AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into
as of the 31st day of August, 2001, by and between Cinergy and Xxxxxxx X. Xxxxxx
(the "Executive"). This Agreement replaces and supersedes any and all prior
employment agreements between Cinergy and the Executive. The capitalized words
and terms used throughout this Agreement are defined in Section 11.
RECITALS
A. The Executive is currently serving as Vice President of Cinergy, and
Vice President, Corporate Development of Cinergy, and Cinergy desires to secure
the continued employment of the Executive in accordance with this Agreement.
B. The Executive is willing to continue to remain in the employ of
Cinergy on the terms and conditions set forth in this Agreement.
C. The parties intend that this Agreement will replace and supersede
any and all prior employment agreements between Cinergy (or any component
company or business unit of Cinergy) and the Executive.
AGREEMENT
In consideration of the mutual promises, 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 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
promises, 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, 2004;
provided that, commencing on December 31, 2002, 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
of Cinergy, and Vice President, Corporate Development of
Cinergy, and 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, 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxx. 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 $350,004.00. 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 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 II
executives for compensation purposes, except with respect to
any plan, practice, policy or program to which the Executive
has waived his rights in writing.
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The Executive will be entitled and fully vested in a
supplemental retirement benefit equal to the difference
between (1) his total benefit under all Executive Retirement
Plans, and (2) 60% of the Executive's Highest Average
Earnings. The form, timing, and method of payment of the
supplemental retirement benefit payable under this Paragraph
will be the same as those elected by the Executive under the
Pension Plan. If the Executive dies prior to his retirement,
and if his Spouse, on the date of his death, is living on the
date the first installment of the supplemental retirement
benefit would be payable under this Paragraph, the Spouse will
be entitled to receive the supplemental retirement benefit as
a Spouse's benefit. The form, timing, and method of payment of
any Spouse's benefit under this Paragraph will be the same as
those applicable to the Spouse under the Pension Plan.
Upon his retirement, 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 seventy
percent (70%) of the Executive's Annual Base Salary (the
"Maximum Annual Bonus"), with a target of no less than forty
percent (40%) 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
ninety percent (90%) 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 and practices 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.
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(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 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 II
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.
e. RELOCATION BENEFITS. Following termination of the Executive's
employment for any reason (other than death), the Executive
will be entitled to reimbursement from Cinergy for the
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. Notwithstanding the
foregoing, if the Executive becomes employed by another
employer and is eligible to receive relocation benefits under
another employer-provided plan, any benefits provided to the
Executive under this Subsection 3e will be secondary to those
provided under the other employer-provided relocation plan.
The executive must report to Cinergy any such relocation
benefits that he actually receives under another
employer-provided plan.
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
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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).
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(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.
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(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 Termination,
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.
(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
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than the Target Annual Bonus, nor greater
than the Maximum Annual 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.
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(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.
(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 Target Annual Bonus,
nor greater than the Maximum Annual 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
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Date of Termination. The lump sum present
value, assuming commencement at age as of
the Date of Termination, 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. 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
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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 the extent not
previously paid.
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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
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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.
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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 Subsection 3e and 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'
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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
Section, Cinergy will reimburse or pay all legal fees and expenses that
under this 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
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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 Amended and Restated
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 0000
Xxx) 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,
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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).
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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 August 31, 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 Xxxxxxx X. Xxxxxx.
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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. HIGHEST AVERAGE EARNINGS. "Highest Average Earnings" means the
greater of (a) the Executive's "Highest Average Earnings" as
defined in the Pension Plan (without regard to the limitation
of Code paragraph 401(a)(17)) or (b) the Executive's Earnings
for the 12 consecutive calendar months immediately preceding
his termination of employment with Cinergy.
cc. 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.
dd. M&W PLANS. "M&W Plans" has the meaning set forth in
Subparagraph 5a(ii)(2).
ee. MAXIMUM ANNUAL BONUS. "Maximum Annual Bonus" has the meaning
set forth in Subsection 3b.
ff. NOTICE OF TERMINATION. "Notice of Termination" has the meaning
set forth in Subsection 4f.
gg. PAYMENT OR PAYMENTS. "Payment" or "Payments" has the meaning
set forth in Subsection 5c.
hh. PENSION PLAN. "Pension Plan" means the Cinergy Corp. Non-Union
Employees' Pension Plan or any successor to that plan.
ii. 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:
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(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.
jj. 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.
kk. 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.
ll. RETIREES' DENTAL PLAN. "Retirees' Dental Plan" means the
Cinergy Corp. Retirees' Dental program or any similar program
or successor to that program.
mm. RETIREES' MEDICAL PLAN. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical program or any similar program
or successor to that program.
nn. SEVERANCE BENEFITS. "Severance Benefits" means the payments
and benefits payable to the Executive pursuant to Section 5.
oo. SPOUSE. "Spouse" means the Executive's lawfully married
spouse. For this purpose, common law marriage or a similar
arrangement will not be recognized unless otherwise required
by federal law.
pp. 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.
qq. TARGET ANNUAL BONUS. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
rr. TARGET LTIP BONUS. "Target LTIP Bonus" has the meaning set
forth in Subsection 3b.
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ss. 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:
Xxxxxxx X. Xxxxxx
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000-0000
IF TO CINERGY:
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000-0000
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
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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: /s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
Chairman and
Chief Executive Officer
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
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