Exhibit ▇▇.▇▇
CHANGE IN CONTROL AGREEMENT
CHANGE IN CONTROL AGREEMENT (the "Agreement"), effective as of __________,
by and between _____________ (the "Employee") and DUKE ENERGY CORPORATION
("Duke"), a North Carolina corporation with its principal executive offices in
Charlotte, North Carolina.
WHEREAS, Duke has determined that it is in the best interests of Duke, its
affiliates and its stockholders to assure that Duke will have the continued
undivided time, attention, loyalty and dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined below);
WHEREAS, Duke believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by any pending or threatened Change in Control and to encourage the
Employee's full undivided time, attention, loyalty, and dedication to Duke
currently and in the event of any pending or threatened Change in Control; and
WHEREAS, it is Duke's intention that the Employee be assured of
compensation and benefit arrangements if his or her employment terminates as a
result of a Change in Control which are competitive with those of peer executive
or management employees of similarly situated corporations, and the Employee is
willing to enter into an agreement to that end, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Term of Agreement.
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The term of this Agreement (the "Agreement Term") shall commence on the
date first written above (the "Commencement Date") and shall terminate on
August 19, 2001, in the event a Change in Control shall not have occurred by
such date; provided, however, that such termination date shall be automatically
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extended for consecutive one-month periods effective on the first date of each
month (each, a "Renewal Date") following the Commencement Date unless either
party gives written notice to the other party not less than ten (10) days prior
to a Renewal Date of its intention to terminate the Agreement at the end of the
then-current Agreement Term. In the event a Change in Control shall have
occurred prior to the expiration of the Agreement Term, this Agreement will
continue in force and effect until the satisfaction of all of the parties'
obligations hereunder.
2. Covered Termination.
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(a) General. The Employee shall be treated as having incurred a "Covered
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Termination" if during the period beginning on the date of a Change in Control
that occurs during the Agreement Term and ending on the close of the 24th full
calendar month following
such Change in Control (the "Covered Period"), either (i) Duke and/or any entity
that controls, is controlled by, or is under common control with Duke (a "Duke
Affiliate") terminates his or her employment other than for Cause (as defined
below)(so that the Employee is no longer employed by Duke or any Duke Affiliate)
or (ii) the Employee terminates his or her employment with Duke and all Duke
Affiliates for Good Reason (as defined below). The Employee shall not be treated
as having incurred a Covered Termination if his or her employment shall
terminate on account of his or her death, disability, a termination by Duke or
any Duke Affiliate for Cause, a termination by the Employee other than for Good
Reason, or a termination for any reason other than during the Covered Period.
(b) Cause. For purposes of this Agreement, "Cause" shall mean the
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occurrence of any one of the following (provided the Employee receives written
notice from Duke identifying the acts or omissions constituting Cause and is
given a 30-day opportunity to cure, if such acts or omissions are capable of
cure): (A) a final conviction of a felony or a crime involving moral turpitude;
(B) an egregious act of dishonesty (including, without limitation, theft or
embezzlement) in connection with employment, or a malicious action by the
Employee toward the customers or employees of Duke or any Duke Affiliate; or (C)
a material failure to carry out, or malfeasance or gross insubordination in
carrying out, reasonably assigned duties or instructions consistent with his or
her position (provided that material failure to carry out reasonably assigned
duties shall be deemed to constitute Cause only after a finding by Duke's Chief
Executive Officer of material failure on the part of the Employee).
(c) Good Reason. For purposes of this Agreement, "Good Reason" shall
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mean the occurrence of any one of the following, without the written consent of
the Employee, during the Covered Period (provided Duke receives written notice
from the Employee, within 60 days of the occurrence of the event that gives rise
to Good Reason, which identifies the acts or omissions constituting Good Reason
and Duke is given a 30-day opportunity to cure): (i) any reduction in the
Employee's Base Salary (as defined below) as in effect immediately prior to the
Change in Control; (ii) any reduction in the Employee's annual bonus opportunity
(as a percentage of Base Salary) from that which was in effect under the
applicable Bonus Plan (as defined below) at the time of the Change in Control;
(iii) any material diminution in the Employee's overall level of authority or
responsibility with Duke and all Duke Affiliates (or their successors) as in
effect immediately prior to the Change in Control; or (iv) any requirement that
the Employee relocate his principal place of business, as in effect immediately
prior to a Change in Control, by more than 50 miles.
(d) Change in Control. For purposes of this Agreement, a "Change in
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Control" shall be deemed to have occurred upon the first to occur of one of the
following events prior to the Expiration Date:
(i) an acquisition subsequent to the date hereof by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of either (A) the then outstanding shares of
Duke common stock (the "Common Stock") or (B) the combined voting
power of the then outstanding voting securities of Duke entitled to
vote generally in the election of directors (the "Outstanding
Corporation Voting Securities");
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excluding, however, the following: (1) any acquisition directly from
Duke, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from Duke, (2) any acquisition by Duke and (3) any
acquisition by an Employee benefit plan (or related trust) sponsored
or maintained by Duke or any of its subsidiaries;
(ii) during any period of two (2) consecutive years (not
including any period prior to the date hereof), individuals who at the
beginning of such period constitute the Board (and any new directors
whose election by the Board or nomination for election by Duke's
shareholders was approved 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 the period or whose election or nomination for election
was so approved) cease for any reason (except for death, disability or
voluntary retirement) to constitute a majority thereof;
(iii) the approval by the shareholders of Duke and consummation
of a merger, consolidation, reorganization or similar corporate
transaction, whether or not Duke is the surviving corporation in such
transaction, other than a merger, consolidation, or reorganization
that would result in the voting securities of Duke outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting
power of the voting securities of Duke (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization;
(iv) the approval by the shareholders of Duke and consummation
of (A) the sale or other disposition of all or substantially all of
the assets of Duke or (B) a complete liquidation or dissolution of
Duke; or
(v) adoption by the Board of a resolution to the effect that
any person has acquired effective control of the business and affairs
of Duke.
3. Termination Benefits.
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(a) General. In the event of a Covered Termination, the Employee
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shall be entitled to the compensation and termination benefits set forth in
Section 3(b) hereof. Any lump-sum payments required under this Section 3 will be
made by Duke in cash within 10 business days after the effective date of the
Employee's Covered Termination. This Agreement does not grant the Employee any
right or entitlement to be retained by Duke or any Duke Affiliate and shall not
affect or prejudice the right of Duke or any Duke Affiliate to terminate the
employment of the Employee at any time for any reason, subject to the
termination payments described in this Section 3. In the event of the
termination of the Employee's employment with Duke and all Duke Affiliates, the
Employee agrees to immediately resign all of his or her positions as an officer
or director of Duke or any Duke Affiliate.
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(b) Covered Termination Payments and Benefits. In the event that the
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Employee's employment hereunder is terminated on account of a Covered
Termination, the Employee will be paid and entitled to the following:
(i) any salary or compensation earned through the date of
termination and any rights or payments that have become vested or that
are otherwise due under any employee benefit, incentive or
compensation plan or arrangement maintained by Duke or a Duke
Affiliate that the Employee participated in at the time of his or her
termination of employment;
(ii) a lump-sum payment equal to (A) the Employee's annual bonus
payment earned for any completed bonus year to termination of
employment, if not previously paid, plus (B) a pro-rata amount of the
Employee's target bonus under any Bonus Plan (as defined below) for
the year in which the termination occurs, determined as if all program
goals had been met (the "Target Bonus"), pro-rated based on the number
of days of service during the bonus year occurring prior to
termination of employment;
(iii) a lump-sum payment equal to the sum of the Employee's then-
current Base Salary and Target Bonus for each year of the Severance
Period (as defined below), including a pro-rata amount (determined on
a daily basis) for any partial years during this period;
(iv) continued coverage for the Severance Period (as defined
below) under the medical and dental (but not medical spending account
or employee assistance) and basic life insurance plans that the
Employee participated in at the time of his or her termination, or
their equivalent, under the same terms and at the same cost to the
Employee as though the Employee had not terminated employment;
provided, however, that in the event the
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Employee becomes covered or eligible for coverage under substitute
medical or life insurance plans of another employer during this
period, subject to applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended and the regulations
thereunder ("COBRA"), Duke will no longer be obligated to provide such
coverage to the Employee under this subparagraph; and, provided,
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further, that in lieu of providing medical coverage (as described
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above) hereunder, Duke may make a lump-sum payment to the Employee in
an amount equal to the aggregate cost of such coverage for the
Severance Period, based on the premium costs being utilized for the
provision of such coverage to former employees under COBRA at the time
of the Employee's termination of employment, and/or in lieu of
providing basic life insurance coverage hereunder, Duke may make a
lump-sum payment to the Employee in an amount equal to the anticipated
cost of such coverage for the Severance Period, based on Duke's
assumed costs for such coverage for internal accounting purposes at
the time of the Employee's termination of employment;
(v) a lump-sum payment equal to the present value (determined
based on a six (6) percent interest rate assumption and, in the case
of any pension plan accrual, the applicable mortality table for
calculating optional forms of benefits
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under such plan) of any employer contribution (other than a
contribution under section 401(k) of the Internal Revenue Code of
1986, as amended), benefit accrual or employer-financed account
allocation that would have been made or accrued during the Severance
Period under any qualified or non-qualified pension or savings plan
maintained by Duke or any Duke Affiliate in which the Employee
participated at the time of his or her termination, determined using
the Employee's Base Salary and Target Bonus (if relevant) at the time
of termination and assuming the maximum elective deferral by the
Employee permitted by such plans, if applicable;
(vi) notwithstanding the terms of any award agreement or plan
document to the contrary, continued vesting of any long term incentive
awards, including awards of stock options or restricted stock (but
excluding any award that is designated by Duke as a "Chairman's
Award"), held by the Employee at the time of his or her termination of
employment that are not vested or exercisable on such date, in
accordance with their terms as if the Employee's employment had not
terminated, for the duration of the Severance Period, with any options
or similar rights to remain exercisable (to the extent exercisable at
the end of the Severance Period) for a period of 90 days following the
close of the Severance Period, but not beyond the maximum original
term of such options or rights; and
(vii) in the event that the Employee would have satisfied the
eligibility requirements of any retiree medical plan or program
maintained by Duke or any Duke Affiliate generally for its retirees (a
"Retiree Plan") within two years after the date of his or her
termination of employment, the provision of such retiree medical
benefits to the Employee from and after the date he or she would have
satisfied such requirements (assuming continued employment) on a basis
substantially equivalent to the retiree medical benefits provided
generally under the Retiree Plan, subject to such terms and conditions
and requirements for participation as apply under the Retiree Plan
from time to time and as such Retiree Plan may be amended or
terminated by Duke or a Duke Affiliate, as the case may be, at any
time.
(c) Definitions. For purposes of this Agreement, the terms below
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shall have the following definitions:
(1) "Bonus Plan" shall mean any bonus plan, program or
arrangement in which the Employee participates where bonus payments are
based upon achievement of performance targets by Duke, Duke Affiliates, any
business unit thereof or the Employee.
(2) "Base Salary" shall mean the annualized amount of the
Employee's regular salary during any payroll period, prior to any
reductions for elective deferrals or salary reductions but excluding any
overtime, incentive or other special compensation.
(3) "Severance Period" shall be the period beginning on the date
of the Covered Termination and ending on the earlier of (i) the end of the
__th month following
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such Covered Termination or (ii) the Employee's attainment of age 65 (with
any fraction of a month to be rounded to the nearest whole month).
(d) Other Termination Benefits. In the event of a termination of the
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Employee's employment that does not constitute a Covered Termination, the
Employee will not be due any payments, rights or benefits under this Agreement
other than those provided for in Section 3(b)(i) hereof.
4. Excise Tax Provision.
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(a) If it shall be determined that any amount, right or benefit paid,
distributed or treated as paid or distributed by Duke or any Duke Affiliate to
or for the Employee's benefit (whether paid or payable or distributed or
distributable hereunder or otherwise, but determined without regard to any
additional payments required under this Section 4) (a "Payment") would be
subject to the excise tax imposed by section 4999 of the Code, or any interest
or penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, collectively, the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this Section 4,
including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm
designated jointly by the Employee and Duke (the "Accounting Firm"), which shall
be permitted to designate an independent counsel to advise it for this purpose.
The Accounting Firm shall provide detailed supporting calculations both to Duke
and the Employee within 15 business days of the receipt of notice from the
Employee or Duke that there has been a Payment, or such earlier time as is
requested by Duke. All fees and expenses of the Accounting Firm and its legal
counsel shall be paid by Duke. Any Gross-Up Payment, as determined pursuant to
this Section 4, shall be paid by Duke to the Employee (or to the Internal
Revenue Service on the Employee's behalf) within five days of the receipt of the
Accounting Firm's determination. All determinations made by the Accounting Firm
shall be binding upon Duke and the Employee. As a result of the uncertainty
regarding the application of section 4999 of the Code hereunder, it is possible
that the Internal Revenue Service may assert that an Excise Tax is due that was
not included in the Accounting Firm's calculation of the Gross-Up Payments (an
"Underpayment"). In the event that Duke exhausts its remedies pursuant to this
Section 4 and the Employee 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 additional Gross-Up Payments that are due as a result
thereof shall be promptly paid by Duke to the Employee (or to the Internal
Revenue Service on the Employee's behalf).
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(c) The Employee shall notify Duke in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by Duke
of the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than 10 business days after the Employee receives written
notification of such claim and shall apprise Duke of the nature of such claim
and the date on which such claim is requested to be paid. The Employee shall not
pay such claim prior to the expiration of the 30-day period following the date
on which it gives such notice to Duke (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If Duke notifies
the Employee in writing prior to the expiration of such period that it desires
to contest such claim, the Employee shall: (i) give Duke all information
reasonably requested by Duke relating to such claim; (ii) take such action in
connection with contesting such claim as Duke shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney selected by Duke and
reasonably acceptable to the Employee and ceasing all efforts to contest such
claim; (iii) cooperate with Duke in good faith in order to effectively contest
such claim; and (iv) permit Duke to participate in any proceeding relating to
such claim; provided, however, that Duke shall bear and pay directly all
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reasonable costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expense. Without limiting the
foregoing provisions of this Section 4, Duke shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct the Employee to pay the tax claimed and ▇▇▇ for a refund or
contest the claim in any permissible manner, and the Employee agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as Duke
shall determine and direct; provided, however, that if Duke directs the Employee
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to pay such claim and ▇▇▇ for a refund, Duke shall advance the amount of such
payment to the Employee, on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, Duke's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the Employee's receipt of an amount advanced by Duke
pursuant to this Section 4, the Employee becomes entitled to receive any refund
with respect to such claim, the Employee shall pay to Duke within 10 business
days the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the Employee's receipt of an
amount advanced by Duke pursuant to this Section 4, a determination is made that
the Employee shall not be entitled to any refund with respect to such claim and
Duke does not notify the Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after Duke's receipt of
notice of such determination, then such advance shall be
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forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
5. Lapse of Restrictive Covenants. Upon the occurrence of a Covered
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Termination, the Employee will no longer be bound by any non-competition
restriction or other restrictive covenant to which he or she is a party with
respect to Duke or any Duke Affiliate.
6. Tax Withholding. Duke may withhold from any amounts payable under
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this Agreement such federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
7. Notice. Any notices to be given hereunder by either party to the
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other may be effectuated either by personal delivery in writing or by mail,
registered or certified, postage prepaid, with return receipt requested. Mailed
notices shall be addressed to the parties at the following addresses:
If to Duke or any other
Duke Affiliate: ▇▇. ▇▇▇▇▇▇▇ Priory
Chairman, President and CEO
Duke Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
cc: ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President, Corporate Human Resources
Duke Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
8. Waiver of Breach. The waiver by any party to a breach of any
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provision in this Agreement cannot operate or be construed as a waiver of any
subsequent breach by a party. Any waiver or consent from Duke with respect to
any term or provision of this Agreement or any other aspect of the Employee's
conduct or employment shall be effective only in the specific instance and for
the specific purpose for which given and shall not be deemed, regardless of
frequency given, to be a further or continuing waiver or consent. The failure or
delay of Duke at any time or times to require performance of, or to exercise any
of its powers, rights or remedies with respect to, any term or provision of this
Agreement or any other aspect of the Employee's conduct or employment shall in
no manner (except as otherwise expressly provided herein) affect Duke's right at
a later time to enforce any such term or provision.
9. Severability. The validity or unenforceability of any particular
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provision in this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
10. Entire Agreement. Except as otherwise provided herein, this
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Agreement covers the entire understanding of the parties with respect to the
subject matter hereof, superseding all prior understandings and agreements. No
modifications or amendments of the
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terms and conditions herein shall be effective unless in writing and signed by
the parties or their respective duly authorized agents.
11. Applicability of Key Employee Severance Agreement. In the event
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of a Covered Termination following a Change in Control, this Agreement will
supersede any "Key Employee Severance Agreement and Release" (or similar
severance agreement) to which the Employee is a party, but shall have no effect
on any such agreement in the event of a termination of employment that is not
treated as a Covered Termination under this Agreement.
12. Governing Law. This Agreement shall be interpreted, construed
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and governed according to the laws of the State of North Carolina, without
reference to conflicts of law principles thereof.
13. Successors and Assigns. Neither this Agreement, nor any of the
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parties' respective rights, powers, duties or obligations hereunder, may be
assigned by either party without the prior written consent of the other party.
This Agreement shall be binding upon and inure to the benefit of the Employee
and his or her heirs and legal representatives and Duke and its successors.
Successors of Duke shall include, without limitation, any company or companies
acquiring, directly or indirectly, all or substantially all of the assets of
Duke, whether by merger, consolidation, purchase, lease or otherwise, and such
successor shall thereafter be deemed "Duke" for the purpose hereof.
14. Forum Selection. The Employee agrees that any claim against Duke
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or any Duke Affiliate arising out of or relating in any way to this Agreement or
to the Employee's employment with Duke or any Duke Affiliate (including without
limitation any claim arising under the federal civil rights statutes) shall be
brought exclusively in the Superior Court of Mecklenburg County, North Carolina,
or the United States District Court for the Western District of North Carolina,
and in no other forum. The Employee hereby consents to the personal and subject
matter of jurisdiction of these courts for the purpose of adjudicating any
claims subject to this forum selection clause. The Employee also agrees that any
dispute of any kind arising out of or relating to this Agreement or to the
Employee's employment (including without limitation any claim arising under the
federal civil rights statutes) shall at the sole election or demand of Duke or
the applicable Duke Affiliate be submitted to final, conclusive and binding
arbitration before and according to the rules then prevailing of the American
Arbitration Association in Mecklenburg County, North Carolina, which election or
demand may be made by Duke or the applicable Duke Affiliate at any time prior to
the last day to answer and/or respond to a summons and/or complaint made by the
Employee. The results of any such arbitration proceeding shall be final and
binding both upon Duke or the applicable Duke Affiliate and upon the Employee,
and shall be subject to judicial confirmation as provided by the Federal
Arbitration Act or the North Carolina Arbitration Act, including specifically
the terms of N.C. Gen. Stat. (S) 1-567.2, which are incorporated herein by
reference.
15. Legal Fees. To provide the Employee with reasonable assurance
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that the purposes of this Agreement will not be frustrated by the cost of
enforcement, Duke shall pay and be solely responsible for reasonable attorneys'
fees and expenses incurred by the Employee as a result of a claim that Duke has
breached or otherwise failed to perform its obligations under this Agreement or
any provision hereof, regardless of which party, if any, prevails in the
contest;
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provided, however, that Duke shall not be responsible for such fees and
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expenses to the extent incurred in connection with a claim made by the Employee
that the trier of fact in any such contest finds to be frivolous.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
__________.
DUKE ENERGY CORPORATION
By:_____________________________
Title: ___________________________
EMPLOYEE
__________________________
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