EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 12th day
of February, 2001 (the "Effective Date"), by and between Cinergy and R. Foster
Duncan (the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
RECITALS
A. The Executive is qualified and available to assume responsibility
for and hold the position of Executive Vice President and Chief Financial
Officer of Cinergy. Cinergy desires to secure the employment of the Executive in
accordance with this Agreement.
B. The Executive is willing to enter and continue to remain in the
employ of Cinergy, and any successor to Cinergy, on the terms and conditions set
forth in this Agreement.
AGREEMENT
In consideration of the mutual promises, covenants and agreements set
forth below, the parties agree as follows:
1. EMPLOYMENT AND TERM
a. Cinergy, and any successor to Cinergy, agree to employ the
Executive, and the Executive agrees to enter and remain in the
employ of Cinergy, in accordance with the terms and provisions
of this Agreement, for the Employment Period set forth in
Subsection b. The parties agree that the Company will be
responsible for carrying out all of the promises, covenants,
and agreements of Cinergy set forth in this Agreement.
b. The Employment Period of this Agreement will commence as of
the Effective Date and continue until December 31, 2003;
provided that, commencing on December 31, 2001, and on each
subsequent December 31, the Employment Period will be extended
for one (1) additional year unless either party gives the
other party written notice not to extend this Agreement at
least ninety (90) days before the extension would otherwise
become effective.
2. DUTIES AND POWERS OF EXECUTIVE
a. POSITION. The Executive will serve Cinergy as Executive Vice
President and Chief Financial Officer, and he will have such
responsibilities, duties, and authority as are customary for
someone of that position and such additional duties,
consistent with his position, as may be assigned to him from
time to time during the Employment Period by the Board of
Directors or the Chief Executive Officer.
b. PLACE OF PERFORMANCE. In connection with the Executive's
employment, the Executive will be based at the principal
executive offices of Cinergy, 221 East Fourth Street,
Cincinnati, Ohio, and, except for required business travel to
an extent substantially consistent with the present business
travel obligations of Cinergy executives who have positions of
authority comparable to that of the Executive, the Executive
will not be required to relocate to a new principal place of
business that is more than thirty (30) miles from Cinergy's
current principal executive offices.
3. COMPENSATION. The Executive will receive the following compensation for
his services under this Agreement.
a. SALARY. The Executive's Annual Base Salary, payable not less
often than semi-monthly, will be at the annual rate of not
less than $475,000.00. The Board of Directors or its designee
may, from time to time, increase the Annual Base Salary as the
Board of Directors deems to be necessary or desirable,
including without limitation adjustments to reflect increases
in the cost of living. Any increase in the Annual Base Salary
will not serve to limit or reduce any other obligation of
Cinergy under this Agreement. The Annual Base Salary will not
be reduced except for across-the-board salary reductions
similarly affecting all Cinergy management personnel. If
Annual Base Salary is increased during the Employment Period,
then the increased salary will be the Annual Base Salary for
all purposes under this Agreement.
b. RETIREMENT, INCENTIVE, WELFARE BENEFIT PLANS AND OTHER
BENEFITS. During the Employment Period, the Executive will be
eligible, and Cinergy will take all necessary action to cause
the Executive to become eligible, to participate in 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 Cinergy who are
considered Tier II executives for compensation purposes,
except with respect to any plan, practice, policy or program
to which the Executive has waived his rights in writing.
The Executive will be a participant in the Senior Executive
Supplement portion of the Cinergy Corp. Supplemental Executive
Retirement Plan and will be fully and immediately vested, as
of the Effective Date of this Agreement, in any benefit that
he accrues under that plan.
Upon his retirement on or after having attained age fifty
(50), the Executive will be eligible for comprehensive medical
and dental insurance pursuant to the terms of the Retirees'
Medical Plan and the Retirees' Dental Plan. The Executive,
however, will receive the full subsidy provided by Cinergy to
retirees, as of the Effective Date of this Agreement, for
purposes of determining the amount of monthly premiums due
from the Executive.
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The Executive will be a participant in the Annual Incentive
Plan, and the Executive will be paid pursuant to that plan an
annual benefit of up to ninety percent (90%) of the
Executive's Annual Base Salary, with a target of no less than
sixty percent (60%) of the Executive's Annual Base Salary (the
"Target Annual Bonus"); provided, however, the guaranteed
minimum bonus for the years 2001 and 2002 will be no less than
$190,000.00 per year.
The Executive will be a participant in the Long-Term Incentive
Plan (the "LTIP"), and the Executive's annualized target award
opportunity under the LTIP will be equal to no less than
ninety percent (90%) of his Annual Base Salary (the "Target
LTIP Bonus").
The Company will grant an option to acquire 200,000 shares of
the Company's common stock pursuant to an option granted under
the terms of the Company's 1996 Long-Term Incentive
Compensation Plan, which options will vest ratably over a five
year period from the date of grant with a grant price based on
the "fair market value" of a share of the Company's common
stock as set forth in the terms of the plan document.
c. TRANSITION ALLOWANCE. On the Effective Date or as soon
thereafter as administratively feasible, Cinergy will pay to
the Executive the sum of $250,000.00 (reduced by applicable
federal, state, and local tax withholding), as a transition
allowance as consideration for the Executive's decision to
accept employment with Cinergy and adhere to the terms of this
Agreement.
d. FRINGE BENEFITS AND PERQUISITES. During the Employment Period,
the Executive will be entitled to the following additional
fringe benefits:
(i) Cinergy will furnish to the Executive an automobile
and will pay all of the related expenses for
gasoline, insurance, maintenance, and repairs.
(ii) Cinergy will pay the initiation fee and the annual
dues, assessments, and other membership charges of
the Executive for membership in a country club and a
luncheon club selected by the Executive.
(iii) Cinergy will provide paid vacation for four (4) weeks
per year (or longer if permitted by Cinergy's
policy).
(iv) Cinergy will provide benefits under the Executive
Supplement Life Program.
(v) Cinergy will pay to relocate the Executive and his
immediate family to the Cincinnati, Ohio area under
the terms of the Relocation Program.
(vi) Cinergy will furnish to the Executive an annual
physical exam and annual financial planning and tax
preparation services. In addition, the Executive will
be entitled to receive such other fringe benefits in
accordance with
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Cinergy plans, practices, programs, and policies in
effect from time to time, commensurate with his
position and at least comparable to those received
by other Cinergy senior executives.
e. EXPENSES. Cinergy agrees to reimburse the Executive for all
expenses, including those for travel and entertainment,
properly incurred by him in the performance of his duties
under this Agreement in accordance with the policies
established from time to time by the Board of Directors.
f. RELOCATION BENEFITS. Following termination of the Executive's
employment for any reason (other than death), the Executive
will be entitled to reimbursement from Cinergy for the
reasonable costs of relocating from the Cincinnati, Ohio, area
to a new primary residence in the forty-eight contiguous
United States in a manner that is consistent with the terms of
the Relocation Program.
4. TERMINATION OF EMPLOYMENT
a. DEATH. The Executive's employment will terminate automatically
upon the Executive's death during the Employment Period.
b. BY CINERGY FOR CAUSE. Cinergy may terminate the Executive's
employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" means the
following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with
Cinergy (other than any such failure resulting from
the Executive's incapacity due to physical or mental
illness) after the Board of Directors or the Chief
Executive Officer has delivered to the Executive a
written demand for substantial performance, which
demand specifically identifies the manner in which
the Executive has not substantially performed his
duties. This event will constitute Cause even if the
Executive issues a Notice of Termination for Good
Reason pursuant to Subsection 4d after the Board of
Directors or Chief Executive Officer delivers a
written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality
provisions set forth in Section 9.
(iii) The conviction of the Executive for the commission of
a felony, including the entry of a guilty or nolo
contendere plea, or any willful or grossly negligent
action or inaction by the Executive that has a
materially adverse effect on Cinergy. For purposes of
this definition of Cause, no act, or failure to act,
on the Executive's part will be deemed "willful"
unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief
that the Executive's act, or failure to act, was in
the best interest of Cinergy.
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c. BY CINERGY WITHOUT CAUSE. Cinergy may, upon at least 30 days
advance written notice to the Executive, terminate the
Executive's employment during the Employment Period for a
reason other than Cause, but the obligations placed upon
Cinergy in Section 5 will apply.
d. BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate
his employment during the Employment Period for Good Reason.
For purposes of this Agreement, "Good Reason" means the
following:
(i) A reduction in the Executive's Annual Base Salary,
except for across-the-board salary reductions
similarly affecting all Cinergy management personnel,
or a reduction in any other benefit or payment
described in Section 3 of this Agreement, except for
changes to the employee benefits programs affecting
all Cinergy management personnel, provided that those
changes (either individually or in the aggregate)
will not result in a material adverse change with
respect to the benefits to which the Executive was
entitled as of the Effective Date.
(ii) The material reduction without his consent of the
Executive's title, authority, duties, or
responsibilities from those in effect immediately
prior to the reduction or a material adverse change
in the Executive's reporting responsibilities.
(iii) Any breach by Cinergy of any other material provision
of this Agreement (including but not limited to the
place of performance as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental
illness or injury that precludes the Executive from
performing any job for which he is qualified and able
to perform based upon his education, training or
experience.
(v) A failure by any successor entity to the Company to
assume all of the Company's obligations to the
Executive under this Agreement.
e. BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive may
terminate his employment without Good Reason upon prior
written notice to the Company.
f. NOTICE OF TERMINATION. Any termination of the Executive's
employment by Cinergy or by the Executive during the
Employment Period (other than a termination due to the
Executive's death) will be communicated by a written Notice of
Termination to the other party to this Agreement in accordance
with Subsection 12b. For purposes of this Agreement, a "Notice
of Termination" means a written notice that specifies the
particular provision of this Agreement relied upon and that
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for terminating the Executive's
employment under the
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specified provision. The failure by the Executive or
Cinergy to set forth in the Notice of Termination any fact
or circumstance that contributes to a showing of Good
Reason or Cause will not waive any right of the Executive
or Cinergy under this Agreement or preclude the Executive
or Cinergy from asserting that fact or circumstance in
enforcing rights under this Agreement.
5. OBLIGATIONS OF CINERGY UPON TERMINATION.
a. CERTAIN TERMINATIONS.
(i) If a Termination occurs during the Employment Period,
Cinergy will pay to the Executive a lump sum amount,
in cash, equal to the sum of the following Accrued
Obligations:
(1) the Executive's Annual Base Salary through
the Date of Termination to the extent not
previously paid;
(2) an amount equal to the AIP Benefit for the
fiscal year that includes the Date of
Termination multiplied by a fraction, the
numerator of which is the number of days
from the beginning of that fiscal year to
and including the Date of Termination and
the denominator of which is three hundred
and sixty-five (365). The AIP Benefit
component of the calculation will be
determined using a percentage determined by
the Chief Executive Officer, in his
discretion, up to the maximum percentage
specified in Subsection 3b, but no less than
the Target Annual Bonus; and
(3) any vested Deferred Compensation (together
with any accrued interest or earnings) and
any accrued vacation pay, in each case to
the extent not previously paid.
The Accrued Obligations described in this Paragraph
5a(i) will be paid within thirty (30) days after the
Date of Termination. These Accrued Obligations are
payable to the Executive regardless of whether a
Change in Control has occurred.
(ii) In the event of a Termination prior to, or greater
than twenty-four (24) months subsequent to, the
occurrence of a Change in Control, and other than by
reason of the Executive's death, Cinergy will pay the
Accrued Obligations, and Cinergy will have the
following obligations:
(1) Cinergy will pay to the Executive a lump sum
amount, in cash, equal to two (2) times the
sum of the Annual Base Salary and the Target
Annual Bonus. For this purpose, the Annual
Base Salary will be at the rate in effect at
the time Notice of Termination is given
(without giving effect to any reduction in
Annual Base
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Salary, if any, prior to the termination).
This lump sum will be paid within thirty
(30) days of the Date of Termination.
(2) Cinergy will pay to the Executive the value
of (A) any Deferred Compensation, beyond
that included in the Accrued Obligations and
(B) any benefits under the Executive
Supplemental Life Program, to the extent
that these amounts are vested and payable
under the terms of the applicable plan or
program as of the Date of Termination.
(3) Except as provided under Clauses (A) and (B)
below, Cinergy will continue, until the end
of the Employment Period, medical and dental
benefits to the Executive and/or the
Executive's family at least equal to those
that would have been provided if the
Executive's employment had not been
terminated (excluding benefits to which the
Executive has waived his rights in writing).
The benefits described in the preceding
sentence will be in accordance with the
medical and welfare benefit plans,
practices, programs, or policies of Cinergy
(the "M&W Plans") as then currently in
effect and applicable generally to other
Cinergy senior executives and their
families.
(A) If, as of the Executive's Date of
Termination, the Executive meets the
eligibility requirements for
Cinergy's retiree medical and
welfare benefit plans, the provision
of those retiree medical and welfare
benefit plans to the Executive will
satisfy Cinergy's obligation under
this Subparagraph 5a(ii)(3).
(B) If, as of the Executive's Date of
Termination, the provision to the
Executive of the M&W Plan benefits
described in this Subparagraph
5a(ii)(3) would either (1) violate
the terms of the M&W Plans or (2)
violate any of the Code's
nondiscrimination requirements
applicable to the M&W Plans, then
Cinergy, in its sole discretion,
may elect to pay the Executive, in
lieu of the M&W Plan benefits
described under this Subparagraph
5a(ii)(3), a lump sum cash payment
equal to the total monthly premiums
that would have been paid by
Cinergy for the Executive under the
M&W Plans from the Date of
Termination through the end of the
Employment Period. Nothing in this
Clause will affect the Executive's
right to elect COBRA continuation
coverage under a M&W Plan in
accordance with applicable law.
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(C) If the Executive becomes employed by
another employer and is eligible to
receive medical or other welfare
benefits under another
employer-provided plan, any benefits
provided to the Executive under the
M&W Plans will be secondary to those
provided under the other
employer-provided plan during the
Executive's applicable period of
eligibility.
(4) Ownership of the automobile assigned to the
Executive by Cinergy will be transferred to
the Executive within 30 days of the Date of
Termination. The effect of this transfer
will be grossed up for federal and state
income taxes as soon as administratively
feasible after the transfer is effective.
(5) Cinergy will provide tax counseling services
through an agency selected by the Executive,
not to exceed Fifteen Thousand Dollars
($15,000.00) in cost.
(iii) In the event of Termination upon or during the
twenty-four (24) month period after the occurrence of
a Change in Control, 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 Paragraph
5a(ii), Cinergy will have the following obligations:
(1) Cinergy will pay to the Executive a lump sum
severance payment, in cash, equal to three
(3) times the higher of (x) the sum of the
Executive's current Annual Base Salary and
AIP Benefit, or (y) the sum of the Executive
Annual Base Salary in effect immediately
prior to the Change in Control and his AIP
Benefit for 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) Cinergy will pay to the Executive the value
of (A) any Deferred Compensation, beyond that
included in the Accrued Obligations and (B)
any benefits under the Executive Supplemental
Life Program, to the extent that these
amounts are vested and payable under the
terms of the applicable plan or program as of
the Date of Termination.
(3) For a thirty-six (36) month period after the
Date of Termination, Cinergy will arrange to
provide the Executive with life, disability,
accident, and health insurance benefits
substantially similar to those that the
Executive is receiving immediately prior to
the Notice of Termination (without giving
effect to any reduction in those benefits
subsequent to a Change in Control that
constitutes Good Reason), except for any
benefits that were waived by the Executive in
writing. If Cinergy arranges to provide the
Executive with life,
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disability, accident, and health
insurance benefits, those benefits will
be reduced to the extent comparable
benefits are actually received by or made
available to the Executive without cost
during the thirty-six (36) month period
following the Executive's Date of
Termination. The Executive must report to
Cinergy any such benefits that he
actually receives. In lieu of the
benefits described in the preceding
sentences, Cinergy, in its sole
discretion, may elect to pay to the
Executive a lump sum cash payment equal
to thirty-six (36) times the monthly
premiums that would have been paid by
Cinergy to provide those benefits to the
Executive. Nothing in this Subparagraph
5a(iii)(3) will affect the Executive's
right to elect COBRA continuation
coverage in accordance with applicable
law.
(4) Ownership of the automobile assigned to the
Executive by Cinergy will be transferred to
the Executive within 30 days of the Date of
Termination. The effect of this transfer
will be grossed up for federal and state
income taxes as soon as administratively
feasible after the transfer is effective.
(5) Cinergy will provide tax counseling services
through an agency selected by the Executive,
not to exceed Fifteen Thousand Dollars
($15,000.00) in cost.
For purposes of this Paragraph (iii), the Executive
will be deemed to have incurred a Termination
following a Change in Control if the Executive's
employment is terminated prior to a Change in
Control, without Cause at the direction of a Person
who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in
Control, or if the Executive terminates his
employment for Good Reason prior to a Change in
Control if the circumstances or event that
constitutes Good Reason occurs at the direction of
such a Person.
b. TERMINATION BY CINERGY FOR CAUSE OR BY THE EXECUTIVE OTHER
THAN FOR GOOD REASON. Subject to the provisions of Section 7,
and notwithstanding any other provisions of this Agreement, if
the Executive's employment is terminated for Cause during the
Employment Period, or if the Executive terminates employment
during the Employment Period other than a termination for Good
Reason, Cinergy will have no further obligations to the
Executive under this Agreement other than the obligation to
pay to the Executive the Accrued Obligations, plus any other
earned but unpaid compensation, in each case to the extent not
previously paid.
c. CERTAIN TAX CONSEQUENCES.
(i) In the event that any Severance Benefits paid or
payable to the Executive or for his benefit pursuant
to the terms of this Agreement or otherwise in
connection with, or arising out of, his employment
with Cinergy or a
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change in ownership or effective control of
Cinergy or of a substantial portion of its assets
(a "Payment" or "Payments") would be subject to
any Excise Tax, then the Executive will be
entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including
any interest, penalties, additional tax, or
similar items imposed with respect thereto and the
Excise Tax), including any Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(ii) An initial determination as to whether a Gross-Up
Payment is required pursuant to this Agreement and
the amount of that Gross-Up Payment will be made at
Cinergy's expense by an Accounting Firm selected by
the Executive and reasonably acceptable to Cinergy.
The Accounting Firm will provide its determination,
together with detailed supporting calculations and
documentation, to Cinergy and the Executive within 10
days after the Date of Termination, or such other
time as requested by Cinergy or by the Executive, and
if the Accounting Firm determines that no Excise Tax
is payable by the Executive with respect to a Payment
or Payments, it will furnish the Executive with an
opinion reasonably acceptable to the Executive that
no Excise Tax will be imposed with respect to any
such Payment or Payments. Within 10 days after the
Accounting Firm delivers its determination to the
Executive, the Executive will have the right to
dispute the determination. The Gross-Up Payment, if
any, as determined pursuant to this Subsection 5c
will be paid by Cinergy to the Executive within five
days of the receipt of the Accounting Firm's
determination. The existence of a dispute will not in
any way affect the Executive's right to receive the
Gross-Up Payment in accordance with the
determination. If there is no dispute, the
determination will be binding, final, and conclusive
upon Cinergy and the Executive. If there is a
dispute, then Cinergy and the Executive will together
select a second Accounting Firm, which will review
the determination and the Executive's basis for the
dispute and then will render its own determination,
which will be binding, final, and conclusive on
Cinergy and on the Executive. Cinergy will bear all
costs associated with that determination, unless the
determination is not greater than the initial
determination, in which case all such costs will be
borne by the Executive.
(iii) The value of any non-cash benefits or any deferred
payment or benefit paid or payable to the Executive
will be determined in accordance with the principles
of Code paragraphs 280G(d)(3) and (4). For purposes
of determining the amount of the Gross-Up Payment,
the Executive will be deemed to pay federal income
taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up
Payment is to be made and applicable state and local
income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's
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residence on the Date of Termination, net of the
maximum reduction in federal income taxes that would
be obtained from deduction of those state and local
taxes.
(iv) Notwithstanding anything contained in this Agreement
to the contrary, in the event that, according to the
Accounting Firm's determination, an Excise Tax will
be imposed on any Payment or Payments, Cinergy will
pay to the applicable government taxing authorities
as Excise Tax withholding, the amount of the Excise
Tax that Cinergy has actually withheld from the
Payment or Payments in accordance with law.
d. VALUE CREATION PLAN AND STOCK OPTIONS. Upon the Executive's
termination of employment for any reason, the Executive's
entitlement to restricted shares and performance shares under
the Value Creation Plan and any stock options granted under
the Stock Option Plan or the LTIP will be determined under the
terms of the appropriate plan and any applicable
administrative guidelines and written agreements.
e. OTHER FEES AND EXPENSES. Cinergy will also pay to the
Executive all legal fees and expenses incurred by the
Executive in successfully disputing a Termination that
entitles the Executive to Severance Benefits. Payment will be
made within five (5) business days after delivery of the
Executive's written request for payment accompanied by such
evidence of fees and expenses incurred as Cinergy reasonably
may require.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement will prevent or
limit the Executive's continuing or future participation in any
benefit, plan, program, policy, or practice provided by Cinergy and for
which the Executive may qualify, except with respect to any benefit to
which the Executive has waived his rights in writing or any plan,
program, policy, or practice that expressly excludes the Executive from
participation. In addition, nothing in this Agreement will limit or
otherwise affect the rights the Executive may have under any other
contract or agreement with Cinergy entered into after the Effective
Date. Amounts that are vested benefits or that the Executive is
otherwise entitled to receive under any benefit, plan, program, policy,
or practice of, or any contract or agreement entered into after the
Effective Date with Cinergy, at or subsequent to the Date of
Termination, will be payable in accordance with that benefit, plan,
program, policy or practice, or that contract or agreement, except as
explicitly modified by this Agreement.
7. FULL SETTLEMENT: MITIGATION. Cinergy's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement will not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right, or action that Cinergy may
have against the Executive or others. In no event will the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement
and, except as provided in Subparagraphs 5a(ii)(3)
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and 5a(iii)(3), those amounts will not be reduced simply because
the Executive obtains other employment. If the Executive finally
prevails on the substantial claims brought with respect to any
dispute between Cinergy and the Executive as to the interpretation,
terms, validity, or enforceability of (including any dispute about
the amount of any payment pursuant to) this Agreement, Cinergy
agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. ARBITRATION. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims)
arising out of or relating in any way to the Executive's employment,
the terms, benefits, and conditions of employment, or concerning this
Agreement or its termination and any resulting termination of
employment, including whether such a dispute is arbitrable, shall be
settled by arbitration. This agreement to arbitrate includes but is not
limited to all claims for any form of illegal discrimination, improper
or unfair treatment or dismissal, and all tort claims. The Executive
will still have a right to file a discrimination charge with a federal
or state agency, but the final resolution of any discrimination claim
will be submitted to arbitration instead of a court or jury. The
arbitration proceeding will be conducted under the employment dispute
resolution arbitration rules of the American Arbitration Association in
effect at the time a demand for arbitration under the rules is made.
The decision of the arbitrator(s), including determination of the
amount of any damages suffered, will be exclusive, final, and binding
on all parties, their heirs, executors, administrators, successors and
assigns. Each party will bear its own expenses in the arbitration for
arbitrators' fees and attorneys' fees, for its witnesses, and for other
expenses of presenting its case. Other arbitration costs, including
administrative fees and fees for records or transcripts, will be borne
equally by the parties. Notwithstanding anything in this Section to the
contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, Cinergy will reimburse or
pay all legal fees and expenses that the Executive may reasonably incur
as a result of the dispute as required by Section 7.
9. CONFIDENTIAL INFORMATION. The Executive will hold in a fiduciary
capacity for the benefit of Cinergy, as well as all of Cinergy's
successors and assigns, all secret, confidential information,
knowledge, or data relating to Cinergy, and its affiliated businesses,
that the Executive obtains during the Executive's employment by Cinergy
or any of its affiliated companies, and that has not been or
subsequently becomes public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement). During the Employment Period and thereafter, the Executive
will not, without Cinergy's prior written consent or as may otherwise
by required by law or legal process, communicate or divulge any such
information, knowledge, or data to anyone other than Cinergy and those
designated by it. The Executive understands that during the Employment
Period, Cinergy may be required from time to time to make public
disclosure of the terms or existence of the Executive's employment
relationship to comply with various laws and legal requirements. In
addition to all other remedies available to Cinergy in law and equity,
this Agreement is subject to termination by Cinergy for Cause under
Section 4b in the event the Executive violates any provision of this
Section.
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10. SUCCESSORS.
a. This Agreement is personal to the Executive and, without
Cinergy's prior written consent, cannot be assigned by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement will inure to the benefit of and
be enforceable by the Executive's legal representatives.
b. This Agreement will inure to the benefit of and be binding
upon Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of
Cinergy to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that
Cinergy would be required to perform it if no succession had
taken place. Cinergy's failure to obtain such an assumption
and agreement prior to the effective date of a succession will
be a breach of this Agreement and will entitle the Executive
to compensation from Cinergy in the same amount and on the
same terms as if the Executive were to terminate his
employment for Good Reason after a Change in Control, except
that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective will be deemed the
Date of Termination.
11. DEFINITIONS. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. 1934 ACT. "1934 Act" means the Securities Exchange Act of
1934.
b. ACCOUNTING FIRM. "Accounting Firm" means an accounting firm
that is designated as one of the five largest accounting firms
in the United States (which may include Cinergy's independent
auditors).
c. ACCRUED OBLIGATIONS. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
d. AGREEMENT. "Agreement" means this Employment Agreement between
Cinergy and the Executive.
e. AIP BENEFIT. "AIP Benefit" means the Annual Incentive Plan
benefit described in Subsection 3b.
f. ANNUAL BASE SALARY. "Annual Base Salary" means the annual base
salary payable to the Executive pursuant to Subsection 3a.
g. ANNUAL INCENTIVE PLAN. "Annual Incentive Plan" means the
Cinergy Corp. Annual Incentive Plan or any successor to that
plan.
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h. BOARD OF DIRECTORS. "Board of Directors" means the board of
directors of the Company.
i. CAUSE. "Cause" has the meaning set forth in Subsection 4b.
j. CHANGE IN CONTROL. A "Change in Control" will be deemed to
have occurred if any of the following events occur, after the
Effective Date:
(i) Any "person" or "group" (within the meaning of
subsection 13(d) and paragraph 14(d)(2) of the 1934
Act) is or becomes the beneficial owner (as defined
in Rule l3d-3 under the 1934 Act), directly or
indirectly, of securities of the Company (not
including in the securities beneficially owned by
such a Person any securities acquired directly from
the Company or its affiliates) representing more than
twenty percent (20%) of the combined voting power of
the Company's then outstanding securities, excluding
any person who becomes such a beneficial owner in
connection with a transaction described in Clause (1)
of Paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the
Company with any other corporation, other than (1) a
merger or consolidation that would result in the
voting securities of the Company outstanding
immediately prior to that merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or its parent) at
least sixty percent (60%) of the combined voting
power of the securities of the Company or the
surviving entity or its parent outstanding
immediately after the merger or consolidation, or (2)
a merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no person is or becomes the
beneficial owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such a Person any
securities acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing twenty percent (20%) or more
of the combined voting power of the Company's then
outstanding securities; or
(iii) During any period of two consecutive years,
individuals who at the beginning of that period
constitute the Board of Directors and any new
director (other than a director whose initial
assumption of office is in connection with an actual
or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Company's shareholders
was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
that period or whose appointment, election, or
nomination for election was
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previously so approved or recommended cease for
any reason to constitute a majority of the Board
of Directors; or
(iv) The shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or
disposition by the Company of all or substantially
all of the Company's assets, other than a sale or
disposition by the Company of all or substantially
all of the Company's assets to an entity, at least
sixty percent (60%) of the combined voting power of
the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company
immediately prior to the sale.
k. CHIEF EXECUTIVE OFFICER. "Chief Executive Officer" means the
chief executive officer of the Company.
l. CINERGY. "Cinergy" means the Company, its subsidiaries, and/or
its affiliates.
m. CODE. "Code" means the Internal Revenue Code of 1986, as
amended, and interpretive rules and regulations.
n. COMPANY. "Company" means Cinergy Corp.
o. DATE OF TERMINATION. "Date of Termination" means:
(i) if the Executive's employment is terminated by the
Company for Cause, or by the Executive with or
without Good Reason, the date of receipt of the
Notice of Termination or any later date specified in
the notice, as the case may be;
(ii) if the Executive's employment is terminated by the
Company other than for Cause, thirty (30) days after
the date on which the Company notifies the Executive
of the termination; and
(iii) if the Executive's employment is terminated by reason
of death, the date of death.
p. DEFERRED COMPENSATION. "Deferred Compensation" means
compensation deferred by the Executive pursuant to the Cinergy
Corp. Non-Qualified Deferred Incentive Compensation Plan and
employer contributions, if any, credited to the Executive
under the terms of that Plan.
q. EARNINGS. "Earnings" means the Executive's "Earnings" as
defined in the Pension Plan but without regard to the
limitation of Code paragraph 401(a)(17).
r. EFFECTIVE DATE. "Effective Date" means February 12, 2001.
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s. EMPLOYMENT PERIOD. "Employment Period" has the meaning set
forth in Subsection 1b.
t. EXCISE TAX. "Excise Tax" means any excise tax imposed by Code
section 4999, together with any interest, penalties,
additional tax or similar items that are incurred by the
Executive with respect to the excise tax imposed by Code
section 4999.
u. EXECUTIVE. "Executive" means R. Foster Duncan.
v. EXECUTIVE RETIREMENT PLANS. The "Executive Retirement Plans"
are the Pension Plan, the Supplemental Executive Retirement
Plan, and the Cinergy Corp. Excess Pension Plan or any
successor to those plans.
w. EXECUTIVE SUPPLEMENTAL LIFE PROGRAM. "Executive Supplemental
Life Program" means the Cinergy Corp. Executive Supplemental
Life Program or any successor to that plan.
x. GOOD REASON. "Good Reason" has the meaning set forth in
Subsection 4d.
y. GROSS-UP PAYMENT. "Gross-Up Payment" has the meaning set forth
in Subsection 5c.
z. M&W PLANS. "M&W Plans" has the meaning given in Subparagraph
5a(ii)(3).
aa. LONG-TERM INCENTIVE PLAN. "Long-Term Incentive Plan" means the
long-term inventive plan implemented under the Cinergy Corp.
1996 Long-Term Incentive Compensation Plan or any successor to
that plan.
bb. NOTICE OF TERMINATION. "Notice of Termination" has the meaning
set forth in Subsection 4e.
cc. PAYMENT OR PAYMENTS. "Payment" or "Payments" has the meaning
set forth in Subsection 5c.
dd. PERSON. "Person" has the meaning set forth in paragraph
3(a)(9) of the 1934 Act, as modified and used in subsections
13(d) and 14(d) of the 1934 Act; however, a Person will not
include the following:
(i) Cinergy or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under
an employee benefit plan of Cinergy or its
subsidiaries;
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(iii) An underwriter temporarily holding securities
pursuant to an offering of those securities; or
(iv) A corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the
Company.
ee. RELOCATION PROGRAM. "Relocation Program" means the Cinergy
Corp. Relocation Program or any successor to that program, as
in effect on the date of the Executive's termination of
employment.
ff. RETIREES' DENTAL PLAN. "Retirees' Dental Plan" means the
Cinergy Corp. Retirees' Dental Plan or any successor to that
plan.
gg. RETIREES' MEDICAL PLAN. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical Plan or any successor to that
plan.
hh. SEVERANCE BENEFITS. "Severance Benefits" means the payments
and benefits payable to the Executive pursuant to Section 5.
ii. SPOUSE. "Spouse" means the Executive's lawfully married
spouse. For this purpose, common law marriage or a similar
arrangement will not be recognized unless otherwise required
by federal law.
jj. STOCK RELATED DOCUMENTS. "Stock Related Documents" means the
LTIP, the Cinergy Corp. Stock Option Plan, and the Value
Creation Plan and any applicable administrative guidelines and
written agreements relating to those plans.
kk. TARGET ANNUAL BONUS. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
ll. TARGET LTIP BONUS. "Target LTIP Bonus" has the meaning set
forth in Subsection 3b.
mm. TERMINATION. "Termination" means (1) the termination by
Cinergy of the Executive's employment with Cinergy other than
a termination for Cause or (2) the termination by the
Executive of the Executive's employment with Cinergy for Good
Reason.
nn. VALUE CREATION PLAN. "Value Creation Plan" means the Value
Creation Plan of the LTIP.
12. MISCELLANEOUS.
a. This Agreement will be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions
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of this Agreement are not part of its provisions and will
have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended, or
discharged except by an agreement in writing signed by the
party against whom enforcement of the amendment,
modification, repeal, waiver, extension, or discharge is
sought. Only the Chief Executive Officer or his designee
will have authority on behalf of Cinergy to agree to
amend, modify, repeal, waive, extend, or discharge any
provision of this Agreement.
b. All notices and other communications under this Agreement will
be in writing and will be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
R. Foster Duncan
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
IF TO CINERGY:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party has furnished to the
other in writing in accordance with this Agreement. All
notices and communications will be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of
any other provision of this Agreement.
d. Cinergy may withhold from any amounts payable under this
Agreement such federal, state, or local taxes as are required
to be withheld pursuant to any applicable law or regulation.
e. The Executive's or Cinergy's failure to insist upon strict
compliance with any provision of this Agreement or the failure
to assert any right the Executive or Cinergy may have under
this Agreement, including without limitation the right of the
Executive to terminate employment for Good Reason pursuant to
Subsection 4d or the right of Cinergy to terminate the
Executive's employment for Cause pursuant to Subsection 4b,
will not be deemed to be a waiver of that provision or right
or any other provision or right of this Agreement.
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f. This instrument contains the entire agreement of the Executive
and Cinergy with respect to the subject matter of this
Agreement; and subject to any agreements evidencing stock
option or restricted stock grants described in Subsection 3b
and the Stock Related Documents, all promises,
representations, understandings, arrangements, and prior
agreements are merged into this Agreement and accordingly
superseded.
g. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which together
will constitute one and the same instrument.
h. Cinergy and the Executive agree that Cinergy Services, Inc.
will be authorized to act for Cinergy with respect to all
aspects pertaining to the administration and interpretation of
this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_________________________________
James E. Rogers
Chairman and Chief Executive
Officer
EXECUTIVE
By:_________________________________
R. Foster Duncan
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