CINERGY CORP. NONQUALIFIED
DEFERRED INCENTIVE COMPENSATION PLAN
ARTICLE I
NATURE AND PURPOSE OF PLAN
1.1 History of Plan. This document is a continuation and
complete restatement, effective December 1, 1996, of the
Cinergy Corp. Nonqualified Deferred Compensation Plan, which
was approved by the Board of Directors on January 25, 1996.
Effective December 1, 1996, the Plan is renamed the Cinergy
Corp. Nonqualified Deferred Incentive Compensation Plan.
1.2 Type of Plan. The Plan is maintained by the Company as
an unfunded, nonqualified deferred compensation plan for a
select group of the Employer's management or highly-
compensated employees.
1.3 Purpose of Plan. The purpose of the Plan is to provide
a means for the payment of deferred incentive compensation
to a select group of key senior management employees of the
Employer, in recognition of their substantial contributions
to the operation of the Employer, and to provide those
individuals with additional financial security as an
inducement to them to remain in employment with the
Employer.
ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. As used in the Plan, the following words
and phrases, when capitalized, have the following meanings
except when used in a context that plainly requires a
different meaning:
(a) "Account" means the record of a Participant's
interest in the Plan.
(b) "Beneficiary" means, with respect to a
Participant, the person or persons designated pursuant
to Section 5.5 (Designation of Beneficiary) to receive
benefits under the Plan in the event of the
Participant's death.
(c) "Board of Directors" means the duly constituted
board of directors of the Company on the applicable
date.
(d) "Change in Control" means an event described in
Subsection 5.2(b) (Distribution Upon a Change in
Control).
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and interpretive rules and
regulations.
(f) "Committee" means a committee composed of those
members of the Compensation Committee of the Board of
Directors who are not Participants in the Plan.
(g) "Company" means Cinergy Corp., a Delaware
Corporation, and any corporation that shall succeed to
its business and adopt the Plan.
(h) "Compensation" means, with respect to a
Participant for a Plan Year, the award or bonus payable
to the Participant for the Plan Year under any of the
Company's annual or long-term incentive plans or
programs determined by the Committee as awards or
bonuses to be eligible for deferral under this Plan.
(i) "Deferral Agreement" means the written agreement
entered into between an Eligible Employee and the
Employer pursuant to which the Eligible Employee elects
to make deferrals under the Plan.
(j) "Eligible Employee" means a key management
Employee who is selected by the Committee as an
individual who has the opportunity to impact
significantly the annual operating success of the
Employer.
(k) "Employee" means any person employed by the
Employer on a full-time salaried basis, including
officers of the Company or a Related Employer.
(l) "Employer" means the Company and any Related
Employer.
(m) "Insolvent" means, with respect to the Company,
the Company being unable to pay its debts as they are
due, or the Company being subject to a pending
proceeding as a debtor under the United States
Bankruptcy Code.
(n) "Investment Options" means, with respect to any
Plan Year, the investment options designated by the
Committee as available measures of investment earnings
under the Plan for the Plan Year.
(o) "Participant" means an Eligible Employee or former
Eligible Employee who has an interest in the Plan
pursuant to Section 3.2 (Election to Defer).
(p) "Plan" means this document, as amended from time
to time, and the nonqualified deferred compensation
plan so established.
(q) "Plan Year" means a calendar year commencing on or
after January 1, 1997.
(r) "Rabbi Trust" means the grantor trust that the
Company, in its sole discretion, may establish pursuant
to Subsection 4.4(b) (Accounts Unfunded) for the
deposit of funds to be used for the exclusive purpose
of paying benefits accrued under the Plan, subject to
the claims of the Company's general creditors in the
event the Company becomes Insolvent.
(s) "Related Employer" means any Employer that,
together with the Company, is under common control or a
member of an affiliated service group, as determined
under Code Subsections 414(b), (c), (m), and (o).
(t) "Termination of Employment" means, with respect to
a Participant, the cessation of the relationship of
Employer and Employee between the Participant and the
Employer for any reason other than the Participant's
death. A Participant shall not be treated as having
incurred a Termination of Employment until the
employment relationship between the Participant and all
Related Employers has terminated.
(u) "Trustee" means the trustee of the Rabbi Trust
that the Company, in its sole discretion, may establish
pursuant to Subsection 4.4(b) (Accounts Unfunded).
(v) "Unforeseeable Emergency" means, for the purpose
of Subsection 3.2(d) (Suspension or Cessation of
Deferrals) and Section 5.3 (Distribution Upon Financial
Emergency), with respect to a Participant or
Beneficiary, a severe financial hardship to the
Participant or Beneficiary resulting from a sudden and
unexpected illness or accident of the Participant,
Beneficiary, or his or her dependents; loss of the
Participant's or Beneficiary's property due to
casualty; or other similar extraordinary and
unforeseeable circumstances arising as a result of
events beyond the Participant's or Beneficiary's
control.
2.2 Rules of Construction. The following rules of
construction shall govern in interpreting the Plan:
(a) The provisions of this Plan shall be construed and
governed in all respects under and by the internal laws
of the State of Ohio, to the extent not preempted by
federal law.
(b) Words used in the masculine gender shall be
construed to include the feminine gender, where
appropriate, and vice versa.
(c) Words used in the singular shall be construed to
include the plural, where appropriate, and vice versa.
(d) The headings and subheadings in the Plan are
inserted for convenience of reference only and are not
to be considered in the construction of any provision
of the Plan.
(e) If any provision of the Plan shall be held to be
illegal or invalid for any reason, that provision shall
be deemed to be null and void, but the invalidation of
that provision shall not otherwise impair or affect the
Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Participation in the Plan is limited to
Eligible Employees.
3.2 Election to Defer.
(a) Incentive Plans Subject to the Plan. For each
Plan Year the Committee shall designate which, if any,
incentive compensation plans and programs of the
Employers are subject to the provisions of the Plan for
that Plan Year.
(b) Election Procedure. Within a reasonable time
before the beginning of each Plan Year, the Committee
shall provide each Eligible Employee with a Deferral
Agreement. An Eligible Employee may elect to defer all
or a specified portion of his Compensation under the
Plan by delivering a completed Deferral Agreement to
the Committee or its designate prior to the first day
of the Plan Year. On the Deferral Agreement, the
Eligible Employee shall indicate the amount or
percentage of his Compensation to be deferred under the
Plan for the Plan Year, subject to the provisions of
Subsection (b). Subject to Subsection (c), an election
made under this Section shall be effective as of the
first day of the Plan Year, and subject to Subsection
(d), the election for any Plan Year shall be
irrevocable.
(c) Maximum Amount of Deferrals. For each Plan Year
beginning on or after the Effective Date, each Eligible
Employee may elect to defer under the Plan up to 100%
of his Compensation.
(d) New Participant Deferrals. The Committee, in its
sole discretion, may permit a new Eligible Employee to
enroll in the Plan during a Plan Year and, no later
than 30 days after becoming an Eligible Employee, make
an irrevocable prospective election to defer a portion
of his Compensation for the remainder of the Plan Year.
(e) Suspension or Cessation of Deferrals. With the
written consent of the Committee, a Participant may
suspend or cease deferrals, in whole or in part, during
the course of a Plan Year, due to an Unforeseeable
Emergency. Suspension or cessation of deferrals shall
not in any way affect a Participant's rights or
benefits with respect to amounts already deferred under
the Plan. In the event a Participant suspends or
ceases deferrals pursuant to this Subsection, the
Participant shall not be permitted to resume deferrals
before the first day of the following Plan Year or such
later date as specified by the Committee.
3.3 Cessation of Participation. Any Participant who ceases
to be an Eligible Employee, but continues to be an Employee,
shall cease to be eligible to make deferrals under this
Article but shall continue to have an Account, shall
continue to be credited with earnings and losses on his
Account under Section 4.2 (Earnings and Losses) until those
Accounts are fully distributed pursuant to Article V
(Distribution of Benefits), and shall be entitled to receive
benefits under Article V (Distribution of Benefits).
ARTICLE IV
PARTICIPANTS' ACCOUNTS
4.1 Establishment of Accounts. The Committee shall create
and maintain adequate records to disclose the interest in
the Plan of each Participant and Beneficiary. Records shall
be in the form of individual bookkeeping accounts, which
shall be credited with deferrals and contributions pursuant
to Sections 3.2 (Election to Defer), and earnings and losses
pursuant to Section 4.2 (Earnings and Losses), and debited
with any payments pursuant to Article V (Distribution of
Benefits). Each Participant shall have a separate Account.
The Participant's interest in his Account shall be fully
vested at all times. Notwithstanding the preceding
sentence, the Participant's interest in his Account shall be
subject to the claims of the Company's general creditors in
the event the Company becomes Insolvent.
4.2 Earnings and Losses.
(a) Deemed Investment of Accounts. During each
Plan Year, a Participant's Account shall be credited
with investment earnings and losses as though it is
invested, in accordance with the Participant's election
pursuant to Subsection (b), in one or more of the
Investment Options. The deemed investment of a
Participant's Account among the Investment Options in
accordance with the Participant's election is solely
the measure of the investment performance of the
Account. It does not give the Participant any
ownership interest in any Investment Option, nor does
it bind the Company, the Committee, or the Trustee as
to the investment of any Rabbi Trust or any other
amounts represented by the Accounts.
(b) Election Procedure. Each Participant, upon
first becoming an Eligible Employee, may make an
initial election, on a form provided by the Committee,
to allocate his Account among the Investment Options.
If the Participant fails to make an initial election,
he shall be deemed to have elected to allocate his
Account to the Fidelity Retirement Money Market Fund
Investment Option for that Plan Year. A Participant
may change his Investment Option designations (for his
future deferrals, his existing Account, or both) once
each Plan Year, as of the first day of the Plan Year,
by filing an appropriate election form with the
Committee by the prior December 31. Until a
Participant timely files a new investment election
form, his prior Investment Option designation shall
control.
4.3 Credits to Accounts.
(a) A Participant's deferrals pursuant to Section 3.2
(Election to Defer) shall be credited to his Account in
terms of cash as of the date(s) on which the deferred
amount would otherwise have been paid to the
Participant.
(b) Earnings and losses on the deemed investment of
the Participant's Account under Section 4.2 (Earnings
and Losses) shall be credited monthly, on the last day
of each month, based on the value of the Participant's
Account as of the first day of the month.
4.4 Accounts Unfunded.
(a) Accounts shall be accounting accruals, in the
names of Participants, on the Employer's books.
Accounts shall be unfunded, so that the Employer's
obligation to pay benefits under the Plan is merely a
contractual duty to make payments when due under the
Plan. The Employer's promise to pay benefits under the
Plan shall not be secured in any way, and except as
provided in Subsection (b), the Company shall not set
aside or segregate assets for the purpose of paying
amounts credited to Participants' Accounts.
(b) Notwithstanding the provisions of Subsection (a),
the Company, in its sole discretion, may establish a
Rabbi Trust. The Employer, in its sole discretion, may
make such contributions to the Rabbi Trust as the
Committee determines are appropriate to enable the
Employer to pay benefits under the Plan. Any Rabbi
Trust established under this Section shall be created
pursuant to a written trust document that conforms to
the model form of rabbi trust agreement approved by the
Internal Revenue Service in Revenue Procedure 92-64 (as
amended from time to time).
4.5 Valuation of Accounts. The value of a Participant's
Account as of any date shall equal the dollar amount of any
deferrals credited to the Account pursuant to Section 3.2
(Election to Defer), increased or decreased by the earnings
and losses deemed to be credited to the Account in
accordance with Section 4.2 (Earnings and Losses), and
decreased by the amount of any payments made from the
Account to the Participant or his Beneficiary pursuant to
Article V (Distribution of Benefits).
4.6 Annual Report. Within 120 days following the end of
each Plan Year, the Committee shall provide to each
Participant a written statement of the amount standing to
his credit in his Account as of the end of that Plan Year.
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 General Distribution Rules.
(a) General Provisions. Except as otherwise provided
in Sections 5.2 (Distribution Upon a Change in
Control), Section 5.3 (Distribution Upon Financial
Emergency), and Section 5.4 (Death Benefits), a
Participant's Account shall be distributed to the
Participant (or to his Beneficiary in the event of his
death) as provided in this Section.
(b) Participant's Election. For each Plan Year, a
Participant may select, on a form provided by the
Committee and from among the options described in this
Section, the form for the payment of his deferrals for
the Plan Year (and any investment earnings attributable
to those deferrals). A Participant's election for each
Plan Year shall be irrevocable, but the Participant may
make a new election for each Plan Year's deferrals.
(1) Form of Distribution. A Participant may
elect to have his deferrals (and attributable
earnings) for a Plan Year distributed in one
of the following forms:
(A) A lump sum payment; or
(B) Substantially equal
annual installments over a specified
number of two to ten years.
(2) Time of Distribution.
Distribution of a Participant's interest in
his Account shall commence no later than 30
days after the earlier of the Participant's
death or his Termination of Employment.
Subsequent installments shall be payable on
or as soon as administratively feasible
following the first business day of each
succeeding year.
(c) Default Procedure. If a Participant fails to make
an election pursuant to this Section, then, except as
otherwise provided in Section 5.2 (Distribution Upon a
Change in Control, Section 5.3 (Distribution Upon
Financial Emergency), and Section 5.4 (Death Benefits),
the Participant's Account (and attributable earnings)
shall be distributed in five substantially equal annual
installments commencing no later than 30 days after the
earlier of the Participant's death or his Termination
of Employment.
5.2 Distribution Upon a Change in Control.
(a) Notwithstanding any other Section, if a
Change in Control occurs, the Committee in its sole
discretion may elect to accelerate the distribution of
a Participant's Account so that a Participant's Account
shall be distributed to the Participant (or, in the
event of his death, to his Beneficiary) in a single
lump sum payment no later than 30 days after the Change
in Control occurs.
(b) As used in this Plan, a "Change in Control"
of the Company shall occur if (1) any "person" or
"group" (within the meaning of Subsection 13(d) and
Paragraph 14(d)(2) of the 1934 Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
1934 Act) of more than 50 percent of the then
outstanding voting stock of the Company, otherwise than
through a transaction arranged by, or consummated with
the prior approval of, the Board of Directors; (2) the
Company's shareholders approve a definitive agreement
to merge or consolidate the Company with or into
another corporation in a transaction in which neither
the Company nor any of its subsidiaries or affiliates
will be the surviving corporation, or to sell or
otherwise dispose of all or substantially all of the
Company's asset to any person or group other than the
Company or any of its subsidiaries or affiliates, other
than a merger or a sale which will result in the voting
securities of the Company outstanding prior to the
merger or sale continuing to represent at least 50
percent of the combined voting power of the voting
securities of the corporation surviving the merger or
purchasing the assets; or (3) during any period of two
consecutive years, individuals who at the beginning of
that period constitute the Board of Directors (and any
new Director whose election by the Board of Directors
or whose nomination for election by the Company's
shareholders was approved by a vote of at least two-
thirds of the Directors then still in office who either
were Directors at the beginning of that period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority
of the Board of Directors.
5.3 Distribution Upon Financial Emergency. A Participant
or Beneficiary, upon written petition to the Committee, may
withdraw some or all of the balance of the Participant's
Account if the Committee, in its sole discretion, determines
that the requested withdrawal is on account of an
Unforeseeable Emergency and that the amount to be withdrawn
does not exceed the amount necessary to satisfy the
Unforeseeable Emergency. Withdrawals under this Section
shall not be permitted to the extent that the Unforeseeable
Emergency may reasonably be relieved through (a)
reimbursement or compensation by insurance or otherwise, (b)
liquidation of the Participant's or Beneficiary's assets (to
the extent liquidation would not itself cause a financial
hardship), or (c) suspension or cessation of elective
deferrals under this Plan.
5.4 Death Benefits. In the event that a Participant dies
before his Account is completely distributed, his
Beneficiary shall be entitled to a death benefit equal to
the amount credited to the Participant's Account immediately
before his death. The form and timing of the payment of the
death benefit shall be determined pursuant to Section 5.1
(General Distribution Rules).
5.5 Designation of Beneficiary. A Participant's
Beneficiary shall be the person or persons, including a
trustee, designated by the Participant in writing pursuant
to the practices of, or rules prescribed by, the Committee,
as the recipient of any benefits payable under the Plan
following the Participant's death. To be effective, a
Beneficiary designation must be filed with the Committee
during the Participant's life on a form prescribed by the
Committee; provided, however, that finalized divorce or
marriage (other than a common law marriage) shall
automatically revoke a previously filed Beneficiary
designation, unless in the case of divorce the former spouse
was not designated as the Beneficiary or in the case of
marriage the Participant's new spouse is already the
designated Beneficiary. If the Participant designates more
than one Beneficiary, any payments under this Article to
each Beneficiary shall be made in equal shares unless the
Participant has designated otherwise, in which case the
payments shall be made in the shares designated by the
Participant. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary
designation has been revoked by marriage or divorce, or if
no person designated as Beneficiary survives the
Participant, the Participant's estate shall be his
Beneficiary.
ARTICLE VI
ADMINISTRATION
6.1 Administrator. The Committee shall be the
Administrator of the Plan. All decisions of the Committee
shall be by a vote of a majority of its members and shall be
final and binding.
6.2 Notices. Any notice or filing required or permitted to
be given to the Committee under the Plan shall be sufficient
if it is in writing or hand delivered, or sent by registered
or certified mail, to any member of the Committee or its
designate. The notice or filing shall be deemed made as of
the date of delivery, or if delivery is made by mail, as of
the date shown on the postmark on the receipt for
registration or certification.
6.3 Powers and Duties of the Committee. Subject to the
specific limitations stated in this Plan, the Committee
shall have the following powers, duties, and
responsibilities:
(a) To carry out the general administration of the
Plan;
(b) To cause to be prepared all forms necessary
or appropriate for the administration of the Plan;
(c) To keep appropriate books and records;
(d) To determine amounts to be distributed to
Participants and Beneficiaries under the provisions of
the Plan;
(e) To determine, consistent with the provisions
of this instrument, all questions of eligibility,
rights, and status of Participants and Beneficiaries
under the Plan;
(f) To issue, amend, and rescind rules relating
to the administration of the Plan, to the extent those
rules are consistent with the provisions of this
document;
(g) To exercise all other powers and duties
specifically conferred upon the Committee elsewhere in
this document; and
(h) To interpret, with discretionary authority,
the provisions of this Plan and to resolve, with
discretionary authority, all disputed questions of Plan
interpretation and benefit eligibility.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 Amendment. The Company reserves the right to amend the
Plan at any time by action of the Board of Directors or the
Committee, with written notice given to each Participant in
the Plan. The Company, however, may not make any amendment
that reduces a Participant's benefits accrued as of the date
of the amendment unless the Participant consents in writing
to the amendment. Notwithstanding the foregoing, the
Company may not amend any of the provisions of Section 5.2
(Distribution Upon a Change in Control) within three years
of a Change in Control.
7.2 Termination. The Company reserves the right to
terminate the Plan, by action of the Board of Directors or
the Committee, at any time it deems appropriate. Upon
termination of the Plan, no further contribution shall be
made to the Plan. Subject to Section 5.2 (Distribution Upon
a Change in Control), distribution following termination of
the Plan shall be made at the time and under the terms and
conditions as the Company, in its sole discretion, shall
determine, which shall commence no later than the earlier of
a Participant's death or Termination of Employment.
ARTICLE VIII
MISCELLANEOUS
8.1 Relationship. Notwithstanding any other provision of
this Plan, this Plan and action taken pursuant to it shall
not be deemed or construed to establish a trust or fiduciary
relationship of any kind between or among the Company,
Participants, Beneficiaries or any other persons. The Plan
is intended to be unfunded for purposes of the Code and the
Employee Retirement Income Security Act of 1974, as amended.
The rights of Participants and Beneficiaries to receive
payment of deferred compensation under the Plan is strictly
a contractual right of payment, and this Plan does not
grant, nor shall it be deemed to grant Participants,
Beneficiaries, or any other person any interest or right to
any of the funds, property, or assets of the Employer other
than as an unsecured general creditor of the Employer.
8.2 Other Benefits and Plans. Nothing in this Plan shall
be deemed to prevent Participants from receiving, in
addition to the benefits provided for under this Plan, any
funds that may be distributable to them at any time under
any other present or future retirement or incentive plan of
the Employer.
8.3 Anticipation of Benefits. Neither Participants nor
Beneficiaries shall have the power to transfer, assign,
anticipate, pledge, alienate, or otherwise encumber in
advance any of the payments that may become due under this
Plan, and any attempt to do so shall be void. Any payments
that may become due under this Plan shall not be subject to
attachment, garnishment, execution, or be transferable by
operation of law in the event of bankruptcy, insolvency, or
otherwise.
8.4 No Guarantee of Continued Employment. Nothing
contained in this Plan or any action taken under the Plan
shall be construed as a contract of employment or as giving
any Participant any right to be retained in employment with
the Employer. The Employer specifically reserves the right
to terminate any Participant's employment at any time with
or without cause, and with or without notice or assigning a
reason, subject to the terms of any written employment
agreement between the Participant and the Employer.
8.5 Waiver of Breach. The Company's or the Committee's
waiver of any Plan provision shall not operate or be
construed as a waiver of any subsequent breach by the
Participant.
8.6 Protective Provisions. Each Participant shall
cooperate with the Company and the Committee by furnishing
any and all information requested by the Company or the
Committee in order to facilitate the payment of benefits
under the Plan, and by taking any other relevant action as
may be requested by the Company or the Committee. If any
Participant refuses to so cooperate, the Company shall have
no further obligation to the Participant or his Beneficiary
under this Plan, other than to distribute to the Participant
the cumulative deferrals he has already made, and the
cumulative contributions that have been made on his behalf,
pursuant to the Plan; provided, however, that the Committee
may determine that benefits may be payable in an amount
reduced to compensate the Company for any loss, cost,
damage, or expense suffered or incurred by the Company as a
result in any way of the Participant's action or failure to
act.
8.7 Benefit. This Plan shall be binding upon and inure to
the benefit of the Employer and its successors and assigns.
8.8 Responsibility for Legal Effect. Neither the Committee
nor the Company makes any recommendations or warranties,
express or implied, or assumes any responsibility concerning
the legal context or other implications or effects of this
Plan.
8.9 Tax Withholding. The Employer shall withhold from any
deferrals or from any payment made under the Plan such
amount or amounts as may be required by applicable federal,
State, or local laws.
Cinergy Corp. has caused this document to be executed by its
duly authorized officers, as of December 1, 1996.
CINERGY CORP.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman, President and
Chief Executive Officer
Dated: December 30, 1996
APPROVED:
By: CHERYL M. FOLEY
Cheryl M. Foley
Vice President, General Counsel
and Corporate Secretary
Dated: December 30, 1996