AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of
May, 2001(the "Effective Date"), by and between Cinergy and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for and
hold the position of Vice President and Comptroller. Cinergy desires to secure
the employment of the Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ of
Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set forth
below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive agrees to
enter and remain in the employ of Cinergy, in accordance with the
terms and provisions of this Agreement, for the Employment Period set
forth in Subsection b. The parties agree that the Company will be
responsible for carrying out all of the premises, covenants, and
agreements of Cinergy set forth in this Agreement.
b. The Employment Period of this Agreement will commence as of the
Effective Date and continue until December 31, 2003; provided that,
commencing on December 31, 2001, and on each subsequent December 31,
the Employment Period will be extended for one (1) additional year
unless either party gives the other party written notice not to extend
this Agreement at least ninety (90) days before the extension would
otherwise become effective.
2. Duties and Powers of Executive
a. Position. The Executive will serve Cinergy as Vice President and
Comptroller. He will have such responsibilities, duties, and authority
as are customary for someone of that position and such additional
duties, consistent with his position, as may be assigned to him from
time to time during the Employment Period by the Board of Directors,
the Chief Executive Officer, or the senior executive officer to whom
he directly reports. Executive shall devote substantially all of
Executive's business time, efforts and attention to the performance of
Executive's duties under this Agreement; provided, however, that this
requirement shall not preclude Executive from reasonable participation
in civic, charitable or professional activities or the management of
Executive's passive investments, so long as such activities do not
materially interfere with the performance of Executive's duties under
this Agreement.
b. Place of Performance. In connection with the Executive's employment,
the Executive will be based at the principal executive offices of
Cinergy, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇. Except for required
business travel to an extent substantially consistent with the present
business travel obligations of Cinergy executives who have positions
of authority comparable to that of the Executive, the Executive will
not be required to relocate to a new principal place of business that
is more than thirty (30) miles from Cinergy's principal executive
offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the annual
rate of not less than $210,000 (subject to across-the-board salary
reductions described below). Any increase in the Annual Base Salary
will not serve to limit or reduce any other obligation of Cinergy
under this Agreement. The Annual Base Salary will not be reduced
except for across-the-board salary reductions similarly affecting all
Cinergy management personnel. If Annual Base Salary is increased or
reduced during the Employment Period, then such adjusted salary will
thereafter be the Annual Base Salary for all purposes under this
Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will be eligible, and
Cinergy will take all necessary action to cause the Executive to
become eligible, to participate in all short-term and long-term
incentive, stock option, restricted stock, performance unit, savings,
retirement and welfare plans, practices, policies and programs
applicable generally to other senior executives of Cinergy who are
considered Tier III executives for compensation purposes, except with
respect to any plan, practice, policy or program to which the
Executive has waived his rights in writing.
Upon his retirement on or after having attained age fifty (50), the
Executive will be eligible for comprehensive medical and dental
benefits which are not materially different from the benefits provided
under the Retirees' Medical Plan and the Retirees' Dental Plan. The
Executive, however, will receive the maximum level of subsidy
currently applicable to similarly situated active Cinergy employees
that is provided by Cinergy to retirees, as of the Effective Date of
this Agreement, for purposes of determining the amount of monthly
premiums due from the Executive.
The Executive will be a participant in the Annual Incentive Plan, and
the Executive will be paid pursuant to the terms and conditions of
that plan an annual benefit of up to fifty-two and one-half percent
(52.5%) of the Executive's Annual Base Salary (the "Maximum Annual
Bonus"), with a target of no less than thirty percent (30%) of the
Executive's Annual Base Salary (the "Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive Plan
(the "LTIP"), and the Executive's annualized target award opportunity
under the LTIP will be equal to no less than seventy-five percent
(75%) of his Annual Base Salary (the "Target LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period, the
Executive will be entitled to the following additional fringe benefits
in accordance with the terms and conditions of Cinergy's policies for
such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile appropriate
for the Executive's level of position, or, at Cinergy's
discretion, a cash allowance of equivalent value. Cinergy will
also pay all of the related expenses for gasoline, insurance,
maintenance, and repairs, or provide for such expenses within the
cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive for
membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per year
(or such longer period for which Executive is otherwise eligible
under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial planning
and tax preparation services.
(v) Cinergy will provide reasonable costs of relocating from the
Cincinnati, Ohio area to a new primary residence in a manner that
is consistent with the terms of the Relocation Program following
termination of the Executive's employment for any reason
(vi) Cinergy will provide other fringe benefits in accordance with
Cinergy plans, practices, programs, and policies in effect from
time to time, commensurate with his position and at least
comparable to those received by other Cinergy Tier III
executives.
d. Expenses. Cinergy agrees to reimburse the Executive for all expenses,
including those for travel and entertainment, properly incurred by him
in the performance of his duties under this Agreement in accordance
with the policies established from time to time by the Board of
Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically upon
the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy (other
than any such failure resulting from the Executive's incapacity
due to physical or mental illness) that, if curable, has not been
cured within 30 days after the Board of Directors or the Chief
Executive Officer has delivered to the Executive a written demand
for substantial performance, which demand specifically identifies
the manner in which the Executive has not substantially performed
his duties. This event will constitute Cause even if the
Executive issues a Notice of Termination for Good Reason pursuant
to Subsection 4d after the Board of Directors or Chief Executive
Officer delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9.
(iii)The conviction of the Executive for the commission of a felony,
including the entry of a guilty or nolo contendere plea, or any
willful or grossly negligent action or inaction by the Executive
that has a materially adverse effect on Cinergy. For purposes of
this definition of Cause, no act, or failure to act, on the
Executive's part will be deemed "willful" unless it is done, or
omitted to be done, by the Executive in bad faith and without
reasonable belief that the Executive's act, or failure to act,
was in the best interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days advance
written notice to the Executive, terminate the Executive's employment
during the Employment Period for a reason other than Cause, but the
obligations placed upon Cinergy in Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except for
across-the-board salary reductions similarly affecting all
Cinergy management personnel, or a reduction in any other benefit
or payment described in Section 3 of this Agreement, except for
changes to the employee benefits programs generally affecting
Cinergy management personnel, provided that those changes, in the
aggregate, will not result in a material adverse change with
respect to the benefits to which the Executive was entitled as of
the Effective Date.
(ii) The material reduction without his consent of the Executive's
title, authority, duties, or responsibilities from those in
effect immediately prior to the reduction, or a material adverse
change in the Executive's reporting responsibilities.
(iii)Any breach by Cinergy of any other material provision of this
Agreement (including but not limited to the place of performance
as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness or
injury that precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience.
(v) A failure by the Company to require any successor entity to the
Company specifically to assume in writing all of the Company's
obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate his
employment without Good Reason upon prior written notice to the
Company.
f. Notice of Termination. Any termination of the Executive's employment
by Cinergy or by the Executive during the Employment Period (other
than a termination due to the Executive's death) will be communicated
by a written Notice of Termination to the other party to this
Agreement in accordance with Subsection 12b. For purposes of this
Agreement, a "Notice of Termination" means a written notice that
specifies the particular provision of this Agreement relied upon and
that sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for terminating the Executive's employment
under the specified provision. The failure by the Executive or Cinergy
to set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or preclude
the Executive or Cinergy from asserting that fact or circumstance in
enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment Period,
Cinergy will pay to the Executive a lump sum amount, in cash,
equal to the sum of the following Accrued Obligations:
(1) the pro-rated portion of the Executive's Annual Base Salary
payable through the Date of Termination, to the extent not
previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently completed
fiscal year, to the extent not theretofore paid.
(3) an amount equal to the AIP Benefit for the fiscal year that
includes the Date of Termination multiplied by a fraction,
the numerator of which is the number of days from the
beginning of that fiscal year to and including the Date of
Termination and the denominator of which is three hundred
and sixty-five (365). The AIP Benefit component of the
calculation will be equal to the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the date of determination,
determined by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable.(3)
(4) the Accrued Obligations described in this Paragraph 5a(i)
will be paid within thirty (30) days after the Date of
Termination. These Accrued Obligations are payable to the
Executive regardless of whether a Change in Control has
occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four (24)
months following the occurrence of a Change in Control, Cinergy
will pay the Accrued Obligations, and Cinergy will have the
following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash, equal to three (3) times the sum of the Annual Base
Salary and the Annual Bonus. For this purpose, the Annual
Base Salary will be at the rate in effect at the time Notice
of Termination is given (without giving effect to any
reduction in Annual Base Salary, if any, prior to the
termination, other than across-the-board reductions), and
the Annual Bonus will be the higher of (A) the annual bonus
earned by the Executive pursuant to any annual bonus or
incentive plan maintained by Cinergy in respect of the year
ending immediately prior to the fiscal year in which occurs
the Date of Termination, and (B) the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be less
than the Annual Target Bonus, nor greater than the Maximum
Target Bonus for the year in which the Date of Termination
occurs. This lump sum will be paid within thirty (30) days
of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period, medical and
dental benefits to the Executive and/or the Executive's
dependents at least equal to those that would have been
provided if the Executive's employment had not been
terminated (excluding benefits to which the Executive has
waived his rights in writing). The benefits described in the
preceding sentence will be in accordance with the medical
and welfare benefit plans, practices, programs, or policies
of Cinergy (the "M&W Plans") as then currently in effect
and applicable generally to other Cinergy senior executives
and their families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any
related insurance policies) or (2) violate any of the
Code's nondiscrimination requirements applicable to the
M&W Plans, then Cinergy, in its sole discretion,
may elect to pay the Executive, in lieu of the M&W
Plan benefits described under this Subparagraph
5a(ii)(2), a lump sum cash payment equal to the total
monthly premiums (or in the case of a self funded plan,
the cost of COBRA continuation coverage) that would
have been paid by Cinergy for the Executive under the
M&W Plans from the Date of Termination through the
end of the Employment Period, grossed up for the effect
of federal, state and local income taxes. Nothing in
this Clause will affect the Executive's right to elect
COBRA continuation coverage under a M&W Plan in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W
Plans will be secondary to those provided under the
other employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(4) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the Executive
within thirty (30) days of the Date of Termination. To the
extent there is imputed income to the Executive resulting
from the transfer of title, the Executive will receive a
cash payment equal to the amount of federal, state and local
income taxes resulting from this transfer as soon as
administratively feasible after the transfer is effective.
At Cinergy's discretion, a cash payment of an equivalent
value of the automobile and corresponding income taxes may
be paid in lieu of the assignment of the automobile.
(5) Cinergy will pay to the Executive the lump sum present value
of any benefits under the Executive Supplemental Life
Program under the terms of the applicable plan or program as
of the Date of Termination, calculated as if the Executive
was fully vested as of the Date of Termination. The lump sum
present value, assuming commencement at age 50 or age as of
the Date of Termination if later, will be determined using
the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes the
Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under
section 417(e)(3) of the Code, or any successor provision
thereto, for the second full calendar month preceding the
first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(iii)In the event of a Qualifying Termination during the twenty-four
(24) month period beginning upon the occurrence of a Change in
Control, Cinergy will pay the Accrued Obligations, and Cinergy
will also have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher of (x)
the sum of the Executive's current Annual Base Salary and
Target Annual Bonus and (y) the sum of the Executive's
Annual Base Salary in effect immediately prior to the Change
in Control and the Change in Control Bonus. For purposes of
this Agreement, the Change in Control Bonus shall mean the
higher of (A) the annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior to
the fiscal year in which occurs the Date of Termination or,
if higher, immediately prior to the fiscal year in which
occurs the Change in Control, and (B) the annual bonus that
would have been earned by the Executive pursuant to any
annual bonus or incentive plan maintained by Cinergy in
respect of the year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objective for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable, provided, however, that for purposes of this
Subsection 5a(iii)(1)(B), such Change in Control Annual
Bonus shall not be less than the Annual Target Bonus, nor
greater than the Maximum Target Bonus. This lump sum will be
paid within thirty (30) days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present value
of any benefits under the Executive Supplemental Life
Program under the terms of the applicable plan or program as
of the Date of Termination, calculated as if the Executive
was fully vested as of the Date of Termination. The lump sum
present value, assuming commencement at age 50 or age as of
the Date of Termination if later, will be determined using
the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes the
Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under
section 417(e)(3) of the Code, or any successor provision
thereto, for the second full calendar month preceding the
first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued benefits
as of the Date of Termination under the Executive Retirement
Plans, and his accrued benefits thereunder will be
calculated as if the Executive was credited with three (3)
additional years of age and service as of the Date of
Termination. However, Cinergy will not commence payment of
such benefits until the Executive has attained age 50. For
purposes of determining benefits under the Executive
Retirement Plans, the definition of earnings will be the
same as defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive and/or the
Executive's dependents are receiving immediately prior to
the Notice of Termination at a substantially similar cost to
the Executive (without giving effect to any reduction in
those benefits subsequent to a Change in Control that
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents with
life, disability, accident, and health insurance benefits,
those benefits will be reduced to the extent comparable
benefits are actually received by or made available to the
Executive and/or the Executive's dependents during the
thirty-six (36) month period following the Executive's Date
of Termination. The Executive must report to Cinergy any
such benefits that he or his dependents actually receives.
In lieu of the benefits described in the preceding
sentences, Cinergy, in its sole discretion, may elect to pay
to the Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a self
funded plan, the cost of COBRA continuation coverage) that
would have been paid by Cinergy to provide those benefits to
the Executive and/or the Executive's dependents, grossed up
for the effect of federal, state and local income taxes.
Nothing in this Subparagraph 5a(iii)(4) will affect the
Executive's right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make the
payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and whether or
not the Executive receives health coverage from another
employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the Executive
within thirty (30) days of the Date of Termination. To the
extent there is imputed income to the Executive resulting
from the transfer of title, the Executive will receive a
cash payment equal to the amount of federal, state and local
income taxes resulting from this transfer as soon as
administratively feasible after the transfer is effective.
At Cinergy's discretion, a cash payment of an equivalent
value of the automobile and corresponding income taxes may
be paid in lieu of the assignment of the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by the
Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to the
Executive's position until the end of the Employment Period
or, if earlier, until the first acceptance by the Executive
of an offer of employment. At the Executive's discretion,
15% of Annual Base Salary may be paid in lieu of
outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than for
Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the Employment
Period, or if the Executive terminates employment during the
Employment Period other than a termination for Good Reason, Cinergy
will have no further obligations to the Executive under this Agreement
other than the obligation to pay to the Executive the Accrued
Obligations, plus any other earned but unpaid compensation, in each
case to theextent not previously paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to the
Executive or for his benefit pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, his
employment with Cinergy or a change in ownership or effective
control of Cinergy or of a substantial portion of its assets (a
"Payment" or "Payments") would be subject to any Excise Tax, then
the Executive will be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest, penalties,
additional tax, or similar items imposed with respect thereto and
the Excise Tax), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all determinations
required to be made under this Section 5c, including whether and
when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by the Accounting Firm,
which shall provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days of
the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this
Section 5c, shall be paid by Cinergy to the Executive within five
(5) days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
Cinergy and the Executive. However, as a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that Cinergy exhausts its remedies pursuant to
Section 5c(iii) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Cinergy to or for the
benefit of the Executive. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Executive's
employment, the Executive 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 that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment being
repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local
income or employment tax deduction) plus interest on the amount
of such repayment at the rate provided in Code section
1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment or
benefit paid or payable to the Executive will be determined in
accordance with the principles of Code sections 280G(d)(3) and
(4). For purposes of determining the amount of the Gross-Up
Payment, the Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes that would be obtained from
deduction of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting Firm's
determination, an Excise Tax will be imposed on any Payment or
Payments, Cinergy will pay to the applicable government taxing
authorities as Excise Tax withholding, the amount of the Excise
Tax that Cinergy has actually withheld from the Payment or
Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's entitlement
to restricted shares and performance shares under the Value Creation
Plan and any stock options granted under the Stock Option Plan or the
LTIP will be determined under the terms of the appropriate plan and
any applicable administrative guidelines and written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the Executive's
entitlements, if any, under the Non-Qualified Deferred Compensation
Plan and 401(k) Excess Plan shall be distributed under the terms of
such plans and any applicable administrative guidelines and written
agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the Executive for
all reasonable legal fees and expenses incurred by the Executive in
successfully disputing a Qualifying Termination that entitles the
Executive to Severance Benefits. Payment will be made within five (5)
business days after delivery of the Executive's written request for
payment accompanied by such evidence of fees and expenses incurred as
Cinergy reasonably may require.
6. Non-Exclusivity of Rights. Nothing in this Agreement will prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy, or practice provided by Cinergy and for which the
Executive may qualify, except with respect to any benefit to which the
Executive has waived his rights in writing or any plan, program, policy, or
practice that expressly excludes the Executive from participation. In
addition, nothing in this Agreement will limit or otherwise affect the
rights the Executive may have under any other contract or agreement with
Cinergy entered into after the Effective Date. Amounts that are vested
benefits or that the Executive is otherwise entitled to receive under any
benefit, plan, program, policy, or practice of, or any contract or
agreement entered into after the Effective Date with Cinergy, at or
subsequent to the Date of Termination, will be payable in accordance with
that benefit, plan, program, policy or practice, or that contract or
agreement, except as explicitly modified by this Agreement.
7. Full Settlement: Mitigation. Cinergy's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement will not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right, or action that Cinergy may have
against the Executive or others. In no event will the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Subparagraphs 5a(ii)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, will be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, Cinergy will reimburse or pay
all legal fees and expenses that the Executive may reasonably incur as a
result of the dispute as required by Section 7.
9. Confidential Information. The Executive will hold in a fiduciary capacity
for the benefit of Cinergy, as well as all of Cinergy's successors and
assigns, all secret, confidential information, knowledge, or data relating
to Cinergy, and its affiliated businesses, that the Executive obtains
during the Executive's employment by Cinergy or any of its affiliated
companies, and that has not been or subsequently becomes public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). During the Employment Period and thereafter,
the Executive will not, without Cinergy's prior written consent or as may
otherwise by required by law or legal process, communicate or divulge any
such information, knowledge, or data to anyone other than Cinergy and those
designated by it. The Executive understands that during the Employment
Period, Cinergy may be required from time to time to make public disclosure
of the terms or existence of the Executive's employment relationship to
comply with various laws and legal requirements. In addition to all other
remedies available to Cinergy in law and equity, this Agreement is subject
to termination by Cinergy for Cause under Section 4b in the event the
Executive violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without Cinergy's
prior written consent, cannot be assigned by the Executive other than
Executive's designation of a beneficiary of any amounts payable
hereunder after the Executive's death. This Agreement will inure to
the benefit of and be enforceable by the Executive's legal
representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Cinergy to assume expressly and
agree to perform this Agreement in the same manner and to the same
extent that Cinergy would be required to perform it if no succession
had taken place. Cinergy's failure to obtain such an assumption and
agreement prior to the effective date of a succession will be a breach
of this Agreement and will entitle the Executive to compensation from
Cinergy in the same amount and on the same terms as if the Executive
were to terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective will be deemed the
Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between Cinergy
and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan benefit
described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base salary
payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in Subsection
5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy Corp.
Annual Incentive Plan or any similar plan or successor to the Annual
Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of directors
of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the Effective
Date:
(i) Any "person" or "group" (within the meaning of subsection 13(d)
and paragraph 14(d)(2) of the ▇▇▇▇ ▇▇▇) is or becomes the
beneficial owner (as defined in Rule l3d-3 under the 1934 Act),
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such a Person
any securities acquired directly from the Company or its
affiliates) representing more than twenty percent (20%) of the
combined voting power of the Company's then outstanding
securities, excluding any person who becomes such a beneficial
owner in connection with a transaction described in Clause (1) of
Paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (1) a merger or consolidation that would
result in the voting securities of the Company outstanding
immediately prior to that merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at
least sixty percent (60%) of the combined voting power of the
securities of the Company or the surviving entity or its parent
outstanding immediately after the merger or consolidation, or (2)
a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such a Person any securities
acquired directly from the Company or its affiliates other than
in connection with the acquisition by the Company or its
affiliates of a business) representing twenty percent (20%) or
more of the combined voting power of the Company's then
outstanding securities; or
(iii)During any period of two (2) consecutive years, individuals who
at the beginning of that period constitute the Board of Directors
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Company's
shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of that period or whose
appointment, election, or nomination for election was previously
so approved or recommended cease for any reason to constitute a
majority of the Board of Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least sixty percent (60%) of
the combined voting power of the voting securities of which are
owned by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior
to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the meaning set
forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the chief
executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or its
affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended, and
interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive with Good Reason, the date of receipt
of the Notice of Termination or any later date specified in the
notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on which the
Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company other
than for Cause, thirty (30) days after the date on which the
Company notifies the Executive of the termination; and
(iv) if the Executive's employment is terminated by reason of death,
the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means the
Cinergy Corp. Non-Qualified Deferred Incentive Compensation Plan or
any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means May 15, 2001.
t. Employment Period. "Employment Period" has the meaning set forth in
Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code section
4999, together with any interest, penalties, additional tax or similar
items that are incurred by the Executive with respect to the excise
tax imposed by Code section 4999.
v. Executive. "Executive" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
w. Executive Retirement Plans. "Executive Retirement Plans" means the
Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy Corp.
Supplemental Executive Retirement Plan and the Cinergy Corp. Excess
Pension Plan or any similar plans or successors to those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life Insurance
Program or any similar program or successor to the Executive
Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that plan.
z. Good Reason. "Good Reason" has the meaning set forth in Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or "LTIP"
means the long-term incentive plan implemented under the Cinergy Corp.
1996 Long-Term Incentive Compensation Plan or any successor to that
plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in
Subparagraph 5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set forth
in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning set
forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set forth
in Subsection 5c.
gg. Person. "Person" has the meaning set forth in paragraph 3(a)(9) of the
1934 Act, as modified and used in subsections 13(d) and 14(d) of the
1934 Act; however, a Person will not include the following:
(i) Cinergy or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under an employee
benefit plan of Cinergy or its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of those securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with Cinergy
other than a termination for Cause or (ii) the termination by the
Executive of the Executive's employment with Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination of
employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy Corp.
Retirees' Dental program or any similar program or successor to that
program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the Cinergy
Corp. Retirees' Medical program or any similar program or successor to
that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. Stock Related Documents. "Stock Related Documents" means the LTIP, the
Cinergy Corp. Stock Option Plan, and the Value Creation Plan and any
applicable administrative guidelines and written agreements relating
to those plans.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set forth
in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth in
Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value Creation
Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of its
provisions and will have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended, or discharged except by
an agreement in writing signed by the party against whom enforcement
of the amendment, modification, repeal, waiver, extension, or
discharge is sought. Only the Chief Executive Officer or his designee
will have authority on behalf of Cinergy to agree to amend, modify,
repeal, waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be in
writing and will be given by hand delivery to the other party or by
Federal Express or other comparable national or international
overnight delivery service, addressed as follows:
If to the Executive:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Cinergy Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Cinergy:
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Cinergy Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Executive Officer
or to such other address as either party has furnished to the
other in writing in accordance with this Agreement. All
notices and communications will be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement
will not affect the validity or enforceability of any other provision
of this Agreement.
d. Cinergy may withhold from any amounts payable under this Agreement
such federal, state, or local taxes as are required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or Cinergy's failure to insist upon strict compliance
with any provision of this Agreement or the failure to assert any
right the Executive or Cinergy may have under this Agreement,
including without limitation the right of the Executive to terminate
employment for Good Reason pursuant to Subsection 4d or the right of
Cinergy to terminate the Executive's employment for Cause pursuant to
Subsection 4b, will not be deemed to be a waiver of that provision or
right or any other provision or right of this Agreement.
f. References in this Agreement to the masculine include the feminine
unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive and
Cinergy with respect to the subject matter of this Agreement; and
subject to any agreements evidencing stock option or restricted stock
grants described in Subsection 3b and the Stock Related Documents, all
promises, representations, understandings, arrangements, and prior
agreements are merged into this Agreement and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which will be
deemed to be an original but all of which together will constitute one
and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will be
authorized to act for Cinergy with respect to all aspects pertaining
to the administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and
Chief Executive Officer
EXECUTIVE
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
