MANAGEMENT CONTINUITY AGREEMENT
THIS AGREEMENT is made and entered into as of the ______ day
of ___________, 1998, by and between CILCORP Inc., an Illinois
corporation (hereinafter referred to as the "Company") and
_______________________ (hereinafter referred to as the "Key
Employee").
WITNESSETH:
WHEREAS, the Company has determined it should enter into
management continuity agreements with certain key employees of
the Company;
WHEREAS, _________________________ is a Key Employee of the
Company or one of its subsidiaries; and
WHEREAS, should the possibility of a Change-in-Control of
the Company arise, the Company believes it to be in the best
interests of the Company and its shareholders to minimize
concerns that the Key Employee might be distracted by the
personal uncertainties and risks created by the possibility of a
Change-in-Control;
NOW THEREFORE, to assure the Company that it will have the
continued service and dedication of the Key Employee
notwithstanding the possibility, threat, or occurrence of a
Change-in-Control of the Company, to induce the Key Employee to
remain in the employ of the Company, and for other good and
valuable consideration, the Company and the Key Employee agree as
follows:
Section 1. Definition of Change-in-Control; Change-in-Control
Period.
1.1 Change-in-Control.
For purposes of this Agreement, a "Change-in-Control" of the
Company shall be deemed to have occurred:
(a) if the Company merges or consolidates with or into
another corporation in a transaction in which neither the
Company nor any of its wholly-owned subsidiaries is the
surviving corporation; or sells or otherwise disposes of all
or substantially all of the Company's assets to any
corporation, person, other entity or group (other than the
Company or any of its wholly-owned subsidiaries or any
qualified or nonqualified plan maintained by the Company);
(b) if any corporation, person, other entity or group (other
than the Company or any of its wholly-owned subsidiaries)
becomes the Beneficial Owner (as defined in the Company's
articles of incorporation) of 30% or more of the voting
stock of the Company; or
(c) if during any period of two consecutive years,
Continuing Directors, as hereinafter defined, cease to
comprise a majority of the Company's Board of Directors.
Continuing Directors are:
(i) members of the Board of Directors of the
Company at the beginning of such period of two
consecutive years; and
(ii) any person who subsequently becomes a member
of the Board of Directors if such person's nomination
for election or election to the Board of Directors of
the Company is recommended or approved by resolution of
a majority of the Continuing Directors or such person
is included as a nominee in a proxy statement of the
Company distributed when a majority of the Board of
Directors of the Company consists of Continuing
Directors.
1.2 Change-in-Control Period.
The Change-in-Control Period shall mean the period beginning on
the date of a Change-in-Control and ending on the second
anniversary of the date thereof.
Section 2. Termination of Employment.
2.1 Termination by the Company with Cause. For purposes of this
Agreement, the Company may terminate the Key Employee's
employment during the Change-in-Control Period for Cause. In the
event of such termination, the Company shall give the Key
Employee a Notice of Termination in conformity with Section 6
herein. For purposes of this Agreement, Cause shall mean:
(a) the Key Employee's willful and continued
failure to perform substantially his/her duties with
the Company or one of its subsidiaries other than such
failure resulting from disability (as hereinafter
defined), as determined by the Chief Executive Officer
of the Company (the "CEO"), after a written demand for
substantial performance is delivered to the Key
Employee by the CEO which specifically identifies the
manner in which the CEO believes that the Key Employee
has not substantially performed his/her duties; or
(b) the Key Employee's willful engaging in illegal
conduct or gross misconduct which the CEO believes is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the
Key Employee's part, shall be considered "willful" unless it is
done, or omitted to be done, by the Key Employee in bad faith or
without reasonable belief that his/her action or omission was in
the best interests of the Company. Any act or failure to act,
based on authority given pursuant to a resolution duly adopted by
the Board or on the instructions of the CEO or a senior officer
of the Company or based on the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by the Key Employee in good faith and in the best interests of
the Company. The termination of the Key Employee's employment
shall not be deemed to be for Cause unless and until there shall
have been delivered to him/her a copy of the resolution duly
adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice
is provided to the Key Employee and the Key Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Key Employee is guilty of the conduct described above.
2.2 Termination by the Employee for Good Reason.
The Key Employee's employment with the Company shall be deemed to
be terminated by him/her for Good Reason if, during the Change-in-
Control Period:
(a) there is a reduction by the Company in the Key
Employee's Annual Compensation (as hereinafter defined);
(b) there is a material reduction in his/her benefits;
(c) the Company requires the Key Employee to travel on
Company business to a substantially greater extent than
required immediately prior to the Change-in-Control; or
(d) the Company notifies the Key Employee that he/she will
be required to change the Key Employee's principal place of
employment during the Change-in-Control Period to a location
that is more than 75 miles from the Key Employee's principal
place of employment immediately prior to the effective date
of the Change-in-Control; and
(e) as a result of one of the foregoing events, the Key
Employee voluntarily terminates his/her employment
relationship with the Company.
In the event the Key Employee terminates his/her employment for
Good Reason, the Key Employee shall notify the Company in
accordance with Section 6 within 30 days of the date following
the first occurrence of an event described herein.
2.3 Termination by Retirement or Death.
For purposes of this Agreement, termination of the Key Employee's
employment based on Retirement during the Change-in-Control
Period shall mean voluntary termination in accordance with the
Company's retirement policy, including early retirement,
generally applicable to the Company's salaried employees. The
Key Employee's death during the Change-in-Control Period shall
automatically terminate his/her employment. In either the event
of retirement or death, the Company shall pay the Key Employee or
the Key Employee's beneficiary(ies) any unpaid Annual
Compensation and pay for any accrued, unused vacation through the
Date of Termination, at the salary rate then in effect, plus all
other amounts to which the Key Employee or the Key Employee's
beneficiary(ies) are entitled under any retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect, and the Company shall have no further obligations
to the Key Employee and the Key Employee's beneficiary(ies) under
this Agreement.
2.4 Termination by Disability.
If the Company determines in good faith that the Key Employee's
Disability has occurred during the Change-in-Control Period
(pursuant to the definition of Disability as set forth in the
Company's Long-Term Disability Plan then in effect), it may give
the Key Employee written notice, in accordance with Section 6
herein, of its intention to terminate the Key Employee's
employment. In such event, the Key Employee's employment with
the Company will terminate within 30 days after written Notice of
Termination is received by the Key Employee ("Disability
Effective Date") and provided that within 30 days after receiving
such notice, the Key Employee has not returned to the full-time
performance of his/her duties. The Key Employee shall receive
his/her unpaid Annual Compensation through the Disability
Effective Date at which point the Key Employee's compensation and
benefits, if any, shall be determined in accordance with the
Company's retirement, insurance, and other applicable plans and
programs in effect on the Disability Effective Date, and the
Company shall have no further obligations to the Key Employee
under this Agreement.
Section 3. Obligations of the Company Upon Termination.
3.1 If, during the Change-in-Control Period, the Company
terminates the Key Employee's employment other than for Cause,
Death, Disability, or Retirement or if the Key Employee
terminates employment for Good Reason, the Key Employee shall
receive, in addition to any salary, benefit or compensation due
the Key Employee as of the Termination Date, the aggregate of the
following amounts:
(a) an amount equal to two times the Key Employee's Annual
Compensation if the Key Employee is terminated within 12
months following a Change-in-Control and one time if the Key
Employee is terminated after 12 months following a Change-in-
Control but before the end of the Change-in-Control Period;
and
(b) an amount equal to 18 times the monthly premium charged
to a terminated employee who selects continuation coverage
under the Company's comprehensive hospital and medical
insurance plan (commonly known as "COBRA payments").
The Company shall also provide the Key Employee with years of
service and compensation credits, along with commensurate
additional benefits, if any, the Key Employee would have accrued
during the Change-in-Control Period, but for the termination, in
any qualified or nonqualified pension, retirement, supplemental
benefit or compensation deferral plan in effect on the Date of
Termination.
For purposes of this Agreement, Annual Compensation shall include
Annual Base Salary (the greater of annual base pay rate in effect
during the month immediately preceding a Date of Termination or
the annual base pay rate in effect during the month immediately
prior to a Change-in-Control) plus, pro rata, the annual target
level of any bonus established for the Key Employee for the
fiscal year in which a Change-in-Control occurs, assuming an
achievement level of 100% of any target award established under
an incentive compensation or bonus plan of the Company in which
the Key Employee participates. For purposes of this section,
COBRA payments shall be that amount necessary to provide either
family or individual comprehensive hospital or medical insurance
coverage as had been elected by the Key Employee in the month
immediately preceding the Date of Termination.
3.2 Timing of Payments.
At the Key Employee's irrevocable election at the time of his/her
signing of this Agreement, all payments made by the Company
pursuant to Section 3.1 shall be paid either:
(a) in a lump sum payment in cash within 30 days after
his/her Date of Termination;
(b) in 18 equal, monthly installments beginning on the
first day of the month following his/her Date of
Termination.
3.3 Tax Indemnity.
In the event it shall ultimately be determined by a court or the
Internal Revenue Service that any payment by the Company to or
for the benefit of the Key Employee (whether paid or payable
pursuant to the terms of this Agreement) would be subject to the
excise tax (including penalties and interest) imposed by Section
4999 of the Internal Revenue Code of 1986, as amended, (the
"Code"), then the Key Employee shall be entitled to receive a
lump sum cash payment sufficient to place the Key Employee in the
same net after-tax position as if the excise tax had not been
imposed (a "gross up" payment). The determination of the maximum
gross up amount payable to the Key Employee shall be made by an
accounting firm designated by the Company and shall be paid to
the Key Employee within 30 days of such determination.
Section 4. Administration of the Agreement.
4.1 Administration.
The CEO or his/her assignee shall administer the Agreement. The
CEO shall have the authority to interpret the Agreement and adopt
rules for the implementation thereof.
4.2 Date of Termination.
The "Date of Termination" shall mean:
(a) if the Key Employee's employment is terminated by the
Company for Cause or the Key Employee terminates his/her
employment for Good Reason, the date of the receipt of the
Notice of Termination (as defined in Section 6);
(b) if the Key Employee's employment is terminated by the
Company other than for Cause, the Date of Termination shall
be the date on which the Company notifies the Key Employee
of the termination; and
(c) if the Key Employee's employment is terminated by
reason of Death, Disability or Retirement, the Date of
Termination shall be the date of the Key Employee's Death,
Retirement or Disability Effective Date, as the case may be.
Section 5. Notice.
For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when hand delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, provided that all notices to the
Company be addressed to:
CILCORP Inc.
Corporate Secretary
000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
or to the Corporate Secretary of any successor company at its
principal place of business;
and if to the Key Employee:
(Insert Key Employee's name and address)
Section 6. Notice of Termination.
Any termination by the Company for Cause or Disability or by the
Key Employee for Good Reason shall be communicated by a written
notice of termination ("Notice of Termination") to the other
party hereto and shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon by
the party, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Key Employee's employment under the provision indicated and the
Date of Termination (as defined above). The failure by the
Company or the Key Employee to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Company or the Key Employee, respectively, from asserting such
fact or circumstance in enforcing the Key Employee's or the
Company's rights hereunder.
Section 7. Not a Contract of Employment.
The employment-at-will relationship between the Key Employee and
the Company shall continue except as modified by this Agreement.
Section 8. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
Section 9. Successors and Assigns.
This Agreement shall be binding on the Company and any assignee
or successor in interest to the Company and on the Key Employee
and his/her heirs, assigns or legatees.
Section 10. Non-exclusive Rights.
Nothing in this Agreement shall prevent or limit the Key
Employee's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its
subsidiaries for which the Key Employee may qualify, nor shall it
affect such rights as the Key Employee may have under any
contract or agreement with the Company or any of its
subsidiaries. The foregoing notwithstanding, should the Key
Employee be entitled to or paid any of the amounts set forth in
Section 3.1, then the Key Employee shall not be eligible for or
paid any severance pay or comprehensive hospital and medical
insurance coverage, payment or benefits except to the extent that
such comprehensive hospital and medical insurance coverage must
be offered under federal COBRA laws.
Section 11. Arbitration and Legal Fees.
The Key Employee and the Company agree to have any dispute or
controversy arising under or in connection with this Agreement
settled by arbitration using an Arbitration Panel. For the
purposes of this Agreement, the term "Arbitration Panel" shall
mean three independent arbitrators, one of whom shall be selected
by the Company, one by the Key Employee and the third shall be
selected by the two other arbitrators. In the event that
agreement cannot be reached on the selection of the third
arbitrator, such arbitrator shall be selected by the American
Arbitration Association. All arbitrators shall be selected from
a list provided by the American Arbitration Association, and all
matters presented to the Arbitration Panel shall be decided by
majority vote. The Key Employee and the Company agree that any
decision rendered in any such arbitration proceeding shall be
final and binding and that each of the parties waives their
rights to seek remedies in court, including the right to jury
trial. All expenses of such arbitration, including the fees and
expenses of the counsel for the Key Employee and the Company
shall be borne by the Company and/or the Key Employee in the
amount determined by the arbitrator. Any such arbitration shall
be held in the city where the Key Employee's principal place of
business while employed by the Company is located, unless the
Company and Key Employee mutually agree on another location.
Section 12. Amendment of Agreement.
Upon the occurrence of a Change-in-Control, and until the end of
the Change-in-Control Period, this Agreement may not be
terminated, or amended in any manner which has a significant
adverse effect on the Key Employee's rights hereunder without the
Key Employee's written consent. Notwithstanding any other
provision hereof, in the sole and absolute discretion of the
Company, the Agreement may be amended only to the extent
necessary in order to obtain or maintain the status of the
Company's retirement plans as qualified plans under Section
401(a) of the Code.
Section 13. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the
parties hereto, including the Company's predecessors, with
respect to the subject matter hereof.
Section 14. Termination of Agreement.
The Agreement shall continue until, and terminate, three years
from the date hereof.
By: By:
Officer
(Title)
Date: Date:
Timing of Payments Election
As a Key Employee and signatory to this Agreement, I hereby
irrevocably elect the following method of payment of any amount
payable under Section 3.1 of this Agreement:
1. Lump sum
2. Monthly installments
