It is the intent of the Company that the Executive
not be required to incur legal fees and the related expenses
associated with the enforcement or defense of his rights under
this Agreement by litigation or other legal action because the
cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to the Executive that the Company
or Subsidiary has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other
person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from,
the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of his choice, at
the expense of the Company and the Subsidiaries as hereafter
provided, to represent the Executive in connection with the
initiation or defense of any litigation or other legal action,
whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive s entering into an
attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails, in whole or
in part, in connection with any of the foregoing, the Company
shall pay or cause to be paid and shall be solely responsible for
any and all attorneys' and related fees and expenses incurred by
the Executive in connection with any of the foregoing.
(b) Without limiting the generality or effect of
Section 9(a) hereof, in order to ensure the benefits intended to
be provided to the Executive under Section 9(a) hereof, the
Company will promptly use its best efforts to secure an
irrevocable standby letter of credit (the "Letter of Credit"),
issued by The First National Bank of Chicago or another bank
having combined capital and surplus in excess of $500 million (the
"Bank") for the benefit of the Executive and certain other of the
officers of the Company and the Subsidiaries and providing that
the fees and expenses of counsel selected from time to time by the
Executive pursuant to this Section 9 shall be paid, or reimbursed
to the Executive if paid by the Executive, on a regular, periodic
basis upon presentation by the Executive to the Bank of a
statement or statements prepared by such counsel in accordance
with its customary practices. The Company shall pay all amounts
and take all action necessary to maintain the Letter of Credit
during the Period of Employment and for two years thereafter and
if, notwithstanding the Company's complete discharge of such
obligations, such Letter of Credit shall be terminated or not
109
renewed, the Company shall obtain a replacement irrevocable clean
letter of credit drawn upon a commercial bank selected by the
Company and reasonably acceptable to the Executive, upon
substantially the same terms and conditions as contained in the
Letter of Credit, or any similar arrangement which, in any case,
assures the Executive the benefits of this Agreement without
incurring any cost or expense in connection therewith.
(c) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 9
will survive any termination or expiration of this Agreement or
the termination of the Executive s employment for any reason
whatsoever.
10. Employment Rights: Nothing expressed or implied in this
Agreement shall create any right or duty on the part of the
Company or any Subsidiary or the Executive to have the Executive
remain in the employment of the Company or any Subsidiary prior to
any Change in Control; provided, however, that any termination of
employment of the Executive or the removal of the Executive from
his office or position in the Company or any Subsidiary following
the commencement of any discussion with a third person that
ultimately results in a Change in Control shall be deemed to be a
termination or removal of the Executive after a Change in Control
for purposes of this Agreement.
11. Withholding of Taxes: The Company or any Subsidiary may
withhold from any amounts payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant
to any law or government regulation or ruling.
12. Successors and Binding Agreement:
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such
succession had taken place. This Agreement shall be binding upon
and inure to the benefit of the Company and any successor to the
Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business
and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor
shall thereafter be deemed the "Company" for the purposes of this
Agreement), but shall not otherwise be assignable, transferable or
delegable by the Company. The Company will cause its Subsidiaries
to comply with the provisions of this Agreement.
110
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive s personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other,
assign, transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in Sections
12(a) and 12(b) hereof. Without limiting the generality of the
foregoing, the Executive s right to receive payments hereunder
shall not be assignable, transferable or delegable, whether by
pledge, creation of a security interest or otherwise, other than
by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or
transfer contrary to this Section 12(c), the Company shall have no
liability to pay any amount so attempted to be assigned,
transferred or delegated.
(d) The Company and the Executive recognize that each
party will have no adequate remedy at law for breach by the other
of any of the agreements contained herein and, in the event of any
such breach, the Company and the Executive hereby agree and
consent that the other shall be entitled to a decree of specific
performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
13. Notice: For all purposes of this Agreement, all
communications including without limitation notices, consents,
requests or approvals, provided for herein shall be in writing and
shall be deemed to have been duly given when delivered or five
business days after having been mailed by United States registered
or certified mail, return receipt requested, postage prepaid,
addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to the Executive at
his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith,
except that notices of change of address shall be effective only
upon receipt.
14. Governing Law: The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of Illinois, without giving effect to the
principles of conflict of laws of such State.
15. Validity: If any provision of this Agreement or the
application of any provision hereof to any person or circumstances
is held invalid, unenforceable or otherwise illegal, the remainder
of this Agreement and the application of such provision to any
other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid and legal.
111
16. Miscellaneous: No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and the
Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or
implied with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this
Agreement.
17. Counterparts: This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
agreement.
18. Prior Agreement. The Employment Agreement dated
February 5, 1991 between the Company and Executive is hereby
terminated as of the effective date of this Agreement. (Note:
this paragraph may be deleted if inapplicable.)
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the date first
above written.
CIPSCO INCORPORATED
By____________________________
Clifford L. Greenwalt,
President
EXECUTIVE
______________________________
112