EXHIBIT 10.6
(Form of Change in Control Agreement - Form A)
February 13, 1996
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Dear :
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On February 13, 1996, the Board of Directors of ENSERCH Corporation
authorized an amendment and restatement to your Change in Control Agreement
dated February 21, 1989, as amended on December 4, 1995. The principal
amendments are reflected in the list of changes provided separately. This
amended and restated document is in replacement of the existing agreement
and amendment.
ENSERCH Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting
and enhancing the best interest of the Company and its shareholders. In
this connection, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Company's Board of Directors (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's, its
division's and subsidiaries' management including yourself, to their
assigned duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a change in
control of the Company.
In order to induce you to remain in the employ of the Company, this
Agreement sets forth certain benefits which the Company agrees will be
provided to you in the event there is a termination of your employment with
the Company that is associated with (as described in Section 3 hereof) a
"change in control of the Company" (as defined in Section 2 hereof) under
the circumstances described below.
1. TERM. This Agreement shall have an initial term expiring on the
earlier of (a) the third anniversary of the date hereof, assuming there has
been no change in control of the Company, or (b) your Normal Retirement
Date as defined herein; provided, however, that upon each anniversary date
of this Agreement the term of this Agreement under clause (a) (as the same
may be extended by this proviso) shall be automatically extended annually
for an additional period of one (1) year on a continuing basis unless
either party shall give written notice of intention not to so extend at
least six (6) months prior to such anniversary date. No notice by the
Company of its intention not to extend shall be effective if, within one
year prior to the original expiration date, or if this Agreement is in a
renewal period, within one year prior to the termination date proposed by
the Company, the Company has received notice, official or unofficial, or
otherwise has reason to believe that a Person (as defined herein) has taken
or is considering steps that would when completed bring about a change in
control of the Company. This Agreement shall in any case continue in
effect for three (3) years following a change in control of the Company.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" or a "change in control" shall mean a change in
control of a nature that would be required to be reported in response to
Item l(a) of the Current Report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act") or would have been required to be so
reported but for the fact that such event had been "previously reported" as
that term is defined in Rule 12b-2 of Regulation 12B of the Exchange Act;
provided that, without limitation such a change in control shall be deemed
to have occurred if (a) any Person is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities ordinarily (apart from
rights accruing under special circumstances) having the right to vote at
elections of directors ("Voting Securities"), or (b) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least two-thirds thereof, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least three-quarters of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this clause
(b), considered as though such person were a member of the Incumbent Board,
or (c) a recapitalization of the Company occurs which results in either a
decrease by 33% or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of stock options
and warrants) or an increase in the aggregate percentage ownership of
Voting Securities held by non-Independent Shareholders (on a primary basis
or on a fully diluted basis after giving effect to the exercise of stock
options and warrants) to greater than 50%, or (d) the shareholders of the
Company have approved an agreement to merge or consolidate with or into
another corporation or an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of
liquidation). For purposes of this Agreement, the term "Person" shall mean
and include any individual, corporation, partnership, group, association or
other "person," as such term is used in Section 14(d) of the Exchange Act,
other than the Company, a subsidiary of the Company or any employee benefit
plan(s) sponsored or maintained by the Company or any subsidiary thereof,
and the term "Independent Shareholder" shall mean any shareholder of the
Company except any employee(s) or director(s) of the Company or any
employee benefit plan(s) sponsored or maintained by the Company or any
subsidiary thereof.
3. TERMINATION ASSOCIATED WITH A CHANGE IN CONTROL. If and only if
any of the events described in Section 2 hereof constituting a change in
control of the Company shall occur, you shall be entitled to the benefits
provided in Section 4 hereof upon the termination of your employment as
provided in this Section 3 within six (6) months prior to such change in
control, or within six (6) months prior to the date that the Board of
Directors of the Company authorizes a merger, consolidation or other
transaction or event that if consummated would constitute a change in
control and such action is consummated (collectively herein referenced to
as "termination preceding a change in control"), or within three (3) years
after such change in control, unless such termination is (a) because of
your death, or Retirement on or after your Normal Retirement Date (that is,
early retirement initiated by the Company shall be treated as a dismissal
and not a voluntary early retirement), (b) by the Company for Cause or
Disability or (c) by you other than for Good Reason (including voluntary
early retirement when there is no concurrent Good Reason); provided,
however, that notwithstanding clause (c), during the thirteenth through the
eighteenth month following a change in control you may elect to voluntarily
terminate your employment and be entitled to payments and benefits provided
in Section 4. (In the case of termination preceding a change in control,
references in the definition of "Good Reason" to conditions in effect
immediately prior to a change in control shall be deemed to mean conditions
in effect immediately prior to your termination.) References to actions by
and employment with the Company shall include actions by and employment
with the divisions and subsidiaries of the Company where the context so
requires.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or
mental illness, you shall have been unable for more than six
(6) months to perform your duties with the Company on a full
time basis, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate your
employment for "Disability."
(B) Termination of your employment based on "Retirement"
shall mean retirement in accordance with the terms of the
Company's Retirement and Death Benefit Program of 1969 (the
"Retirement Plan") as in effect on January 1, 1996, including
early retirement, or in accordance with any retirement
arrangement established with your consent with respect to you.
"Normal Retirement Date" as used herein shall have the meaning
provided in the Retirement Plan or any successor or substitute
plan or plans of the Company put into effect prior to a change
in control of the Company.
(ii) Cause. Termination of your employment by the Company for
"Cause" shall mean termination upon (A) the willful and continued
failure by you substantially to perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness), after a demand for substantial
performance is delivered to you by the Chairman or President of the
Company which specifically identifies the manner in which such
executive believes that you have not substantially performed your
duties, and a reasonable period of opportunity for such substantial
performance is provided, or (B) the willful engaging by you in
illegal misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to act,
on your part shall be considered "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by you in good faith and in the best interest of
the Company. Notwithstanding the foregoing, you shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty
of conduct set forth above in clauses (A) or (B) in this paragraph
and specifying the particulars thereof in detail.
(iii) Good Reason. "Good Reason" for you to terminate your
employment shall mean:
(A) an adverse change in your status or position(s) as an
executive of the Company as in effect immediately prior to the change
in control, including, without limitation, any adverse change in your
status or position as a result of a material diminution in your
duties or responsibilities (other than, if applicable, any such
change directly attributable to the fact that less than 50% of the
Company's voting securities are publicly owned or the fact that your
position becomes a position with a subsidiary or division), or a
material change in your business location or the assignment to you of
any duties or responsibilities which are inconsistent with such
status or position(s), or a substantial increase in your business
travel, or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or
as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control or in the number of
vacation days to which you are then entitled under the Company's
normal vacation policy as in effect immediately prior to the change
in control;
(C) the taking of any action by the Company (including the
elimination of a plan without providing substitutes therefor or the
reduction of your awards thereunder) that would diminish or the
failure by the Company to take any action which would maintain the
aggregate projected value of your awards under the Company's bonus,
stock option or management incentive unit plans in which you were
participating at the time of a change in control of the Company;
(D) the taking of any action by the Company that would diminish
or the failure by the Company to take any action which would maintain
the aggregate value of the benefits provided you under the Company's
medical, health, dental, accident, disability, life insurance, stock
purchase or retirement plans in which you were participating at the
time of a change in control of the Company;
(E) the taking of any action by the Company that would diminish
or the failure of the Company to take any action that would maintain
indemnification or insurance for officers' liability; or
(F) a failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 7 hereof; or
(G) any purported termination by the Company of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); for purposes of this Agreement, no
such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company
pursuant to paragraphs (i) or (ii) above or by you pursuant to
paragraph (iii) above or voluntarily by you during the thirteenth to
eighteenth month following a change in control shall be communicated
by written Notice of Termination to the other party hereto. In the
event of termination preceding a change in control, written Notice of
Termination to the other party hereto shall be communicated within
thirty (30) days following a change in control in order to reflect
termination by the Company pursuant to paragraphs (i) or (ii) above
or by you pursuant to paragraph (iii) above. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice specifying
the termination provision in this Agreement relied upon and setting
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so specified.
(v) Date of Termination. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not
have returned to the performance of your duties on a full-time basis
during such thirty (30) day period), (B) if you terminate your
employment pursuant to paragraph (iii) above, the date specified in
the Notice of Termination, (C) in the case of a termination preceding
a change in control, the date of discharge if termination is by the
Company or the date notice of intention to leave is given by the
executive in the case of termination for Good Reason, and (D) if your
employment is terminated for any other reason except death or
Retirement, the date on which Notice of Termination is given.
4. COMPENSATION UPON CHANGE IN CONTROL, TERMINATION OR DURING
DISABILITY.
(i) Compensation During Disability. During any period that
you fail to perform your duties hereunder as a result of incapacity
due to physical or mental illness, you shall continue to receive your
full base salary at the rate then in effect, and any time of service
for vesting purposes under any plan shall continue to accrue during
such period of incapacity until and if your employment is terminated
pursuant to Section 3(i) hereof (and for any longer period as may be
provided under applicable plans).
(ii) Compensation Upon Termination for Cause. If your
employment is terminated for Cause, the Company shall pay you your
full base salary and accrued vacation pay through the Date of
Termination at the rate in effect at the time Notice of Termination
is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to you,
and shall have no further obligations to you under this Agreement.
(iii) Compensation Upon Termination Other than For Disability
or Cause or Good Reason. Subject to Section 9 hereof, if the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or (ii) hereof or if you terminate your
employment for Good Reason (which termination may be effected by
Retirement prior to your Normal Retirement Date), or if, during the
thirteenth through the eighteenth month after the change in control
you voluntarily terminate your employment, then the Company shall pay
to you (without regard to the provisions of any benefit plan) in a
lump sum on or before the tenth business day following the Date of
Termination ("Payment Date") an amount equal to the sum of the
following paragraphs (A) through (F), reduced by any of such amounts
already paid and the value of any severance amounts agreed to between
you and the Company and paid at the time of severance from the
Company in the case of a termination preceding a change in control:
(A) Your full base salary through the Date of
Termination at the rate in effect just prior to the time Notice
of Termination is given, plus any earned vacation time, plus
any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to
you; plus
(B) An amount equal to the greater of your largest
target bonus during either of the two years preceding the year
in which the change in control occurs or your target bonus for
the year in which the Date of Termination occurs, prorated for
the current year; plus
(C) An amount equal to three times your "Annual
Compensation", as defined below, provided however, that such
amount shall in no event exceed the Annual Compensation you
would have otherwise received had your employment continued at
such rate until your Normal Retirement Date ("Annual
Compensation" shall mean the greater of your annual base salary
on the Date of Termination or your highest annual base salary
in effect during either of the two years immediately prior to
the change in control plus an amount equal to the greater of
your target bonus for the year in which the Date of Termination
occurs or your highest target bonus during either of the two
years immediately prior to the change in control); plus
(D) An amount equal to the balance contained in your
account in the Management Incentive Program Unit Plan; plus
(E) If you choose to receive cash for some or all
unexercised stock options in lieu of exercising such options,
which choice shall be communicated by you in writing to the
Company, an amount equal to the market value of the Company's
common stock on the Date of Termination or on any other date
within 180 days preceding the Date of Termination, on whichever
date the value is highest, multiplied by the number of options
granted to you prior to the Date of Termination (you should
seek legal advice before choosing to receive cash for options
held less than six (6) months) under any stock option plan of
the Company or other arrangement pursuant to which options to
purchase common stock of the Company have been issued and which
have not been exercised through the Payment Date, less the
aggregate value of the option price of such options; and plus
(F) An amount equal to an undiscounted lump sum of the
total Deferred Compensation which would be payable to you at
your Retirement in accordance with the provisions of the
Supplemental Compensation Plan.
(iv) Discharge of Company's Obligation. The payment to you of
appropriate amounts under paragraphs (D), (E) and (F) shall be
considered for all purposes a discharge of all obligations pursuant
to such plans except as to options not cashed out under paragraph
(E).
(v) Base Salary; Severance Pay. For purposes of this
Agreement, the term "base salary" shall include any amounts deducted
pursuant to Sections 125 and 401K of the Internal Revenue Code of
1986, as amended (the "Code"), and any amounts deducted under the
ENSERCH Corporation Deferred Compensation Plan. Amounts paid pursuant
to this paragraph shall be deemed severance pay and in lieu of any
further salary for periods subsequent to the Date of Termination.
(vi) Gross-Up Provision. In the event that you become
entitled to the payments provided by Sections 4(iii) or 5 hereof (the
"Agreement Payments"), if any of the Agreement Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Code (or any similar tax that may hereafter be imposed), the Company
shall pay to you at the time specified in Subsection (vii) below an
additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and local
income tax and Excise Tax upon the Gross-up Payment provided for by
this subsection (vi), but before deduction for any federal, state or
local income tax on the Agreement Payments, shall be equal to the
"Total Payments," as defined below.
For purposes of determining whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (a) any other payments or benefits received or to be
received by you in connection with a change in control of the Company
or your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change of control of
the Company or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the
"Total Payments") 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)(l) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3) of
the Code or are otherwise not subject to the Excise Tax, (b) the
amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (1) the total amount of
the Total Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(l) of the Code (after applying
clause (a), above), and (c) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of Sections
280(G)(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in
which the Gross-up Payment is to be made and the applicable state and
local income taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time the Gross-up Payment is
made, you shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined the portion of the
Gross-up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction
in Excise Tax and/or a federal and state and local income tax
deduction), plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), the Company shall
make an additional gross-up payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(vii) Time of Gross-Up Payment; Estimated Payments; Loan
Provision. The Gross-up Payment or portion thereof provided for in
Subsection (vi) above shall be paid not later than the thirtieth day
following payment of any amounts under Sections 4(iii) or 5;
provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day,
the Company shall pay to you on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later than the
forty-fifth day after payment of any amounts under Sections 4(iii) or
5. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to you, payable on the fifth
day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(viii) Continuation of Certain Benefits. If the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or 3(ii) hereof or if you terminate your
employment for Good Reason or if during the thirteenth through the
eighteenth month after the change in control you voluntarily
terminate your employment (any one of which termination may be
effected by Retirement prior to your Normal Retirement Date), the
Company shall assign to you any club membership held for your benefit
and the Company shall maintain in full force and effect for your
continued benefit for a period terminating on the earliest of (A)
three years after the Date of Termination or (B) your Normal
Retirement Date, all life, health, accident and disability insurance
plans and programs in which you were a participant immediately prior
to the Date of Termination, provided that your continued
participation is possible under the terms and provisions of such
plans and programs. In the event that your participation in any such
plan or program is barred, the Company shall provide you with
benefits substantially similar to those to which you would be
entitled as a participant in such plans and programs. Any required
statutory period of COBRA health benefit continuation that terminated
employees may elect shall not begin until the end of the period of
coverage provided hereby. The benefits provided under this Section,
other than assignment of any club membership, shall be reduced to the
extent of benefits received by you from another employer. At the end
of the period of coverage, you shall have the option to have assigned
to you, at no cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by the Company and relating
specifically to you.
(ix) Lump Sum Payment for Additional Two Years of Service. If
you are not a participant in the Retirement Income Restoration Plan
of ENSERCH Corporation ("RIRP") (the RIRP has provisions comparable to
this subparagraph (ix)) when your employment with the Company is
terminated within the first three years after a change in control, by
the Company without Cause or by you for Good Reason, you shall
receive from the Company, at the time you first receive any payment
under or with respect to the Retirement Plan, an amount (calculated
and paid in the form of a lump sum) equal to the difference between
(i) the "Lump Sum", as defined below, value of any payment you receive
at such time (or any monthly annuities that you then become entitled
to receive) from (a) the Retirement Plan and (b) from the Company
with respect to the portion, if any, of your Retirement Plan pension
which exceed the limitations on pension amounts to which the
Retirement Plan is subject and (ii) the Lump Sum value of payments
that would have been payable if it or they had been calculated as if
you had been deemed to have had two (2) additional "Years of Service",
as defined below. "Years of Service" shall be as defined in the
Retirement Plan and shall be applied as if you were a participant
thereunder at the time of your termination of employment, and "Lump
Sum" shall mean an amount calculated in accordance with the interest
rate and other actuarial assumptions set forth or used in connection
with lump sum calculations under the Retirement Plan.
(x) Lump Sum Payment if Not Vested under Retirement Plan. If
you are not vested under the Retirement Plan when your employment
with the Company is terminated within the first three years after a
change in control by the Company without Cause or by you for Good
Reason, you shall receive from the Company at the time payments are
made pursuant to paragraph (iii) above, an amount (calculated and
paid in a lump sum) equal to the Lump Sum value of any payment you
would have been entitled to receive at your Normal Retirement Date
(or any annuities that you would have been entitled to receive) from
the Retirement Plan and the RIRP calculated (a) as if you were 100%
vested under such plans and (b) using actual years of service
increased by two (2) additional Years of Service.
(xi) Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor (except as provided in Section 4(viii))
shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned or benefit received
by you as the result of employment by another employer after the Date
of Termination, or otherwise.
(xii) Deferred Payment Election. Upon entering into this
Agreement and for a period of 14 days following each anniversary of
the date hereof (the "Election Period"), you may, in writing, direct
the Company that any amounts which should become payable to you
pursuant to Section 4(iii) hereof shall be paid to you in three (3)
equal annual installments, with the first such installment payable
within five (5) business days of the Date of Termination and each
successive installment paid on the anniversary of the Date of
Termination or the next following business day if such date is not a
business day (the "Deferred Payment Election"). A Deferred Payment
Election, once made, cannot be revoked except during an Election
Period; provided, however, that no Deferred Payment Election can be
made or revoked by you during an Election Period that occurs after a
change in control of the Company or at a time when, in the judgment
of the Company, a change in control may occur within sixty (60) days
of such Election Period. Notwithstanding anything in the foregoing
to the contrary, a Deferred Payment Election shall be automatically
revoked should you terminate your employment under the circumstances
described in Section 7 below.
5. TERMINATION IN CONNECTION WITH THE DISPOSITION OF A COMPANY
BUSINESS. If there occurs at any time during the Term of this Agreement a
spin-off to shareholders or a sale or other disposition to a non-affiliate
of the Company (collectively, "New Owner", which term shall include all
entities controlled by or under common control with the New Owner) of a
portion of the business of the Company ("Disposition") for which you perform
substantially all of your duties or as part of a restructuring or
reorganizing of the Company you are assigned to work with such New Owner
and you become employed by the New Owner, then a change in control, for the
limited purpose of this Section 5, will be deemed to have occurred, and
(i) if, and only if, your employment is terminated as
described in any of the paragraphs (A) through (D) below (in each
case a termination shall not be deemed to be a termination for
purposes of this Section 5 if you are offered and refuse to accept a
comparable position with the Company or an affiliate of the Company
or the New Owner and for this purpose a position is not comparable if
there are changes from the position you held prior to the Disposition
that would constitute Good Reason for you to terminate your
employment):
(A) You are terminated by the Company on the date of the
Disposition and are not employed by the New Owner; or
(B) Within six (6) months prior to the date of
Disposition, your employment with the Company is terminated
other than for Cause or Disability or you terminate your
employment with the Company for Good Reason; or
(C) You continue your employment with the Company and
within three years following the Date of the Disposition your
employment with the Company is terminated other than for Cause
or Disability or you terminate your employment for Good Reason;
or
(D) You are employed by the New Owner and within three
years following the date of Disposition your employment with
the New Owner is terminated other than for Cause or Disability
or you terminate your employment with the New Owner for Good
Reason. (For purposes of this subsection, "Company" shall be
deemed to mean "New Owner" in the definition of "Good Reason"
where the context so requires and references in the definition
of "Good Reason" to conditions in effect immediately prior to a
change in control shall be deemed to mean conditions in the
offer of employment to you or otherwise in effect upon your
initial employment with the New Owner.)
(ii) then, subject to Section 9 hereof, you shall be entitled
to the benefits described in either (A) or (B) below:
(A) If any of paragraphs (A) (B) or (C) of subsection
(i) above apply, then you shall be entitled to the payments and
benefits specified in Section 4.
(B) If paragraph (D) of subsection (i) above applies,
then the Company shall pay to you an amount equal to three
times the higher of your annual base salary in effect on the
date of Disposition or your highest annual base salary in
effect during either of the two years immediately prior to the
date of Disposition; plus an amount equal to three times the
greater of your target bonus for the year in which the
Disposition occurred or your highest target bonus during either
of the two years immediately prior to the Disposition; provided
however, that such amount shall in no event exceed the
aggregate amount of base salary and target bonuses that you
would have otherwise received had your employment continued at
such higher rate until your Normal Retirement Date; plus the
Gross-up payments and other provisions of Sections 4(vi) and
4(vii).
6. EMPLOYEE'S COMMITMENT: RIGHT TO TERMINATE.
(i) Employee's Right to Terminate. Except as otherwise
provided in paragraph (ii) below, the Company or you may terminate
your employment at any time, subject to the Company's providing the
benefits specified herein in accordance with the terms hereof.
(ii) Employee's Commitment In Event of Tender or Exchange
Offer. In the event a tender offer or exchange offer is made by a
Person for more than 20% of the combined voting power of the
Company's Voting Securities, including shares of Common Stock of the
Company, you agree that you will not leave the employ of the Company
(other than as a result of Disability or upon Normal Retirement) and
will render the services contemplated in this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a
change in control of the Company has occurred.
(iii) Employee's Duty. During the life of this Agreement, you
will faithfully perform your duties to the best of your ability and
in accordance with the directions of the Chief Executive Officer and
the Board of Directors, provided that after a change in control of
the Company such directions do not constitute Good Reason for you to
terminate your employment; and you will devote to the performance of
such duties your full working time, attention and energies.
(iv) Confidential and Proprietary Information. You will not
at any time during the life of this Agreement, or thereafter,
communicate or disclose to any unauthorized person, or use for your
own account, without the written consent of the Company, any
proprietary processes, or other confidential information of the
Company or any subsidiary concerning their business or affairs,
suppliers or customers, it being understood, however, that the
obligations of this paragraph shall not apply to the extent that the
aforesaid matters (A) are disclosed in circumstances in which you are
legally required to do so or (B) become generally known to and
available for use by the public otherwise than by your wrongful act
or omission.
7. SUCCESSOR'S BINDING AGREEMENT.
(i) Successor's Binding Agreement. The Company will seek, by
written request at least five (5) business days prior to the time a
Person becomes a Successor (as hereinafter defined), to have such
Person, by agreement in form and substance satisfactory to you,
assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by the
later of (A) three business days prior to the time such Person
becomes a Successor or (B) two business days after such person
receives a written request to so assent shall constitute Good Reason
for termination by you of your employment if a change in control of
the Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage
of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's Voting
Securities or otherwise. Whether or not such assent is given by a
Successor, this Agreement shall be binding on the Successor and its
assigns.
(ii) Enforceability by Employee's Successors. This Agreement
shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die before all
amounts that would still be payable to you hereunder if you had
continued to live are paid, all such unpaid amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee or, if there be
no such designee, to your estate.
8. FEES AND EXPENSES. The Company shall pay all legal fees,
expenses of arbitration and related expenses incurred by you in connection
with this Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination of your employment
following a change in control or incurred by you in seeking advice with
respect to the matters set forth in Section 7 hereof or (b) your seeking to
obtain or enforce any right or benefit provided by this Agreement.
9. TAXES. All payments to be made to you under this Agreement will
be subject to required withholding of applicable federal, state and local
taxes.
10. INTEREST. All payments due under this Agreement and unpaid
shall bear interest at the rate of 10% per annum, compounded daily,
beginning on the next ensuing day
after the Payment Date or such other date as they may be due.
11. NON-ALIENABILITY. Your interest under this Agreement is not
subject to anticipation, alienation, assignment or attachment and may not
be transferred or encumbered in any manner, either voluntarily or
involuntarily, and any attempt so to anticipate, alienate, sell, transfer,
assign, pledge, encumber, or charge the same shall be null and void;
neither shall the benefits hereunder be liable for or subject to your
debts, contracts, liabilities, engagement, or torts, nor shall they be
subject to garnishment, attachment, or other legal or equitable process nor
shall they be an asset in bankruptcy, except that not amount shall be
payable hereunder until and unless any and all amounts representing debts
or other obligations owed to any company by you shall have been fully paid
and satisfied.
12. SURVIVAL. The respective obligations of, and benefits afforded
to, the Company and you as provided in Sections 4, 5, 6, 7, 8, 9 and 16 of
this Agreement shall survive termination of this Agreement.
13. NOTICE. Notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid addressed to the respective addresses set forth
on the first page of this Agreement or to such other address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt. All notices to the Company shall be directed to the attention of
the Chief Executive Officer of the Company with a copy to the Secretary of
the Company.
14. MISCELLANEOUS. This Agreement does not supersede any other plan
of the Company or agreement with the Company. No provision of this
Agreement may be modified, waived or discharged except in writing
specifically referring to such provision and signed by you and such officer
as may be specifically designated by the Board of Directors of the Company.
No waiver at any time by either party hereto of the breach of any condition
or provision of this Agreement, or of compliance by the other party with
the same, shall be deemed a waiver of any other condition or provision at
the same or at any other time. No agreement or representation still in
effect, oral or otherwise, express or implied, with respect to the subject
matter hereof has been made by either party other than (i) those set forth
expressly in this Agreement or (ii) those in any stock option agreements,
restricted stock agreements, or deferred compensation agreements. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Texas.
15. VALIDITY. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in the city nearest to your principal residence which has an office of the
American Arbitration Association by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 16.
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 instrument.
If this letter correctly sets forth our entire agreement, as amended
and restated, on the subject matter hereof, kindly sign and return to the
Company the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
ENSERCH Corporation
By:
---------------------------
AGREED to as of the date
first above written.
------------------------
(Form of Change in Control Agreement - Form B)
February 12, 1996
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-----------------------
-----------------------
Dear :
--------------------
On February 12, 1996, the Compensation Committee of the Board of
Directors of ENSERCH Corporation authorized an amendment and restatement to
your Change in Control Agreement dated February 21, 1989, as amended on
December 4, 1995. The principal amendments are reflected in the list of
changes provided separately. This amended and restated document is in
replacement of the existing agreement and amendment.
ENSERCH Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting
and enhancing the best interest of the Company and its shareholders. In
this connection, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Company's Board of Directors (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's, its
division's and subsidiaries' management including yourself, to their
assigned duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a change in
control of the Company.
In order to induce you to remain in the employ of the Company, this
Agreement sets forth certain benefits which the Company agrees will be
provided to you in the event there is a termination of your employment with
the Company that is associated with (as described in Section 3 hereof) a
"change in control of the Company" (as defined in Section 2 hereof) under
the circumstances described below.
1. TERM. This Agreement shall have an initial term expiring on the
earlier of (a) the third anniversary of the date hereof, assuming there has
been no change in control of the Company, or (b) your Normal Retirement
Date as defined herein; provided, however, that upon each anniversary date
of this Agreement the term of this Agreement under clause (a) (as the same
may be extended by this proviso) shall be automatically extended annually
for an additional period of one (1) year on a continuing basis unless
either party shall give written notice of intention not to so extend at
least six (6) months prior to such anniversary date. No notice by the
Company of its intention not to extend shall be effective if, within one
year prior to the original expiration date, or if this Agreement is in a
renewal period, within one year prior to the termination date proposed by
the Company, the Company has received notice, official or unofficial, or
otherwise has reason to believe that a Person (as defined herein) has taken
or is considering steps that would when completed bring about a change in
control of the Company. This Agreement shall in any case continue in
effect for three (3) years following a change in control of the Company.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" or a "change in control" shall mean a change in
control of a nature that would be required to be reported in response to
Item l(a) of the Current Report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act") or would have been required to be so
reported but for the fact that such event had been "previously reported" as
that term is defined in Rule 12b-2 of Regulation 12B of the Exchange Act;
provided that, without limitation such a change in control shall be deemed
to have occurred if (a) any Person is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities ordinarily (apart from
rights accruing under special circumstances) having the right to vote at
elections of directors ("Voting Securities"), or (b) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least two-thirds thereof, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least three-quarters of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this clause
(b), considered as though such person were a member of the Incumbent Board,
or (c) a recapitalization of the Company occurs which results in either a
decrease by 33% or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of stock options
and warrants) or an increase in the aggregate percentage ownership of
Voting Securities held by non-Independent Shareholders (on a primary basis
or on a fully diluted basis after giving effect to the exercise of stock
options and warrants) to greater than 50%, or (d) the shareholders of the
Company have approved an agreement to merge or consolidate with or into
another corporation or an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of
liquidation). For purposes of this Agreement, the term "Person" shall mean
and include any individual, corporation, partnership, group, association or
other "person," as such term is used in Section 14(d) of the Exchange Act,
other than the Company, a subsidiary of the Company or any employee benefit
plan(s) sponsored or maintained by the Company or any subsidiary thereof,
and the term "Independent Shareholder" shall mean any shareholder of the
Company except any employee(s) or director(s) of the Company or any
employee benefit plan(s) sponsored or maintained by the Company or any
subsidiary thereof.
3. TERMINATION ASSOCIATED WITH A CHANGE IN CONTROL. If and only if
any of the events described in Section 2 hereof constituting a change in
control of the Company shall occur, you shall be entitled to the benefits
provided in Section 4 hereof upon the termination of your employment as
provided in this Section 3 within six (6) months prior to such change in
control, or within six (6) months prior to the date that the Board of
Directors of the Company authorizes a merger, consolidation or other
transaction or event that if consummated would constitute a change in
control and such action is consummated (collectively herein referenced to
as "termination preceding a change in control"), or within three (3) years
after such change in control, unless such termination is (a) because of
your death, or Retirement on or after your Normal Retirement Date (that is,
early retirement initiated by the Company shall be treated as a dismissal
and not a voluntary early retirement), (b) by the Company for Cause or
Disability or (c) by you other than for Good Reason (including voluntary
early retirement when there is no concurrent Good Reason). (In the case of
termination preceding a change in control, references in the definition of
"Good Reason" to conditions in effect immediately prior to a change in
control shall be deemed to mean conditions in effect immediately prior to
your termination.) References to actions by and employment with the
Company shall include actions by and employment with the divisions and
subsidiaries of the Company where the context so requires.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or
mental illness, you shall have been unable for more than six
(6) months to perform your duties with the Company on a full
time basis, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate your
employment for "Disability."
(B) Termination of your employment based on "Retirement"
shall mean retirement in accordance with the terms of the
Company's Retirement and Death Benefit Program of 1969 (the
"Retirement Plan") as in effect on January 1, 1996, including
early retirement, or in accordance with any retirement
arrangement established with your consent with respect to you.
"Normal Retirement Date" as used herein shall have the meaning
provided in the Retirement Plan or any successor or substitute
plan or plans of the Company put into effect prior to a change
in control of the Company.
(ii) Cause. Termination of your employment by the Company for
"Cause" shall mean termination upon (A) the willful and continued
failure by you substantially to perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness), after a demand for substantial
performance is delivered to you by the Chairman or President of the
Company which specifically identifies the manner in which such
executive believes that you have not substantially performed your
duties, and a reasonable period of opportunity for such substantial
performance is provided, or (B) the willful engaging by you in
illegal misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to act,
on your part shall be considered "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by you in good faith and in the best interest of
the Company. Notwithstanding the foregoing, you shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty
of conduct set forth above in clauses (A) or (B) in this paragraph
and specifying the particulars thereof in detail.
(iii) Good Reason. "Good Reason" for you to terminate your
employment shall mean:
(A) an adverse change in your status or position(s) as an
executive of the Company as in effect immediately prior to the change
in control, including, without limitation, any adverse change in your
status or position as a result of a material diminution in your
duties or responsibilities (other than, if applicable, any such
change directly attributable to the fact that less than 50% of the
Company's voting securities are publicly owned or the fact that your
position becomes a position with a subsidiary or division), or a
material change in your business location or the assignment to you of
any duties or responsibilities which are inconsistent with such
status or position(s), or a substantial increase in your business
travel, or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or
as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control or in the number of
vacation days to which you are then entitled under the Company's
normal vacation policy as in effect immediately prior to the change
in control;
(C) the taking of any action by the Company (including the
elimination of a plan without providing substitutes therefor or the
reduction of your awards thereunder) that would diminish or the
failure by the Company to take any action which would maintain the
aggregate projected value of your awards under the Company's bonus,
stock option or management incentive unit plans in which you were
participating at the time of a change in control of the Company;
(D) the taking of any action by the Company that would diminish
or the failure by the Company to take any action which would maintain
the aggregate value of the benefits provided you under the Company's
medical, health, dental, accident, disability, life insurance, stock
purchase or retirement plans in which you were participating at the
time of a change in control of the Company;
(E) the taking of any action by the Company that would diminish
or the failure of the Company to take any action that would maintain
indemnification or insurance for officers' liability; or
(F) a failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 7 hereof; or
(G) any purported termination by the Company of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); for purposes of this Agreement, no
such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company
pursuant to paragraphs (i) or (ii) above or by you pursuant to
paragraph (iii) above shall be communicated by written Notice of
Termination to the other party hereto. In the event of termination
preceding a change in control, written Notice of Termination to the
other party hereto shall be communicated within thirty (30) days
following a change in control in order to reflect termination by the
Company pursuant to paragraphs (i) or (ii) above or by you pursuant
to paragraph (iii) above. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice specifying the termination
provision in this Agreement relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so
specified.
(v) Date of Termination. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not
have returned to the performance of your duties on a full-time basis
during such thirty (30) day period), (B) if you terminate your
employment pursuant to paragraph (iii) above, the date specified in
the Notice of Termination, (C) in the case of a termination preceding
a change in control, the date of discharge if termination is by the
Company or the date notice of intention to leave is given by the
executive in the case of termination for Good Reason, and (D) if your
employment is terminated for any other reason except death or
Retirement, the date on which Notice of Termination is given.
4. COMPENSATION UPON CHANGE IN CONTROL, TERMINATION OR DURING
DISABILITY.
(i) Compensation During Disability. During any period that
you fail to perform your duties hereunder as a result of incapacity
due to physical or mental illness, you shall continue to receive your
full base salary at the rate then in effect, and any time of service
for vesting purposes under any plan shall continue to accrue during
such period of incapacity until and if your employment is terminated
pursuant to Section 3(i) hereof (and for any longer period as may be
provided under applicable plans).
(ii) Compensation Upon Termination for Cause. If your
employment is terminated for Cause, the Company shall pay you your
full base salary and accrued vacation pay through the Date of
Termination at the rate in effect at the time Notice of Termination
is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to you,
and shall have no further obligations to you under this Agreement.
(iii) Compensation Upon Termination Other than For Disability
or Cause or Good Reason. Subject to Section 9 hereof, if the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or (ii) hereof or if you terminate your
employment for Good Reason (which termination may be effected by
Retirement prior to your Normal Retirement Date), then the Company
shall pay to you (without regard to the provisions of any benefit
plan) in a lump sum on or before the tenth business day following the
Date of Termination ("Payment Date") an amount equal to the sum of the
following paragraphs (A) through (E), reduced by any of such amounts
already paid and the value of any severance amounts agreed to between
you and the Company and paid at the time of severance from the
Company in the case of a termination preceding a change in control:
(A) Your full base salary through the Date of
Termination at the rate in effect just prior to the time Notice
of Termination is given, plus any earned vacation time, plus
any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to
you; plus
(B) An amount equal to the greater of your largest
target bonus during either of the two years preceding the year
in which the change in control occurs or your target bonus for
the year in which the Date of Termination occurs, prorated for
the current year; plus
(C) An amount equal to three times your "Annual
Compensation", as defined below, provided however, that such
amount shall in no event exceed the Annual Compensation you
would have otherwise received had your employment continued at
such rate until your Normal Retirement Date ("Annual
Compensation" shall mean the greater of your annual base salary
on the Date of Termination or your highest annual base salary
in effect during either of the two years immediately prior to
the change in control plus an amount equal to the greater of
your target bonus for the year in which the Date of Termination
occurs or your highest target bonus during either of the two
years immediately prior to the change in control); plus
(D) An amount equal to the balance contained in your
account in the Management Incentive Program Unit Plan; and plus
(E) If you choose to receive cash for some or all
unexercised stock options in lieu of exercising such options,
which choice shall be communicated by you in writing to the
Company, an amount equal to the market value of the Company's
common stock on the Date of Termination or on any other date
within 180 days preceding the Date of Termination, on whichever
date the value is highest, multiplied by the number of options
granted to you prior to the Date of Termination (you should
seek legal advice before choosing to receive cash for options
held less than six (6) months) under any stock option plan of
the Company or other arrangement pursuant to which options to
purchase common stock of the Company have been issued and which
have not been exercised through the Payment Date, less the
aggregate value of the option price of such options.
(iv) Discharge of Company's Obligation. The payment to you of
appropriate amounts under paragraphs (D) and (E) shall be considered
for all purposes a discharge of all obligations pursuant to such
plans except as to options not cashed out under paragraph (E).
(v) Base Salary; Severance Pay. For purposes of this
Agreement, the term "base salary" shall include any amounts deducted
pursuant to Sections 125 and 401K of the Internal Revenue Code of
1986, as amended (the "Code"), and any amounts deducted under the
ENSERCH Corporation Deferred Compensation Plan. Amounts paid pursuant
to this paragraph shall be deemed severance pay and in lieu of any
further salary for periods subsequent to the Date of Termination.
(vi) Gross-Up Provision. In the event that you become
entitled to the payments provided by Sections 4(iii) or 5 hereof (the
"Agreement Payments"), if any of the Agreement Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Code (or any similar tax that may hereafter be imposed), the Company
shall pay to you at the time specified in Subsection (vii) below an
additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and local
income tax and Excise Tax upon the Gross-up Payment provided for by
this subsection (vi), but before deduction for any federal, state or
local income tax on the Agreement Payments, shall be equal to the
"Total Payments," as defined below.
For purposes of determining whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (a) any other payments or benefits received or to be
received by you in connection with a change in control of the Company
or your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change of control of
the Company or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the
"Total Payments") 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)(l) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3) of
the Code or are otherwise not subject to the Excise Tax, (b) the
amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (1) the total amount of
the Total Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(l) of the Code (after applying
clause (a), above), and (c) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of Sections
280(G)(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in
which the Gross-up Payment is to be made and the applicable state and
local income taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time the Gross-up Payment is
made, you shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined the portion of the
Gross-up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction
in Excise Tax and/or a federal and state and local income tax
deduction), plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), the Company shall
make an additional gross-up payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(vii) Time of Gross-Up Payment; Estimated Payments; Loan
Provision. The Gross-up Payment or portion thereof provided for in
Subsection (vi) above shall be paid not later than the thirtieth day
following payment of any amounts under Sections 4(iii) or 5;
provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day,
the Company shall pay to you on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later than the
forty-fifth day after payment of any amounts under Sections 4(iii) or
5. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to you, payable on the fifth
day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(viii) Continuation of Certain Benefits. If the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or 3(ii) hereof or if you terminate your
employment for Good Reason (either of which termination may be
effected by Retirement prior to your Normal Retirement Date), the
Company shall assign to you any club membership held for your benefit
and the Company shall maintain in full force and effect for your
continued benefit for a period terminating on the earliest of (A)
three years after the Date of Termination or (B) your Normal
Retirement Date, all life, health, accident and disability insurance
plans and programs in which you were a participant immediately prior
to the Date of Termination, provided that your continued
participation is possible under the terms and provisions of such
plans and programs. In the event that your participation in any such
plan or program is barred, the Company shall provide you with
benefits substantially similar to those to which you would be
entitled as a participant in such plans and programs. Any required
statutory period of COBRA health benefit continuation that terminated
employees may elect shall not begin until the end of the period of
coverage provided hereby. The benefits provided under this Section,
other than assignment of any club membership, shall be reduced to the
extent of benefits received by you from another employer. At the end
of the period of coverage, you shall have the option to have assigned
to you, at no cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by the Company and relating
specifically to you.
(ix) Lump Sum Payment for Additional Two Years of Service. If
you are not a participant in the Retirement Income Restoration Plan
of ENSERCH Corporation ("RIRP") (the RIRP has provisions comparable to
this subparagraph (ix)) when your employment with the Company is
terminated within the first three years after a change in control, by
the Company without Cause or by you for Good Reason, you shall
receive from the Company, at the time you first receive any payment
under or with respect to the Retirement Plan, an amount (calculated
and paid in the form of a lump sum) equal to the difference between
(i) the "Lump Sum", as defined below, value of any payment you receive
at such time (or any monthly annuities that you then become entitled
to receive) from (a) the Retirement Plan and (b) from the Company
with respect to the portion, if any, of your Retirement Plan pension
which exceed the limitations on pension amounts to which the
Retirement Plan is subject and (ii) the Lump Sum value of payments
that would have been payable if it or they had been calculated as if
you had been deemed to have had two (2) additional "Years of Service",
as defined below. "Years of Service" shall be as defined in the
Retirement Plan and shall be applied as if you were a participant
thereunder at the time of your termination of employment, and "Lump
Sum" shall mean an amount calculated in accordance with the interest
rate and other actuarial assumptions set forth or used in connection
with lump sum calculations under the Retirement Plan.
(x) Lump Sum Payment if Not Vested under Retirement Plan. If
you are not vested under the Retirement Plan when your employment
with the Company is terminated within the first three years after a
change in control by the Company without Cause or by you for Good
Reason, you shall receive from the Company at the time payments are
made pursuant to paragraph (iii) above, an amount (calculated and
paid in a lump sum) equal to the Lump Sum value of any payment you
would have been entitled to receive at your Normal Retirement Date
(or any annuities that you would have been entitled to receive) from
the Retirement Plan and the RIRP calculated (a) as if you were 100%
vested under such plans and (b) using actual years of service
increased by two (2) additional Years of Service.
(xi) Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor (except as provided in Section 4(viii))
shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned or benefit received
by you as the result of employment by another employer after the Date
of Termination, or otherwise.
(xii) Deferred Payment Election. Upon entering into this
Agreement and for a period of 14 days following each anniversary of
the date hereof (the "Election Period"), you may, in writing, direct
the Company that any amounts which should become payable to you
pursuant to Section 4(iii) hereof shall be paid to you in three (3)
equal annual installments, with the first such installment payable
within five (5) business days of the Date of Termination and each
successive installment paid on the anniversary of the Date of
Termination or the next following business day if such date is not a
business day (the "Deferred Payment Election"). A Deferred Payment
Election, once made, cannot be revoked except during an Election
Period; provided, however, that no Deferred Payment Election can be
made or revoked by you during an Election Period that occurs after a
change in control of the Company or at a time when, in the judgment
of the Company, a change in control may occur within sixty (60) days
of such Election Period. Notwithstanding anything in the foregoing
to the contrary, a Deferred Payment Election shall be automatically
revoked should you terminate your employment under the circumstances
described in Section 7 below.
5. TERMINATION IN CONNECTION WITH THE DISPOSITION OF A COMPANY
BUSINESS. If there occurs at any time during the Term of this Agreement a
spin-off to shareholders or a sale or other disposition to a non-affiliate
of the Company (collectively, "New Owner", which term shall include all
entities controlled by or under common control with the New Owner) of a
portion of the business of the Company ("Disposition") for which you perform
substantially all of your duties or as part of a restructuring or
reorganizing of the Company you are assigned to work with such New Owner
and you become employed by the New Owner, then a change in control, for the
limited purpose of this Section 5, will be deemed to have occurred, and
(i) if, and only if, your employment is terminated as
described in any of the paragraphs (A) through (D) below (in each
case a termination shall not be deemed to be a termination for
purposes of this Section 5 if you are offered and refuse to accept a
comparable position with the Company or an affiliate of the Company
or the New Owner and for this purpose a position is not comparable if
there are changes from the position you held prior to the Disposition
that would constitute Good Reason for you to terminate your
employment):
(A) You are terminated by the Company on the date of the
Disposition and are not employed by the New Owner; or
(B) Within six (6) months prior to the date of
Disposition, your employment with the Company is terminated
other than for Cause or Disability or you terminate your
employment with the Company for Good Reason; or
(C) You continue your employment with the Company and
within three years following the Date of the Disposition your
employment with the Company is terminated other than for Cause
or Disability or you terminate your employment for Good Reason;
or
(D) You are employed by the New Owner and within three
years following the date of Disposition your employment with
the New Owner is terminated other than for Cause or Disability
or you terminate your employment with the New Owner for Good
Reason. (For purposes of this subsection, "Company" shall be
deemed to mean "New Owner" in the definition of "Good Reason"
where the context so requires and references in the definition
of "Good Reason" to conditions in effect immediately prior to a
change in control shall be deemed to mean conditions in the
offer of employment to you or otherwise in effect upon your
initial employment with the New Owner.)
(ii) then, subject to Section 9 hereof, you shall be entitled
to the benefits described in either (A) or (B) below:
(A) If any of paragraphs (A) (B) or (C) of subsection
(i) above apply, then you shall be entitled to the payments and
benefits specified in Section 4.
(B) If paragraph (D) of subsection (i) above applies,
then the Company shall pay to you an amount equal to three
times the higher of your annual base salary in effect on the
date of Disposition or your highest annual base salary in
effect during either of the two years immediately prior to the
date of Disposition; plus an amount equal to three times the
greater of your target bonus for the year in which the
Disposition occurred or your highest target bonus during either
of the two years immediately prior to the Disposition; provided
however, that such amount shall in no event exceed the
aggregate amount of base salary and target bonuses that you
would have otherwise received had your employment continued at
such higher rate until your Normal Retirement Date; plus the
Gross-up payments and other provisions of Sections 4(vi) and
4(vii).
6. EMPLOYEE'S COMMITMENT: RIGHT TO TERMINATE.
(i) Employee's Right to Terminate. Except as otherwise
provided in paragraph (ii) below, the Company or you may terminate
your employment at any time, subject to the Company's providing the
benefits specified herein in accordance with the terms hereof.
(ii) Employee's Commitment In Event of Tender or Exchange
Offer. In the event a tender offer or exchange offer is made by a
Person for more than 20% of the combined voting power of the
Company's Voting Securities, including shares of Common Stock of the
Company, you agree that you will not leave the employ of the Company
(other than as a result of Disability or upon Normal Retirement) and
will render the services contemplated in this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a
change in control of the Company has occurred.
(iii) Employee's Duty. During the life of this Agreement, you
will faithfully perform your duties to the best of your ability and
in accordance with the directions of the Chief Executive Officer and
the Board of Directors, provided that after a change in control of
the Company such directions do not constitute Good Reason for you to
terminate your employment; and you will devote to the performance of
such duties your full working time, attention and energies.
(iv) Confidential and Proprietary Information. You will not
at any time during the life of this Agreement, or thereafter,
communicate or disclose to any unauthorized person, or use for your
own account, without the written consent of the Company, any
proprietary processes, or other confidential information of the
Company or any subsidiary concerning their business or affairs,
suppliers or customers, it being understood, however, that the
obligations of this paragraph shall not apply to the extent that the
aforesaid matters (A) are disclosed in circumstances in which you are
legally required to do so or (B) become generally known to and
available for use by the public otherwise than by your wrongful act
or omission.
7. SUCCESSOR'S BINDING AGREEMENT.
(i) Successor's Binding Agreement. The Company will seek, by
written request at least five (5) business days prior to the time a
Person becomes a Successor (as hereinafter defined), to have such
Person, by agreement in form and substance satisfactory to you,
assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by the
later of (A) three business days prior to the time such Person
becomes a Successor or (B) two business days after such person
receives a written request to so assent shall constitute Good Reason
for termination by you of your employment if a change in control of
the Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage
of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's Voting
Securities or otherwise. Whether or not such assent is given by a
Successor, this Agreement shall be binding on the Successor and its
assigns.
(ii) Enforceability by Employee's Successors. This Agreement
shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die before all
amounts that would still be payable to you hereunder if you had
continued to live are paid, all such unpaid amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee or, if there be
no such designee, to your estate.
8. FEES AND EXPENSES. The Company shall pay all legal fees,
expenses of arbitration and related expenses incurred by you in connection
with this Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination of your employment
following a change in control or incurred by you in seeking advice with
respect to the matters set forth in Section 7 hereof or (b) your seeking to
obtain or enforce any right or benefit provided by this Agreement.
9. TAXES. All payments to be made to you under this Agreement will
be subject to required withholding of applicable federal, state and local
taxes.
10. INTEREST. All payments due under this Agreement and unpaid
shall bear interest at the rate of 10% per annum, compounded daily,
beginning on the next ensuing day
after the Payment Date or such other date as they may be due.
11. NON-ALIENABILITY. Your interest under this Agreement is not
subject to anticipation, alienation, assignment or attachment and may not
be transferred or encumbered in any manner, either voluntarily or
involuntarily, and any attempt so to anticipate, alienate, sell, transfer,
assign, pledge, encumber, or charge the same shall be null and void;
neither shall the benefits hereunder be liable for or subject to your
debts, contracts, liabilities, engagement, or torts, nor shall they be
subject to garnishment, attachment, or other legal or equitable process nor
shall they be an asset in bankruptcy, except that not amount shall be
payable hereunder until and unless any and all amounts representing debts
or other obligations owed to any company by you shall have been fully paid
and satisfied.
12. SURVIVAL. The respective obligations of, and benefits afforded
to, the Company and you as provided in Sections 4, 5, 6, 7, 8, 9 and 16 of
this Agreement shall survive termination of this Agreement.
13. NOTICE. Notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid addressed to the respective addresses set forth
on the first page of this Agreement or to such other address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt. All notices to the Company shall be directed to the attention of
the Chief Executive Officer of the Company with a copy to the Secretary of
the Company.
14. MISCELLANEOUS. This Agreement does not supersede any other plan
of the Company or agreement with the Company. No provision of this
Agreement may be modified, waived or discharged except in writing
specifically referring to such provision and signed by you and such officer
as may be specifically designated by the Board of Directors of the Company.
No waiver at any time by either party hereto of the breach of any condition
or provision of this Agreement, or of compliance by the other party with
the same, shall be deemed a waiver of any other condition or provision at
the same or at any other time. No agreement or representation still in
effect, oral or otherwise, express or implied, with respect to the subject
matter hereof has been made by either party other than (i) those set forth
expressly in this Agreement or (ii) those in any stock option agreements,
restricted stock agreements, or deferred compensation agreements. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Texas.
15. VALIDITY. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in the city nearest to your principal residence which has an office of the
American Arbitration Association by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 16.
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 instrument.
If this letter correctly sets forth our entire agreement, as amended
and restated, on the subject matter hereof, kindly sign and return to the
Company the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
ENSERCH Corporation
By:
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AGREED to as of the date
first above written.
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