IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
SEVERANCE PLAN IN THE EVENT OF A CHANGE IN CONTROL
(Amended as effective July 1, 1993)
October 1993
ARTICLE I - ESTABLISHMENT, TERM AND PURPOSE
1.1 - Establishment of the Plan. Iowa-Illinois Gas and
Electric Company (Iowa-Illinois), by and through the act
of its Board of Directors (Board), hereby establishes a
Severance Plan (Plan) for its Designated Officers in the
event of a Change in Control, all as hereinafter set
forth.
1.2 - Term of the Plan. This Plan shall be effective as of
April 26, 1991 and shall continue in effect until
terminated by at least two-thirds (66-2/3%) vote of the
directors then comprising the Incumbent Board, as defined
in Article II hereof, at a duly convened meeting thereof;
PROVIDED, HOWEVER, that upon a Change in Control, as
defined in Article II hereof, this Plan may not be
terminated or amended for twenty-four (24) full calendar
months after such Change in Control.
1.3 - Purpose. The purpose of this Plan is to assure that,
upon termination of a Designated Officer's employment
within twenty-four (24) full calendar months after a
Change in Control, the Designated Officer will receive
the type of severance treatment the Incumbent Board would
want to provide, even though the Incumbent Board might
otherwise be unable to so provide as a result of the
Change in Control. Although no Change in Control is
foreseen, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of the Designated Officers of
Iowa-Illinois to their assigned duties, without
distraction, in the face of the potentially disturbing
circumstances that would accompany a Change in Control.
ARTICLE II - DEFINITIONS
Whenever used in this Plan, the following terms shall
have the meanings set forth below.
2.1 - "Change in Control" shall mean either (a) approval by the
shareholders of Iowa-Illinois of a reorganization, merger
or consolidation, unless at least sixty percent (60%) of
the members of the Board of Directors of the corporation
resulting from the reorganization, merger or
consolidation were members of the Incumbent Board; or (b)
such other event as designated by a majority vote of the
directors of the Incumbent Board who are not also
employees of Iowa-Illinois.
2.2 - "Designated Officer" shall mean an officer of Iowa-
Illinois or its subsidiaries who is designated by the
Board to participate in the Plan.
2.3 - "Incumbent Board" shall mean the members of the Board of
Iowa-Illinois on April 26, 1991. For this purpose, an
individual who becomes a member of the Board subsequent
to April 26, 1991 and who has been nominated for election
by Iowa-Illinois' shareholders by resolution adopted by a
vote of at least two-thirds (66-2/3%) of the directors
then comprising the Incumbent Board at a duly convened
meeting thereof shall be deemed to be a member of the
Incumbent Board.
2.4 - "Qualifying Termination" shall occur when, within twenty-
four (24) full calendar months after a Change in Control,
a Designated Officer's employment with Iowa-Illinois, or
any of its subsidiaries, or the corporation which results
from such Change in Control is terminated either (a)
involuntarily for any reason; or (b) voluntarily,
PROVIDED THAT the Designated Officer shall have furnished
six (6) full months prior written notice of the intent to
voluntarily terminate employment to the President of such
corporation.
2.5 - "Severance Benefits" shall mean:
(a) an amount equal to two (2) times the Designated
Officer's highest Total Cash Compensation, said
amount to be paid in a lump sum on the effective date
of his/her Qualifying Termination; and
(b) the Designated Officer's accrued vacation pay
through the effective date of his/her Qualifying
Termination, said amount to be paid in a lump sum on
the effective date of such Qualifying Termination;
and
(c) a continuation of the welfare benefits of health
insurance, disability insurance, and group term life
insurance for twenty-four (24) full calendar months
after the effective date of the Designated Officer's
Qualifying Termination, at the same premium cost and
at the same coverage level as in effect on such
effective date; provided, however, in the event the
premium cost and/or coverage level shall change at
any time during such twenty-four month period for all
welfare benefit participants, then the minimum cost
and/or coverage level likewise shall change for such
Designated Officer in a corresponding manner; and
(d) standard outplacement services from a nationally
recognized firm of the Designated Officer's selection
for a period up to twenty-four (24) full calendar
months after the effective date of the Designated
Officer's Qualifying Termination or until such
Designated Officer obtains subsequent employment,
whichever period is less. The cost of such services
shall not exceed twenty percent (20%) of the
Designated Officer's Total Cash Compensation.
2.6 - "Total Cash Compensation" shall mean the amount payable
to a Designated Officer by Iowa-Illinois as annual
salary, without regard to deferrals.
ARTICLE III - QUALIFICATION FOR SEVERANCE BENEFITS
A Designated Officer shall be entitled to receive
Severance Benefits if, within twenty-four (24) full calendar
months after a Change in Control, such Designated Officer
incurs a Qualifying Termination of employment from the
corporation which results from such Change in Control. No
Severance Benefits shall become due or payable hereunder unless
and until (a) the occurrence of a Change in Control and (b) the
occurrence of a Qualifying Termination.
ARTICLE IV - TAXES
4.1 - Withholding of Taxes. The corporation paying the
Severance Benefits shall be entitled to withhold all
Federal, state, city, or other taxes legally required,
subject to Sections 4.2, 4.3 and 4.4 hereof.
4.2 - Equalization Payment. In the event any of the Severance
Benefits payable to a Designated Officer are subject to
the tax ("Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986 (or any similar tax that
may hereafter be imposed) ("Code"), the corporation
paying such Severance Benefits shall pay to the
Designated Officer in cash an additional amount ("Gross-
Up Payment") such that the net amount retained by the
Designated Officer after deduction of any Excise Tax
payable on the Severance Benefits and any Federal, state,
and local income tax and Excise Tax payable upon the
Gross-Up Payment shall be equal to the Severance
Benefits. Such Gross-Up Payment shall be made by the
corporation to the Designated Officer on the effective
date of his/her Qualifying Termination.
4.3 - Tax Computation. For the purpose of determining whether
any of the Severance Benefits will be subject to the
Excise Tax and the amount of such Excise Tax:
(a) any other payments of benefits received or to be
received by a Designated Officer in connection with a
Change in Control or his/her termination of
employment (whether pursuant to the terms of this
Plan or any other plan, arrangement, or agreement
with Iowa- Illinois, or with any person whose actions
result in a Change in Control or with any person
affiliated with Iowa-Illinois) shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel, selected by such
Designated Officer, such other payments or benefits
(in whole or in part) do not constitute parachute
payments, or that such excess parachute payments (in
whole or in part) represent reasonable compensation
for services actually rendered within the meaning of
Section 280G(b)(4) in excess of the base amount
within the meaning of Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; and
(b) the amount of Severance Benefits which shall be
treated as subject to the Excise Tax shall be equal
to the lesser of: (i) the total amount of Severance
Benefits; or (ii) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of
the Code {after applying clause (a) above}; and
(c) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the
independent auditors of the corporation paying such
Severance Benefits in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.
For the purpose of determining the amount of the
Gross-Up Payment, the Designated Officer shall be
deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the
calendar year in which such 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 the Designated Officer's residence on the
effective date of his/her Qualifying Termination, net
of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state
and local taxes.
4.4 - Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computations under Section
4.3 hereof such that the Designated Officer does not
receive the maximum Severance Benefits (including Gross-
Up Payment) permitted by this Plan, the corporation
paying such Severance Benefits shall reimburse the
Designated Officer for the full amount necessary to make
him/her whole, plus interest from the date such
additional Severance Benefits became due to the date of
such payment at the prime rate as may be established by
The First National Bank of Chicago from time-to-time.
ARTICLE V - CONTRACTUAL RIGHTS
This Plan establishes in each Designated Officer a right
to the benefits to which he or she is entitled hereunder.
Nothing herein contained shall require or be deemed to require,
or prohibit or be deemed to prohibit, that Iowa-Illinois
segregate or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for the payment of Severance
Benefits or other payments hereunder required.
ARTICLE VI - EXCLUSIVITY OF BENEFITS
Neither the provisions of this Plan nor the right to
receive Severance Benefits shall reduce any amounts otherwise
payable to any Designated Officer, or in any way diminish
his/her rights as an employee of Iowa-Illinois or any successor
corporation under any benefit, bonus, incentive, stock option,
stock bonus or stock purchase plan, or any employee agreement,
or any other plan, program, policy or practice for which such
Designated Officer may qualify. Vested benefits and other
amounts which the Designated Officer is otherwise entitled to
receive under any plan, program, policy or practice at or
subsequent to the effective date of such Designated Officer's
Qualifying Termination shall be payable in accordance with such
plan, program, policy or practice.
ARTICLE VII - EMPLOYMENT STATUS
In no event shall any Designated Officer be obligated to
seek other employment or to take other action by way of
mitigation of the amounts payable to such Designated Officer
under any of the provisions of this Plan, nor shall the amount
of any payment hereunder be reduced by any compensation earned
by such Designated Officer as a result of employment by another
employer. Nothing herein contained shall be deemed to create
an employment agreement between Iowa-Illinois and any
Designated Officer providing for the employment of such
Designated Officer for any fixed period of time.
ARTICLE VIII - SUCCESSORS
This Plan shall inure to the benefit and be enforceable
by each Designated Officer's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If a Designated Officer dies while any
Severance Benefits would still be payable to him/her under this
Plan, all such unpaid amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Plan
to such Designated Officer's designated beneficiaries or, in
the absence thereof, to such Designated Officer's estate. A
Designated Officer may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any
Severance Benefits. Such designation shall be signed and
submitted in writing by the Designated Officer to the President
of Iowa-Illinois of its successor. A Designated Officer may
make or change such designation at any time.
ARTICLE IX - LEGAL REMEDIES
9.1 - Legal Fees and Expenses. To the extent permitted by law,
the corporation obligated to pay any Severance Benefits
shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good
faith by each Designated Officer as a result of such
corporation's refusal to provide the Severance Benefits
to which the Designated Officer becomes entitled under
this Plan, or as a result of such corporation's
contesting the Plan, or as a result of such corporation's
contesting the validity, enforceability, or
interpretation of the Plan, or as a result of any
conflict pertaining to this Plan.
9.2 - Arbitration. Each Designated Officer shall have the
right and option to elect (in lieu of litigation) to have
any dispute or controversy arising under or in connection
with this Plan settled by arbitration, conducted by an
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. A Designated
Officer's election to arbitrate and the decision of the
arbitrator in that proceeding shall be binding on the
parties to such arbitration.
Judgment may be entered on the award of the arbitrator in
any court having jurisdiction. All expenses of such
arbitration, including the fees and expenses of the
counsel for the Designated Officer, shall be borne by the
corporation which is the party to the arbitration.
ARTICLE X - SEVERABILITY
In the event any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of this Plan,
and the Plan shall be construed and enforced as if the illegal
or invalid provision had not been included. The captions of
this Plan are not part of the provisions hereof and shall have
no force and affect.
ARTICLE XI - APPLICABLE LAW
All matters relating to this Plan shall be interpreted in
accordance with the laws of the State of Illinois.