SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and
entered into as of the 22nd day of September, 1998, by and among Cinergy Corp.,
a Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware
corporation ("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio
corporation ("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI Energy"),
and Xxxxx X. Xxxxxx (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI
will sometimes be referred to in this Agreement collectively as the "Company."
WHEREAS, the Executive is currently serving as Vice Chairman,
President and Chief Executive Officer of the Company, and the Company desires to
secure the continued employment of the Executive in accordance herewith;
WHEREAS, PSI entered into an employment agreement with the
Executive dated May 17, 1990 (the "1990 Employment Agreement");
WHEREAS, PSI, CG&E and CINergy Corp., an Ohio corporation,
entered into an employment agreement with the Executive dated December 11, 1992
(the "1992 Employment Agreement");
WHEREAS, PSI entered into a severance agreement (the
"Severance Agreement") with the Executive as of December 11, 1992;
WHEREAS, pursuant to the Amended and Restated Agreement and
Plan of Reorganization (the "Merger Agreement"), dated as of July 2, 1993, among
PSI Resources, Inc., an Indiana corporation, PSI, CG&E, Cinergy, and CINergy
Sub, Inc., an Ohio corporation, the parties thereto agreed to merge pursuant to
the terms thereof;
WHEREAS, the parties amended the 1990 Employment Agreement and
the 1992 Employment Agreement to conform to the terms of the Merger Agreement
and entered into an Amended and Restated Employment Agreement dated as of July
2, 1993 (the "1993 Employment Agreement"), as amended by a First Amendment dated
effective as of July 2, 1993, and a Second Amendment dated effective as of March
24, 1998;
WHEREAS, the Executive is willing to commit himself to remain
in the employ of the Company on the terms and conditions herein set forth and
thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this agreement
amending, merging, and restating the 1993 Employment Agreement and the Severance
Agreement, in each case, as of the date first set forth above, setting forth the
terms and conditions for the employment relationship of the Executive with the
Company during the Employment Period (as hereinafter defined);
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NOW, THEREFORE, IN CONSIDERATION of the mutual premises,
covenants and agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
(a) The Company, and any successor thereto, agree to employ
the Executive, and the Executive agrees to remain in the employ of the Company
in accordance with the terms and provisions of this Agreement for the period set
forth below (the "Employment Period").
(b) The Employment Period of the 1993 Employment Agreement
commenced as of the consummation date (the "Effective Date") of the merger (the
"Merger") pursuant to the terms of the Merger Agreement and continued until the
third anniversary of the Effective Date; provided, however, that on each
anniversary date of the Effective Date (the "Anniversary Date"), the term of the
1993 Agreement was automatically extended for one (1) additional year because
neither the Company nor the Executive gave written notice to the other of its
intent to terminate the 1993 Employment Agreement at least fifteen (15) days
prior to any Anniversary Date. The Employment Period of the Executive shall
continue uninterrupted under this Agreement until the Anniversary Date next
following the commencement date ("Commencement Date") of this Agreement;
provided however, that on each Anniversary Date, the term of this Agreement
shall automatically be extended for one (1) additional year if, prior to such
Anniversary Date, neither the Company nor the Executive shall have given written
notice to the other of its intent to terminate this Agreement. For that portion
of the Employment Period prior to, but not including, the Commencement Date, the
1993 Employment Agreement, as amended, shall remain in full force and effect. As
of the Commencement Date, the 1993 Employment Agreement shall terminate and be
of no force and effect. The parties hereto agree that Cinergy shall be
responsible for all the premises, covenants, and agreements set forth in this
Agreement.
2. Duties and Powers of Executive.
(a) Position; Location. Until the end of the Employment
Period, the Executive shall serve as President and Chief Executive Officer of
Cinergy. During the Employment Period, the Executive shall have such authority,
duties and responsibilities as are set forth in Annex A hereto. Such titles,
authority, duties, and responsibilities may be changed from time to time only by
mutual written agreement of the parties, unless otherwise provided in Annex A
hereto. During the Employment Period, the Executive shall, without compensation
other than that herein provided, also serve and continue to serve, if and when
elected and reelected, as the Vice Chairman of the Board of Directors of Cinergy
(the "Board").
(b) From the Commencement Date until the end of the Employment
Period, the Company shall annually in connection with the annual meeting of
shareholders of Cinergy cause the Executive to be nominated as Vice Chairman of
the Board.
3. Compensation.
The Executive shall receive the following compensation for his
services hereunder to the Company:
(a) Salary. The Executive's annual base salary ("Annual Base
Salary"), payable not less often than biweekly, shall be at the annual rate of
not less than the greater of $810,000 and the amount in effect as of the day
before the Commencement Date. The Board may from time to
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time direct such upward adjustments in Annual Base Salary as the Board deems to
be necessary or desirable, including without limitation adjustments in order to
reflect increases in the cost of living.
Annual Base Salary shall not be reduced after any increase thereof. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.
(b) Annual Incentive Plan Benefit. The Executive shall be paid
by the Company an annual benefit of up to 90% of the Executive's Annual Base
Salary, which benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
(c) Long-Term Incentive Plan. The Executive shall be a
participant in the Company's Long-Term Incentive Plan (the "LTIP") implemented
under the Company's 1996 Long-Term Incentive Compensation Plan. The LTIP
consists of two parts: a Value Creation Plan involving shares of restricted
common stock of Cinergy and options to purchase shares of common stock of
Cinergy. The Executive's annualized target award opportunity under the LTIP
shall be equal to no less than 100% of his Annual Base Salary.
(d) Stock Option. Cinergy established a stock option plan (the
"Stock Option Plan") that took effect when the Merger was consummated. The
Executive was granted options to purchase shares of common stock of Cinergy
pursuant to the terms of the Stock Option Plan and agreement in grants made
prior to the Commencement Date of this Agreement.
(e) Retirement, Incentive and Welfare Benefit Plans. During
the Employment Period and so long as the Executive is employed by the Company,
he shall be eligible to participate in all incentive, stock option, restricted
stock, performance unit, savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees and/or other senior
executives of the Company, including the Annual Incentive Plan, the Performance
Shares Plan, the Executive Supplemental Life Insurance Program, the 1996
Long-Term Incentive Compensation Plan, the 401(k) Excess Plan, the Nonqualified
Deferred Incentive Compensation Plan, the Pension Plan, the Supplemental
Retirement Plan, the Excess Benefit Plan, or any successors thereto, except with
respect to any benefits under any plan, practice, policy or program to which the
Executive has waived his rights in writing; provided, however, that benefits
paid pursuant to the terms of the Annual Incentive Plan shall be determined in
accordance with (but not in addition to the benefit described in) Section 3(b)
of this Agreement. In addition, the Company shall assume and continue, the Split
Dollar Insurance Agreement, dated October 7, 1992, between the Executive and PSI
("Split Dollar Agreement"), and the Deferred Compensation Agreement, effective
as of January 1, 1992, between the Executive and PSI ("Deferred Compensation
Agreement"). Notwithstanding anything in this Agreement to the contrary, in the
event that the Company or any successor thereto shall fail to assume, shall
breach, or, at any time during their respective terms, shall terminate, modify,
amend or in any way affect, to the Executive's detriment and without the
Executive's consent, the Split Dollar Agreement or the Deferred Compensation
Agreement, then the Executive shall be entitled to: (i) in the case of the
Deferred Compensation Agreement, such amounts as are described in Section 16 of
the Deferred Compensation Agreement; and (ii) in the case of the Split Dollar
Agreement, such amounts as are described in Sections 12 of the Split Dollar
Agreement.
During the Employment Period, the Executive shall participate
in the Company's Supplemental Retirement Plan in accordance with its terms,
except that effective as of the Executive's fiftieth (50th) birthday, the
Executive shall be credited with and vested in twenty-five (25) full "Years of
Participation" (as that term is defined in the Company's Supplemental Retirement
Plan), and shall be credited with and vested in an additional two (2) Years of
Participation on each birthday thereafter for the following five (5) years
provided that he is
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employed by the Company as of each such birthday.
If the Executive retires on or after having attained age
fifty-five (55), the Executive shall be entitled to receive from the Company
total annual retirement income for his lifetime equal to the greater of (i)
sixty percent (60%) of the Executive's "Highest Average Earnings" (as such term
is defined in Cinergy's Pension Plan) or (ii) sixty percent (60%) of the
Executive's "Earnings" (as such term is defined in the Pension Plan) for the
final twelve (12) calendar months immediately prior to the Executive's effective
date of retirement. Thus, in addition to the Executive's retirement benefits
under Cinergy's Pension Plan, its Supplemental Retirement Plan, and its Excess
Benefit Plan, or any successors thereto, the Executive shall receive an annual
amount known as the "Supplemental Executive Retirement Benefit" (a non-qualified
benefit paid from the Company's general assets) that is equal to the difference
between the greater of (i) sixty percent (60%) of the Executive's "Highest
Average Earnings" (as such term is defined in Cinergy's Pension Plan) or (ii)
sixty percent (60%) of the Executive's "Earnings" (as such term is defined in
Cinergy's Pension Plan) for the final twelve (12) calendar months immediately
prior to the Executive's effective date of retirement, and the sum of the
amounts payable to the Executive under Cinergy's Pension Plan, its Supplemental
Retirement Plan, and its Excess Benefit Plan, or any successors thereto.
Upon his retirement on or after having attained age fifty-five
(55), the Executive shall be eligible for comprehensive medical and dental
insurance pursuant to the terms of Cinergy's Retirees' Medical Plan and its
Retirees' Dental Plan, or any successors thereto. However, the Executive shall
receive the full subsidy provided by the Company to retirees for purposes of
determining the amount of monthly premiums due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in
the event that the Executive's employment is terminated following a Change in
Control, the Executive shall immediately be credited with and vested in
thirty-five (35) full "Years of Participation" (as that term is defined in the
Company's Supplemental Retirement Plan), and the word "fifty (50)" shall be
substituted for the word "fifty-five (55)" in each of the first sentences of the
third and fourth paragraphs of this Section 3(e).
(f) Expenses. The Company 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 policies established from time to time by the Board.
(g) Fringe Benefits. During the Employment Period and so long
as the Executive is employed by the Company, he shall be entitled to the
following fringe benefits:
(i) the Company shall pay the annual dues,
assessments and other membership charges of the Executive with respect
to the Executive's membership in the clubs and associations of the
Executive's choice that are used for business purposes;
(ii) the Company shall furnish to the Executive
financial planning and tax preparation services;
(iii) the Company shall furnish an automobile to the
Executive and pay all of the related expenses for gasoline, insurance,
maintenance and repairs; and
(iv) the Company shall provide paid vacation for four
(4) weeks per year
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(or longer if permitted by Company policy). In each case of paragraphs
(i) through (iv), the Executive shall be entitled to fringe benefits on
a basis substantially equivalent to such fringe benefits provided to
the Executive in the past. In addition, the Executive shall be entitled
to receive fringe benefits in accordance with the plans, practices,
programs and policies of the Company from time to time in effect,
commensurate with his position and at least comparable to those
received by other senior executives of the Company.
4. Termination of Employment.
(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
(b) By the Company for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For purposes of
this Agreement "Cause" shall mean the conviction of the Executive for the
commission of a felony which, at the time of such commission, has a materially
adverse effect on the Company.
(c) 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" shall mean:
(i) the reduction in the Executive's Annual Base Salary as
specified in Section 3(a) of this Agreement, the Executive's
Annual Incentive Plan benefit as specified in Section 3(b) of
this Agreement, or any other benefit or payment described in
Section 3 of this Agreement;
(ii) the change without his consent of the Executive's
title, authority, duties or responsibilities as specified in
Section 2(a) of this Agreement;
(iii) the Company requiring the Executive without his
consent to be based at any office or location other than the
location where the Executive is currently employed;
(iv) any breach by the Company of any other material
provision of this Agreement; or
(v) any event that constitutes a "Change in Control" as
defined in Section 4(f) of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, by the Executive for Good Reason, or by the Company after a Change in
Control during the Employment Period, shall be communicated by Notice of
Termination to the other party hereto in accordance with Section 10(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination," means a
written notice that:
(i) indicates the specific termination provision in this
Agreement relied upon;
(ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's
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employment under the provision so indicated; and
(iii) if the Date of Termination (as defined in Section
4(e)) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty
(30) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights under this
Agreement.
A Notice of Termination for Cause after a Change in Control has
occurred is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of Cinergy's Board at a meeting of
Cinergy's Board that was called and held for the purpose of
considering such termination finding that, in the good faith
opinion of Cinergy's Board, the Executive was guilty of conduct
set forth in the definition of Cause, and specifying the
particulars thereof in detail.
(e) Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the
Company for Cause or after a Change in Control, or by the
Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may
be;
(ii) if the Executive's employment is terminated by the
Company other than for Cause, the date on which the Company
notifies the Executive of such termination; and
(iii) if the Executive's employment is terminated by reason
of death, the date of death.
(f) Change in Control. A "Change in Control" shall be deemed
to have occurred if any of the following events occur after the Commencement
Date:
(i) Any "person" or "group" (within the meaning of
Subsection 13(d) and Paragraph 14(d)(2) of the Securities
Exchange Act of 1934 (the "1934 Act") is or becomes the
beneficial owner (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of securities of Cinergy (not including
in the securities beneficially owned by such Person any
securities acquired directly from Cinergy or its affiliates)
representing fifty percent (50%) or more of the combined voting
power of Cinergy'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
Cinergy or any direct or indirect subsidiary of Cinergy with any
other corporation, other than (1) a merger or consolidation that
would result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
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represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii) During any period of two consecutive years,
individuals who at the beginning of that period constitute the
Board 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
Cinergy) whose appointment or election by the Board or nomination
for election by Cinergy'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; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy'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 Cinergy in substantially the same proportion as
their ownership of Cinergy immediately prior to such sale.
(g) Person. "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include:
(i) The Company or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under
an employee benefit plan of Cinergy or any of its subsidiaries;
(iii) An underwriter temporarily holding securities pursuant
to an offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the
stockholders of Cinergy in substantially the same proportions as
their ownership of stock of the Company.
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5. Obligations of the Company upon Termination.
(a) Termination Other Than for Cause. During the Employment
Period, if the Company shall terminate the Executive's employment (other than in
the case of a termination for Cause), the Executive shall terminate his
employment for Good Reason, or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as "Termination"):
(i) the Company shall pay to the Executive a lump sum amount
in cash equal to the sum of:
(1) the Executive's Annual Base Salary through the Date
of Termination to the extent not previously paid;
(2) an amount equal to the Annual Incentive Plan
benefit described in Section 3(b) of this Agreement for the
fiscal year that includes the Date of Termination multiplied
by a fraction the numerator of which shall be the number of
days from the beginning of such fiscal year to and including
the Date of Termination and the denominator of which shall
be three hundred and sixty-five (365);
(3) an amount equal to his vested accrued benefit under
the Company's Value Creation Plan of the Company's LTIP; and
(4) any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the
extent not previously paid.
(The amounts specified in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"). The Accrued
Obligations shall be paid to the Executive within thirty (30) days
after the Date of Termination; and
(ii) prior to the occurrence of a Change in Control, and in the
event of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by CitiBank,
N.A. and in effect as of the Date of Termination (the "Prime
Rate") of the Annual Base Salary and the Annual Incentive Plan
benefit described in Section 3(b) of this Agreement payable
through the end of the Employment Period, each at the rate, and
using the same goals and factors, in effect at the time Notice of
Termination is given, paid within 30 days of the Date of
Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all benefits to which the
Executive would have been entitled had he remained in employment
with the Company until the end of the Employment Period, each,
where applicable, at the rate of the Annual Base Salary, and
using the same goals and factors, in effect at the time Notice of
Termination is given, under the Company's
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Value Creation Plan of the Company's LTIP, the Company's
Performance Shares Plan, and the Company's Executive Supplemental
Life Insurance Program, minus the present value (discounted at
the Prime Rate) of the benefits to which he is actually entitled
under the above mentioned plans and programs;
(3) the Company shall pay the value of all deferred
compensation amounts and all executive life insurance benefits
whether or not then vested or payable; and
(4) the Company shall continue medical and welfare benefits
to the Executive and/or the Executive's family 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), such benefits to be
in accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of the
Company as in effect and applicable generally to other senior
executives of the Company and their families during the ninety
(90) day period immediately preceding the Date of Termination or,
if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other senior executives of the
Company (but on a prospective basis only unless and then only to
the extent, such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive becomes
employed with another employer and is eligible to receive medical
or other welfare benefits under another employer-provided plan,
the benefits under the M&W Plans shall be secondary to those
provided under such other plan during such applicable period of
eligibility.
(iii) from and after the occurrence of a Change in
Control and in the event of Termination other than by reason
of the Executive's death, then in lieu of any further salary
payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any other benefits payable
pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum
severance payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately prior
to the occurrence of the event or circumstance upon which
the Notice of Termination is based or in effect immediately
prior to the Change in Control, and (y) the higher of the
amount paid to the Executive pursuant to all incentive
compensation or bonus plans or programs maintained by the
Corporation, in the year preceding that in which the Date of
Termination occurs or in the year preceding that in which
the Change in Control occurs; and
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(2) For a thirty-six (36) month period after the Date
of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, 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 or any of its subsidiaries or
affiliates, 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 which constitutes Good Reason
occurs at the direction of such Person.
(b) Termination by the Company for Cause or by the Executive
Other than for Good Reason. Subject to the provisions of Section 5(c) and
Section 6 of this Agreement, if the Executive's employment shall be terminated
for Cause during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for Good
Reason, the Company shall have no further obligations to the Executive under
this Agreement other than the obligation to pay to the Executive Annual Base
Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Executive, in each case to the extent previously
unpaid.
(c) Split Dollar and Deferred Compensation Agreements.
Notwithstanding anything in this Agreement to the contrary, but subject to the
last sentence of the first paragraph of Section 3(e) and the second, third,
fourth, and fifth paragraphs of Section 3(e) hereof, upon the termination of the
Executive's employment for any reason, he shall be entitled to receive all
benefits provided for him or his beneficiaries under the terms of the Split
Dollar and Deferred Compensation Agreements, all vested and accrued benefits
under the terms of the Pension Plan, the Supplemental Retirement Plan, the
Excess Benefit Plan, or any successors thereto, and the Supplemental Executive
Retirement Benefit described in the third paragraph of Section 3(e), and the
post-retirement medical and dental benefits described in the fourth paragraph of
Section 3(e).
(e) Certain Tax Consequences. In the event that the Executive
becomes entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be subject to any
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the Executive an
additional amount (the "Gross-up Payment") such that the net amount
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retained by the Executive, after deduction of an Excise Tax on the Severance
Benefits and any federal, state, and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to the
Severance Benefits. For purposes of determining whether any of the Severance
Benefits will be subject to the Excise Tax and the amount of such Excise Tax;
(i) any other payments or benefits received or to be
received by the Executive in connection with a Change in Control
or the Executive's 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 in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Code Section 280G(b)(2), and all "excess parachute
payments" within the meaning of Code Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive such other payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of Code Section 280G(b)(4)(A), or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within
the meaning of Code Section 280G(b)(4)(B) of the Code, in excess
of the "Base Amount" as defined in Code Section 280G(b)(3)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax:
(ii) the amount of the Severance Benefits that shall be
treated as subject to the Excise Tax shall be equal to the lesser
of:
(1) the total amount of the Severance Benefits; or
(2) the amount of excess parachute payments within the
meaning of Code Section 280G(b)(1) (after applying clause
(i) above; and
(iii) 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 Code Section 280G(d)(3) and (4).
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall 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 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 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 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). In the event that the Excise Tax is determined to
exceed the amount taken into account
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hereunder at the time of the termination of the Executive's employment
(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, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess
is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Severance
Benefits.
(f) Other Fees and Expenses. The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive as a result of a
termination that entitles the Executive to the Severance Benefits (including all
such fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
plan, program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the Executive
has waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Commencement Date with the Company. Amounts
that are vested benefits or that the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into after the date hereof with, the Company at or subsequent
to the Date of Termination, shall be payable in accordance with such benefit,
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action that the Company may have against the Executive or others. In no event
shall 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 Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement, such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the interpretation,
terms, validity or enforceability of (including any dispute about the amount of
any payment pursuant to this Agreement), the Company agrees to pay all legal
fees and expenses that the Executive may reasonably incur as a result of any
such 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
dispute is arbitrable, shall be
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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 shall still have a
right to file a discrimination charge with a federal or state agency, but the
final resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall 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, shall be exclusive, final, and binding on all parties,
their heirs, executors, administrators, successors and assigns. Each party shall
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, shall be borne equally by the parties.
9. Confidential Information.
The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret, confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
that shall not have been or now or hereafter have become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). During the Employment Period, the Executive shall not,
without the prior written consent of the Company or as may otherwise be required
by law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it.
10. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall 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 the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its businesses and/or assets that assumes and
agrees to perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the effective date
of a succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to under this Agreement if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
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11. Miscellaneous.
(a) This Agreement shall 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 the
provisions hereof and shall 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 such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee thereof,
shall have authority on behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or anything in
reference thereto.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Xxxxx X. Xxxxxx
0 Xxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
If to the Company:
Vice President, General Counsel and Secretary
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxx 00000-0000
or to such other address as either party shall have furnished to the other in
writing in accordance with this Agreement. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 4(c) of this Agreement, or the right of the Company
to terminate the Executive's employment for Cause pursuant to Section 4(b) of
this Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) This instrument contains the entire agreement of the
Executive and the
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Company with respect to the subject matter hereof, and, subject to any
agreements evidencing the stock option grants described in Section 3(d) hereof,
all promises, representations, understandings, arrangements and prior agreements
are merged into this Agreement and superseded hereby.
IN WITNESS WHEREOF, the Executive and the Company have caused
this Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.; THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By:___/s/ Van P. Smith_________________
Name: Van X. Xxxxx
Title: Chairman, Compensation
Committee
EXECUTIVE
______/s/ Xxxxx X. Rogers_______________
Xxxxx X. Xxxxxx
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Annex A
DUTIES OF EXECUTIVE
Vice-Chairman
The Vice-Chairman of the Board shall be a director and shall
preside at meetings of the Board of Directors or meetings of shareholders in the
absence or inability to act of the Chairman of the Board. The Vice-Chairman
shall perform such duties as may from time-to-time be assigned to him by the
Board of Directors. The Vice-Chairman shall be a member of the Executive
Committee and the Nominating Committee.
Chief Executive Officer
The Chief Executive Officer shall be a director and shall
preside at all meetings of the shareholders, shall submit a report of the
operations of the corporation for the fiscal year to the shareholders at their
annual meeting and from time-to-time shall report to the Board of Directors all
matters within his knowledge which the interests of the corporation may require
be brought to their notice. The Chief Executive Officer shall be the chairman of
the Executive Committee and an ex officio member of all standing committees. The
President and the Internal Auditing Department will report directly to the Chief
Executive Officer.
President and Chief Operating Officer
The President shall be a director and shall be the Chief
Operating Officer of the Corporation. The President shall have general and
active management and direction of the affairs of the Corporation, shall have
supervision of all departments and of all officers of the Corporation, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect, and shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. All corporate officers and functions except those reporting to the
Chief Executive Officer shall report directly to the President.
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