FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, 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"), and Xxxxxxx X.
Xxxxxx (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will
sometimes be referred to in this Employment Agreement collectively as the
"Company".
WHEREAS, the Executive is currently serving as Vice President,
Corporate Development of the Company, and the Company desires to secure the
continued employment of the Executive in accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective April 1, 1998 (the "1998 Employment Agreement");
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1998 Employment Agreement 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 defined in this
Agreement);
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 1998 Employment Agreement commenced as of
April 1, 1998 (the "Effective Date") and continued until December 31,
2000; provided, however, that on January 1, 1999, and each January 1
thereafter (the "Renewal Date"), the 1998 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1998 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1998 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1998 Employment Agreement
shall terminate and be of no force and effect. The parties to this
Agreement agree that Cinergy shall be responsible for all of the
premises, covenants, and agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President, Corporate Development for the
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy during the Employment
Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than Two Hundred Seventy-Five Thousand Dollars
($275,000.00) and the amount in effect as of the day before the
Commencement Date. The Board may, from time to time, direct such
upward adjustments in the 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. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of the Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (both the Mid-Career
Benefit portion and the Senior Executive Supplement), and Cinergy's
Excess Pension Plan, or any successors thereto, except with respect to
any plan, practice, policy or program to which the Executive has
waived his rights in writing.
With regard to the Executive's retirement benefits, the Executive
shall be entitled to a "Contractual Retirement Supplement" (paid from
the Corporation's general assets) which extends to the Executive upon
retirement on or after age fifty-five (55) a non-qualified benefit
that, when added to the Executive's benefit under Cinergy's Non-Union
Employees' Pension Plan and Cinergy's Excess Pension Plan, or any
successors thereto, will provide total retirement income equivalent to
a full career employee with equal annual earnings. For purposes of the
preceding sentence, a "full career employee" shall mean an employee
with thirty-five (35) full years of "participation" under Cinergy's
Supplemental Executive Retirement Plan. In addition, the Contractual
Retirement Supplement will include a sum equal to the amount by which
the Executive's benefit under Cinergy's Non-Union Employees' Pension
Plan is reduced by application of the customary actuarial reduction
for early retirement if receipt of pension benefits under that plan
commences prior to the Executive's attainment of age sixty-two (62).
Upon his retirement on or after having attained age fifty (50), 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 Cinergy's Supplemental Executive Retirement Plan), and
the word "fifty (50)" shall be substituted for the word "fifty-five
(55)" in the first sentence of the second paragraph of this Section
3(b).
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the 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 seventy percent (70%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other 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.
d. 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 the policies established from time to time by the
Board.
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 Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive 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;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which 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, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given 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 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 circumstances which 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
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, 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 Effective
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 which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
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 Cinergy's 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
Cinergy) whose appointment or 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
Cinergy's Board of Directors; 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 proportions 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.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. 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 Cinergy's Annual Incentive Plan target
percentage 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) 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
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(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
Cinergy 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, and paid within thirty (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 amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under Cinergy's Executive Supplemental Life Insurance
Program;
(3) the Company shall pay to the Executive 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, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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
Company, 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
(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 Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment 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 Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greatest.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
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 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 Employment 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 Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code 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 Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code 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 Section 280G(b)(1) of the Code (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 Section 280G(d)(3) and (4)
of the Code. 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 would 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 Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account 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. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. 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 which 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 Employment 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 which 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 date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, 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
under this Agreement 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 which 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 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. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that 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 subsequently 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
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by 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. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
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 Employment 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.
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:
Xxxxxxx X. Xxxxxx
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
X. X. Xxx 000
Xxxxxxxxxx, Xxxx 00000-0000
If to the Corporation:
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
P. O. Xxx 000
Xxxxxxxxxx, Xxxx 00000-0000
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices 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
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company 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
Employment 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/ Xxxxx X. Rogers______
Xxxxx X. Xxxxxx
Vice Chairman and Chief Executive Officer
EXECUTIVE
__/s/ Xxxxxxx X. Winger_______
Xxxxxxx X. Xxxxxx
