(Mark One)
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
or
(
) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the transition period from ___________to__________
| Commission | Registrant, State of Incorporation, | I.R.S. Employer | |
|---|---|---|---|
| File Number | Address and Telephone Number | Identification No. | |
| 1-11377 | CINERGY CORP. | 31-1385023 | |
| (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 | |||
| 1-1232 | THE CINCINNATI GAS & ELECTRIC COMPANY | 31-0240030 | |
| (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 | |||
| 1-3543 | PSI ENERGY, INC. | 35-0594457 | |
| (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (513) 421-9500 | |||
| 2-7793 | THE UNION LIGHT, HEAT AND POWER COMPANY | 31-0473080 | |
| (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 |
Indicate by check mark
whether the registrants (1) have filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrants were required to file
such reports), and (2) have been subject to such filing requirements for the
past 90 days.
Yes X No __
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.
As of July 31, 2001, shares of Common Stock outstanding for each registrant were as listed:
| Registrant | Description | Shares | ||
|---|---|---|---|---|
| Cinergy Corp. | Par value $.01 per share | 159,094,704 | ||
| The Cincinnati Gas & Electric Company | Par value $8.50 per share | 89,663,086 | ||
| PSI Energy, Inc. | Without par value, stated value $.01 per share | 53,913,701 | ||
| The Union Light, Heat and Power Company | Par value $15.00 per share | 585,333 |
(a) The documents listed below are being filed or have previously been filed on behalf of Cinergy Corp., CG&E, PSI, and ULH&P and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not identified as previously filed are filed herewith:
Previously Filed
Exhibit Designation Registrant Nature of Exhibit as Exhibit to:
------------------- ---------- ----------------- --------------
Instruments defining
the rights of holders,
including Indentures
Fifty-third Supplemental Indenture
Cinergy Corp. between PSI and LaSalle National Bank
4a PSI dated June 15, 2001.
Material
Contracts
Amendment to Cinergy Corp. Union
Employees' 401 (k) Plan, adopted
January 1, 1998, effective January 1,
10a Cinergy Corp. 2001.
Cinergy Corp. Non-Union Employees'
Severance Opportunity Plan as amended
and restated effective June 1, 2001,
10b Cinergy Corp. adopted May 30, 2001.
Employment Agreement dated May 15,
Cinergy Corp. 2001, among Cinergy Corp. and CG&E and
10c CG&E J. Joseph Hale, Jr.
Employment Agreement dated May 15,
2001, among Cinergy Corp. and M.
10d Cinergy Corp. Stephen Harkness.
Cinergy Corp. Employment Agreement dated May 15,
CG&E 2001, among Cinergy Corp., CG&E and
10e PSI PSI and Bernard F. Roberts.
Cinergy Corp. Employment Agreement dated March 9,
CG&E 2001, among Cinergy Corp., CG&E and
10f PSI PSI and Lisa D. Gamblin.
Employment Agreement dated March 9,
2001, among Cinergy Corp. and Timothy
10g Cinergy Corp. J. Verhagen.
(b) No reports on Form 8-K were filed during the quarter.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Cinergy Corp., The Cincinnati Gas & Electric Company (CG&E), PSI Energy, Inc. (PSI), and The Union Light, Heat and Power Company (ULH&P) believe that the disclosures are adequate to make the information presented not misleading. In the opinion of Cinergy Corp., CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include normal, recurring adjustments) necessary to reflect the results of operations for the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the chief accounting officer on their behalf by the undersigned thereunto duly authorized.
| CINERGY CORP. | |
| The Cincinnati Gas & Electric Company | |
| PSI Energy, Inc. | |
| The Union Light, Heat and Power Company | |
| Registrants |
| Date: August 13, 2001 | /s/ Bernard F. Roberts | |
| Bernard F. Roberts | ||
| Duly Authorized Officer | ||
| and | ||
| Chief Accounting Officer |
Adopted by the
Benefits Committee
on _________, 2001
This document sets forth amendments to various benefit plans of Cinergy Corp. with regard to the terms of contribution contained in each of the plans. All amendments are effective January 1, 2001. Amendments to the following plans are set forth in this document:
------------------------------------------------------- -----------------------------------------------------
NAME OF PLAN DATE PLAN ADOPTED
------------------------------------------------------- -----------------------------------------------------
------------------------------------------------------- -----------------------------------------------------
Non-Union Employees' 401(k) Plan January 1, 1998
------------------------------------------------------- -----------------------------------------------------
------------------------------------------------------- -----------------------------------------------------
Union Employees' 401(k) Plan January 1, 1998
------------------------------------------------------- -----------------------------------------------------
------------------------------------------------------- -----------------------------------------------------
Union Employees' Savings Incentive Plan January 1, 1998
------------------------------------------------------- -----------------------------------------------------
The provisions regarding “Deferred Compensation Contributions” of Cinergy Corp. contained in each of the above–referenced plans are standard and uniform. Effective January 1, 2001, each of these plans is amended to provide that eligible employees hired on or after January 1, 2001, are automatically enrolled as participants in the appropriate plan at a three percent before-tax salary contribution unless they affirmatively elect in writing not to enroll or participate.
Article 4.1 “Deferred Compensation Contributions”, as amended, reads as follows:
| Eligible employees hired on or after January 1, 2001 are automatically enrolled as Participants at a three percent before-tax salary contribution unless they affirmatively elect in writing not to enroll or participate. Each Participant may elect, in accordance with rules established by the Plan Administrator, to reduce the Participant’s Compensation by any percentage up to 15 percent, in increments of one half percent, and to have the amount by which the Participant’s Compensation is reduced contributed on the Participant’s behalf by the Employer as a Deferred Compensation Contribution to the Plan. The election will be effective as soon as administratively possible after the date the Employee becomes eligible to participate and notifies the Plan Administrator of the deferral percentage. |
| A Participant may elect, in accordance with the rules established by the Plan Administrator, to increase, decrease, or discontinue the Participant’s Compensation reductions. Such an election will be effective as soon as administratively possible after receipt of the election by the Plan Administrator and will be effective only with respect to Compensation not yet earned as of the effective date of the election. |
| The Plan Administrator may adopt rules concerning the administration of the section. The Deferred Compensation Contributions made on behalf of each Participant shall be paid by each Employer to the Trustee and allocated to the Participant’s Deferred Compensation Contributions Account as soon as practical after the end of the pay period to which the Deferred Compensation Contributions relate, but in no case later than the fifteenth business day of the month following the month in which those amounts would otherwise have been payable to the Participant. |
Article 4.1 “Deferred Compensation Contributions”, as amended, reads as follows:
| Eligible employees hired on or after January 1, 2001 are automatically enrolled as Participants at a three percent before-tax salary contribution unless they affirmatively elect in writing not to enroll or participate. Each Participant may elect, in accordance with rules established by the Plan Administrator, to reduce the Participant’s Compensation by any percentage up to 15 percent, in increments of one half percent, and to have the amount by which the Participant’s Compensation is reduced contributed on the Participant’s behalf by the Employer as a Deferred Compensation Contribution to the Plan. The election will be effective as soon as administratively possible after the date the Employee becomes eligible to participate and notifies the Plan Administrator of the deferral percentage. |
| A Participant may elect, in accordance with the rules established by the Plan Administrator, to increase, decrease, or discontinue the Participant’s Compensation reductions. Such an election will be effective as soon as administratively possible after receipt of the election by the Plan Administrator and will be effective only with respect to Compensation not yet earned as of the effective date of the election. |
| The Plan Administrator may adopt rules concerning the administration of the section. The Deferred Compensation Contributions made on behalf of each Participant shall be paid by each Employer to the Trustee and allocated to the Participant’s Deferred Compensation Contributions Account as soon as practical after the end of the pay period to which the Deferred Compensation Contributions relate, but in no case later than the fifteenth business day of the month following the month in which those amounts would otherwise have been payable to the Participant. |
Article 4.1 “Deferred Compensation Contributions”, as amended, reads as follows:
| Eligible employees hired on or after January 1, 2001 are automatically enrolled as Participants at a three percent before-tax salary contribution unless they affirmatively elect in writing not to enroll or participate. Each Participant may elect, in accordance with rules established by the Plan Administrator, to reduce the Participant’s Compensation by any percentage up to 15 percent, in increments of one half percent, and to have the amount by which the Participant’s Compensation is reduced contributed on the Participant’s behalf by the Employer as a Deferred Compensation Contribution to the Plan. The election will be effective as soon as administratively possible after the date the Employee becomes eligible to participate and notifies the Plan Administrator of the deferral percentage. |
| A Participant may elect, in accordance with the rules established by the Plan Administrator, to increase, decrease, or discontinue the Participant’s Compensation reductions. Such an election will be effective as soon as administratively possible after receipt of the election by the Plan Administrator and will be effective only with respect to Compensation not yet earned as of the effective date of the election. |
| The Plan Administrator may adopt rules concerning the administration of the section. The Deferred Compensation Contributions made on behalf of each Participant shall be paid by each Employer to the Trustee and allocated to the Participant’s Deferred Compensation Contributions Account as soon as practical after the end of the pay period to which the Deferred Compensation Contributions relate, but in no case later than the fifteenth business day of the month following the month in which those amounts would otherwise have been payable to the Participant. |
#77107
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of
May, 2001(the "Effective Date"), by and between Cinergy and Bernard F. Roberts
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for and
hold the position of Vice President and Comptroller. Cinergy desires to secure
the employment of the Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ of
Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set forth
below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive agrees to
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 premises, 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 Vice President and
Comptroller. He will have such responsibilities, duties, and authority
as are customary for someone of that position and such additional
duties, consistent with his position, as may be assigned to him from
time to time during the Employment Period by the Board of Directors,
the Chief Executive Officer, or the senior executive officer to whom
he directly reports. Executive shall devote substantially all of
Executive's business time, efforts and attention to the performance of
Executive's duties under this Agreement; provided, however, that this
requirement shall not preclude Executive from reasonable participation
in civic, charitable or professional activities or the management of
Executive's passive investments, so long as such activities do not
materially interfere with the performance of Executive's duties under
this Agreement.
b. Place of Performance. In connection with the Executive's employment,
the Executive will be based at the principal executive offices of
Cinergy, 139 East Fourth Street, Cincinnati, Ohio. Except for required
business travel to an extent substantially consistent with the present
business travel obligations of Cinergy executives who have positions
of authority comparable to that of the Executive, the Executive will
not be required to relocate to a new principal place of business that
is more than thirty (30) miles from Cinergy's principal executive
offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the annual
rate of not less than $210,000 (subject to across-the-board salary
reductions described below). Any increase in the Annual Base Salary
will not serve to limit or reduce any other obligation of Cinergy
under this Agreement. The Annual Base Salary will not be reduced
except for across-the-board salary reductions similarly affecting all
Cinergy management personnel. If Annual Base Salary is increased or
reduced during the Employment Period, then such adjusted salary will
thereafter be the Annual Base Salary for all purposes under this
Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will be eligible, and
Cinergy will take all necessary action to cause the Executive to
become eligible, to participate in 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 other senior executives of Cinergy who are
considered Tier III executives for compensation purposes, except with
respect to any plan, practice, policy or program to which the
Executive has waived his rights in writing.
Upon his retirement on or after having attained age fifty (50), the
Executive will be eligible for comprehensive medical and dental
benefits which are not materially different from the benefits provided
under the Retirees' Medical Plan and the Retirees' Dental Plan. The
Executive, however, will receive the maximum level of subsidy
currently applicable to similarly situated active Cinergy employees
that is provided by Cinergy to retirees, as of the Effective Date of
this Agreement, for purposes of determining the amount of monthly
premiums due from the Executive.
The Executive will be a participant in the Annual Incentive Plan, and
the Executive will be paid pursuant to the terms and conditions of
that plan an annual benefit of up to fifty-two and one-half percent
(52.5%) of the Executive's Annual Base Salary (the "Maximum Annual
Bonus"), with a target of no less than thirty percent (30%) of the
Executive's Annual Base Salary (the "Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive Plan
(the "LTIP"), and the Executive's annualized target award opportunity
under the LTIP will be equal to no less than seventy-five percent
(75%) of his Annual Base Salary (the "Target LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period, the
Executive will be entitled to the following additional fringe benefits
in accordance with the terms and conditions of Cinergy's policies for
such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile appropriate
for the Executive's level of position, or, at Cinergy's
discretion, a cash allowance of equivalent value. Cinergy will
also pay all of the related expenses for gasoline, insurance,
maintenance, and repairs, or provide for such expenses within the
cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive for
membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per year
(or such longer period for which Executive is otherwise eligible
under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial planning
and tax preparation services.
(v) Cinergy will provide reasonable costs of relocating from the
Cincinnati, Ohio area to a new primary residence in a manner that
is consistent with the terms of the Relocation Program following
termination of the Executive's employment for any reason
(vi) Cinergy will provide other fringe benefits in accordance with
Cinergy plans, practices, programs, and policies in effect from
time to time, commensurate with his position and at least
comparable to those received by other Cinergy Tier III
executives.
d. Expenses. Cinergy agrees to reimburse the Executive for all expenses,
including those for travel and entertainment, properly incurred by him
in the performance of his duties under this Agreement in accordance
with the policies established from time to time by the Board of
Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically upon
the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy (other
than any such failure resulting from the Executive's incapacity
due to physical or mental illness) that, if curable, has not been
cured within 30 days after the Board of Directors or the Chief
Executive Officer has delivered to the Executive a written demand
for substantial performance, which demand specifically identifies
the manner in which the Executive has not substantially performed
his duties. This event will constitute Cause even if the
Executive issues a Notice of Termination for Good Reason pursuant
to Subsection 4d after the Board of Directors or Chief Executive
Officer delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9.
(iii)The conviction of the Executive for the commission of a felony,
including the entry of a guilty or nolo contendere plea, or any
willful or grossly negligent action or inaction by the Executive
that has a materially adverse effect on Cinergy. For purposes of
this definition of Cause, no act, or failure to act, on the
Executive's part will be deemed "willful" unless it is done, or
omitted to be done, by the Executive in bad faith and without
reasonable belief that the Executive's act, or failure to act,
was in the best interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days advance
written notice to the Executive, terminate the Executive's employment
during the Employment Period for a reason other than Cause, but the
obligations placed upon Cinergy in Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except for
across-the-board salary reductions similarly affecting all
Cinergy management personnel, or a reduction in any other benefit
or payment described in Section 3 of this Agreement, except for
changes to the employee benefits programs generally affecting
Cinergy management personnel, provided that those changes, in the
aggregate, will not result in a material adverse change with
respect to the benefits to which the Executive was entitled as of
the Effective Date.
(ii) The material reduction without his consent of the Executive's
title, authority, duties, or responsibilities from those in
effect immediately prior to the reduction, or a material adverse
change in the Executive's reporting responsibilities.
(iii)Any breach by Cinergy of any other material provision of this
Agreement (including but not limited to the place of performance
as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness or
injury that precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience.
(v) A failure by the Company to require any successor entity to the
Company specifically to assume in writing all of the Company's
obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate his
employment without Good Reason upon prior written notice to the
Company.
f. Notice of Termination. Any termination of the Executive's employment
by Cinergy or by the Executive during the Employment Period (other
than a termination due to the Executive's death) will be communicated
by a written Notice of Termination to the other party to this
Agreement in accordance with Subsection 12b. For purposes of this
Agreement, a "Notice of Termination" means a written notice that
specifies the particular provision of this Agreement relied upon and
that sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for terminating the Executive's employment
under the specified provision. The failure by the Executive or Cinergy
to set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or preclude
the Executive or Cinergy from asserting that fact or circumstance in
enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment Period,
Cinergy will pay to the Executive a lump sum amount, in cash,
equal to the sum of the following Accrued Obligations:
(1) the pro-rated portion of the Executive's Annual Base Salary
payable through the Date of Termination, to the extent not
previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently completed
fiscal year, to the extent not theretofore paid.
(3) an amount equal to the AIP Benefit for the fiscal year that
includes the Date of Termination multiplied by a fraction,
the numerator of which is the number of days from the
beginning of that fiscal year to and including the Date of
Termination and the denominator of which is three hundred
and sixty-five (365). The AIP Benefit component of the
calculation will be equal to the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the date of determination,
determined by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable.(3)
(4) the Accrued Obligations described in this Paragraph 5a(i)
will be paid within thirty (30) days after the Date of
Termination. These Accrued Obligations are payable to the
Executive regardless of whether a Change in Control has
occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four (24)
months following the occurrence of a Change in Control, Cinergy
will pay the Accrued Obligations, and Cinergy will have the
following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash, equal to three (3) times the sum of the Annual Base
Salary and the Annual Bonus. For this purpose, the Annual
Base Salary will be at the rate in effect at the time Notice
of Termination is given (without giving effect to any
reduction in Annual Base Salary, if any, prior to the
termination, other than across-the-board reductions), and
the Annual Bonus will be the higher of (A) the annual bonus
earned by the Executive pursuant to any annual bonus or
incentive plan maintained by Cinergy in respect of the year
ending immediately prior to the fiscal year in which occurs
the Date of Termination, and (B) the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be less
than the Annual Target Bonus, nor greater than the Maximum
Target Bonus for the year in which the Date of Termination
occurs. This lump sum will be paid within thirty (30) days
of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period, medical and
dental benefits to the Executive and/or the Executive's
dependents at least equal to those that would have been
provided if the Executive's employment had not been
terminated (excluding benefits to which the Executive has
waived his rights in writing). The benefits described in the
preceding sentence will be in accordance with the medical
and welfare benefit plans, practices, programs, or policies
of Cinergy (the "M&W Plans") as then currently in effect
and applicable generally to other Cinergy senior executives
and their families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any
related insurance policies) or (2) violate any of the
Code's nondiscrimination requirements applicable to the
M&W Plans, then Cinergy, in its sole discretion,
may elect to pay the Executive, in lieu of the M&W
Plan benefits described under this Subparagraph
5a(ii)(2), a lump sum cash payment equal to the total
monthly premiums (or in the case of a self funded plan,
the cost of COBRA continuation coverage) that would
have been paid by Cinergy for the Executive under the
M&W Plans from the Date of Termination through the
end of the Employment Period, grossed up for the effect
of federal, state and local income taxes. Nothing in
this Clause will affect the Executive's right to elect
COBRA continuation coverage under a M&W Plan in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W
Plans will be secondary to those provided under the
other employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(4) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the Executive
within thirty (30) days of the Date of Termination. To the
extent there is imputed income to the Executive resulting
from the transfer of title, the Executive will receive a
cash payment equal to the amount of federal, state and local
income taxes resulting from this transfer as soon as
administratively feasible after the transfer is effective.
At Cinergy's discretion, a cash payment of an equivalent
value of the automobile and corresponding income taxes may
be paid in lieu of the assignment of the automobile.
(5) Cinergy will pay to the Executive the lump sum present value
of any benefits under the Executive Supplemental Life
Program under the terms of the applicable plan or program as
of the Date of Termination, calculated as if the Executive
was fully vested as of the Date of Termination. The lump sum
present value, assuming commencement at age 50 or age as of
the Date of Termination if later, will be determined using
the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes the
Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under
section 417(e)(3) of the Code, or any successor provision
thereto, for the second full calendar month preceding the
first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(iii)In the event of a Qualifying Termination during the twenty-four
(24) month period beginning upon the occurrence of a Change in
Control, Cinergy will pay the Accrued Obligations, and Cinergy
will also have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher of (x)
the sum of the Executive's current Annual Base Salary and
Target Annual Bonus and (y) the sum of the Executive's
Annual Base Salary in effect immediately prior to the Change
in Control and the Change in Control Bonus. For purposes of
this Agreement, the Change in Control Bonus shall mean the
higher of (A) the annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior to
the fiscal year in which occurs the Date of Termination or,
if higher, immediately prior to the fiscal year in which
occurs the Change in Control, and (B) the annual bonus that
would have been earned by the Executive pursuant to any
annual bonus or incentive plan maintained by Cinergy in
respect of the year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objective for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable, provided, however, that for purposes of this
Subsection 5a(iii)(1)(B), such Change in Control Annual
Bonus shall not be less than the Annual Target Bonus, nor
greater than the Maximum Target Bonus. This lump sum will be
paid within thirty (30) days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present value
of any benefits under the Executive Supplemental Life
Program under the terms of the applicable plan or program as
of the Date of Termination, calculated as if the Executive
was fully vested as of the Date of Termination. The lump sum
present value, assuming commencement at age 50 or age as of
the Date of Termination if later, will be determined using
the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes the
Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under
section 417(e)(3) of the Code, or any successor provision
thereto, for the second full calendar month preceding the
first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued benefits
as of the Date of Termination under the Executive Retirement
Plans, and his accrued benefits thereunder will be
calculated as if the Executive was credited with three (3)
additional years of age and service as of the Date of
Termination. However, Cinergy will not commence payment of
such benefits until the Executive has attained age 50. For
purposes of determining benefits under the Executive
Retirement Plans, the definition of earnings will be the
same as defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive and/or the
Executive's dependents are receiving immediately prior to
the Notice of Termination at a substantially similar cost to
the Executive (without giving effect to any reduction in
those benefits subsequent to a Change in Control that
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents with
life, disability, accident, and health insurance benefits,
those benefits will be reduced to the extent comparable
benefits are actually received by or made available to the
Executive and/or the Executive's dependents during the
thirty-six (36) month period following the Executive's Date
of Termination. The Executive must report to Cinergy any
such benefits that he or his dependents actually receives.
In lieu of the benefits described in the preceding
sentences, Cinergy, in its sole discretion, may elect to pay
to the Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a self
funded plan, the cost of COBRA continuation coverage) that
would have been paid by Cinergy to provide those benefits to
the Executive and/or the Executive's dependents, grossed up
for the effect of federal, state and local income taxes.
Nothing in this Subparagraph 5a(iii)(4) will affect the
Executive's right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make the
payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and whether or
not the Executive receives health coverage from another
employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the Executive
within thirty (30) days of the Date of Termination. To the
extent there is imputed income to the Executive resulting
from the transfer of title, the Executive will receive a
cash payment equal to the amount of federal, state and local
income taxes resulting from this transfer as soon as
administratively feasible after the transfer is effective.
At Cinergy's discretion, a cash payment of an equivalent
value of the automobile and corresponding income taxes may
be paid in lieu of the assignment of the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by the
Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to the
Executive's position until the end of the Employment Period
or, if earlier, until the first acceptance by the Executive
of an offer of employment. At the Executive's discretion,
15% of Annual Base Salary may be paid in lieu of
outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than for
Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the Employment
Period, or if the Executive terminates employment during the
Employment Period other than a termination for Good Reason, Cinergy
will have no further obligations to the Executive under this Agreement
other than the obligation to pay to the Executive the Accrued
Obligations, plus any other earned but unpaid compensation, in each
case to theextent 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 change in ownership or effective
control of Cinergy or of a substantial portion of its assets (a
"Payment" or "Payments") would be subject to any Excise Tax, then
the Executive will be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest, penalties,
additional tax, or similar items imposed with respect thereto and
the Excise Tax), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all determinations
required to be made under this Section 5c, including whether and
when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by the Accounting Firm,
which shall provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days of
the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this
Section 5c, shall be paid by Cinergy to the Executive within five
(5) days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
Cinergy and the Executive. However, as a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that Cinergy exhausts its remedies pursuant to
Section 5c(iii) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Cinergy to or for the
benefit of the Executive. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Executive's
employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment being
repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local
income or employment tax deduction) plus interest on the amount
of such repayment at the rate provided in Code section
1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment or
benefit paid or payable to the Executive will be determined in
accordance with the principles of Code sections 280G(d)(3) and
(4). For purposes of determining the amount of the Gross-Up
Payment, the Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes that would be obtained from
deduction of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting Firm's
determination, an Excise Tax will be imposed on any Payment or
Payments, Cinergy will pay to the applicable government taxing
authorities as Excise Tax withholding, the amount of the Excise
Tax that Cinergy has actually withheld from the Payment or
Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's entitlement
to restricted shares and performance shares under the Value Creation
Plan and any stock options granted under the Stock Option Plan or the
LTIP will be determined under the terms of the appropriate plan and
any applicable administrative guidelines and written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the Executive's
entitlements, if any, under the Non-Qualified Deferred Compensation
Plan and 401(k) Excess Plan shall be distributed under the terms of
such plans and any applicable administrative guidelines and written
agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the Executive for
all reasonable legal fees and expenses incurred by the Executive in
successfully disputing a Qualifying Termination that entitles the
Executive to Severance Benefits. Payment will be made within five (5)
business days after delivery of the Executive's written request for
payment accompanied by such evidence of fees and expenses incurred as
Cinergy reasonably may require.
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)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' 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.
10. Successors.
a. This Agreement is personal to the Executive and, without Cinergy's
prior written consent, cannot be assigned by the Executive other than
Executive's designation of a beneficiary of any amounts payable
hereunder after the Executive's death. This Agreement will inure to
the benefit of and be enforceable by the Executive's legal
representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Cinergy to assume expressly and
agree to perform this Agreement in the same manner and to the same
extent that Cinergy would be required to perform it if no succession
had taken place. Cinergy's failure to obtain such an assumption and
agreement prior to the effective date of a succession will be a breach
of this Agreement and will entitle the Executive to compensation from
Cinergy in the same amount and on the same terms as if the Executive
were to terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective will be deemed the
Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between Cinergy
and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan benefit
described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base salary
payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in Subsection
5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy Corp.
Annual Incentive Plan or any similar plan or successor to the Annual
Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of directors
of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the Effective
Date:
(i) Any "person" or "group" (within the meaning of subsection 13(d)
and paragraph 14(d)(2) of the 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 (2) consecutive years, individuals who
at the beginning of that period constitute the Board of Directors
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Company's
shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of that period or whose
appointment, election, or nomination for election was previously
so approved or recommended cease for any reason to constitute a
majority of the Board of Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least sixty percent (60%) of
the combined voting power of the voting securities of which are
owned by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior
to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the meaning set
forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the chief
executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or its
affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended, and
interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive with Good Reason, the date of receipt
of the Notice of Termination or any later date specified in the
notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on which the
Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company other
than for Cause, thirty (30) days after the date on which the
Company notifies the Executive of the termination; and
(iv) if the Executive's employment is terminated by reason of death,
the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means the
Cinergy Corp. Non-Qualified Deferred Incentive Compensation Plan or
any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means May 15, 2001.
t. Employment Period. "Employment Period" has the meaning set forth in
Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code section
4999, together with any interest, penalties, additional tax or similar
items that are incurred by the Executive with respect to the excise
tax imposed by Code section 4999.
v. Executive. "Executive" means Bernard F. Roberts.
w. Executive Retirement Plans. "Executive Retirement Plans" means the
Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy Corp.
Supplemental Executive Retirement Plan and the Cinergy Corp. Excess
Pension Plan or any similar plans or successors to those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life Insurance
Program or any similar program or successor to the Executive
Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that plan.
z. Good Reason. "Good Reason" has the meaning set forth in Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or "LTIP"
means the long-term incentive plan implemented under the Cinergy Corp.
1996 Long-Term Incentive Compensation Plan or any successor to that
plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in
Subparagraph 5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set forth
in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning set
forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set forth
in Subsection 5c.
gg. 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;
(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.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with Cinergy
other than a termination for Cause or (ii) the termination by the
Executive of the Executive's employment with Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination of
employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy Corp.
Retirees' Dental program or any similar program or successor to that
program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the Cinergy
Corp. Retirees' Medical program or any similar program or successor to
that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. 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.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set forth
in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth in
Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value Creation
Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of its
provisions and will have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended, or discharged except by
an agreement in writing signed by the party against whom enforcement
of the amendment, modification, repeal, waiver, extension, or
discharge is sought. Only the Chief Executive Officer or his designee
will have authority on behalf of Cinergy to agree to amend, modify,
repeal, waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be in
writing and will be given by hand delivery to the other party or by
Federal Express or other comparable national or international
overnight delivery service, addressed as follows:
If to the Executive:
-------------------
Bernard F. Roberts
Cinergy Corp.
139 East Fourth Street
P.O. Box 960
Cincinnati, Ohio 45201-0960
If to Cinergy:
-------------
Cinergy Corp.
221 East Fourth Street
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.
f. References in this Agreement to the masculine include the feminine
unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive and
Cinergy with respect to the subject matter of this Agreement; and
subject to any agreements evidencing stock option or restricted stock
grants described in Subsection 3b and the Stock Related Documents, all
promises, representations, understandings, arrangements, and prior
agreements are merged into this Agreement and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which will be
deemed to be an original but all of which together will constitute one
and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will be
authorized to act for Cinergy with respect to all aspects pertaining
to the administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_____________________________
James E. Rogers
Chairman and
Chief Executive Officer
EXECUTIVE
--------------------------------
Bernard F. Roberts
41179.07-Palo Alto Server 1A Draft March 6, 2001 - 8:36 pm
-----------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 9th day of
March, 2001 (the "Effective Date"), by and between Cinergy and Timothy J.
Verhagen (the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
---------
The Executive is qualified and available to assume responsibility for and
hold the position of Vice President, Human Resources. Cinergy desires to secure
the employment of the Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ of
Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
----------
In consideration of the mutual premises, covenants and agreements set forth
below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive agrees to
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 premises, 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 Vice President, Human
Resources, and he will have such responsibilities, duties, and
authority as are customary for someone of that position and such
additional duties, consistent with his position, as may be assigned to
him from time to time during the Employment Period by the Board of
Directors, the Chief Executive Officer, or the senior executive
officer to whom he directly reports. Executive shall devote
substantially all of Executive's business time, efforts and attention
to the performance of Executive's duties under this Agreement;
provided, however, that this requirement shall not preclude Executive
from reasonable participation in civic, charitable or professional
activities or the management of Executive's passive investments, so
long as such activities do not materially interfere with the
performance of Executive's duties under this Agreement.
b. Place of Performance. In connection with the Executive's employment,
the Executive will be based at 221 East Fourth Street, Cincinnati, OH
45202. Except for required business travel to an extent substantially
consistent with the present business travel obligations of Cinergy
executives who have positions of authority comparable to that of the
Executive, the Executive will not be required to relocate to a new
principal place of business that is more than thirty (30) miles from
Cinergy's principal executive offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the annual
rate of not less than $225,000.00 (subject to across-the-board salary
reductions described below). Any increase in the Annual Base Salary
will not serve to limit or reduce any other obligation of Cinergy
under this Agreement. The Annual Base Salary will not be reduced
except for across-the-board salary reductions similarly affecting all
Cinergy management personnel. If Annual Base Salary is increased or
reduced during the Employment Period, then such adjusted salary will
thereafter be the Annual Base Salary for all purposes under this
Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will be eligible, and
Cinergy will take all necessary action to cause the Executive to
become eligible, to participate in 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 other senior executives of Cinergy who are
considered Tier III executives for compensation purposes, except with
respect to any plan, practice, policy or program to which the
Executive has waived his rights in writing.
Upon his retirement on or after having attained age fifty (50), the
Executive will be eligible for comprehensive medical and dental
benefits which are not materially different from the benefits provided
under the Retirees' Medical Plan and the Retirees' Dental Plan. The
Executive, however, will receive the maximum level of subsidy
currently applicable to similarly situated active Cinergy employees
that is provided by Cinergy to retirees, as of the Effective Date of
this Agreement, for purposes of determining the amount of monthly
premiums due from the Executive.
The Executive will be a participant in the Annual Incentive Plan, and
the Executive will be paid pursuant to the terms and conditions of
that plan an annual benefit of up to fifty-two and one-half percent
(52.5%) of the Executive's Annual Base Salary (the "Maximum Annual
Bonus"), with a target of no less than thirty percent (30%) of the
Executive's Annual Base Salary (the "Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive Plan
(the "LTIP"), and the Executive's annualized target award opportunity
under the LTIP will be equal to no less than seventy-five percent
(75%) of his Annual Base Salary (the "Target LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period, the
Executive will be ------------------------------- entitled to the
following additional fringe benefits in accordance with the terms and
conditions of Cinergy's policies for such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile appropriate
for the Executive's level of position, or, at Cinergy's
discretion, a cash allowance of equivalent value. Cinergy will
also pay all of the related expenses for gasoline, insurance,
maintenance, and repairs, or provide for such expenses within the
cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive for
membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per year
(or such longer period for which Executive is otherwise eligible
under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial planning
and tax preparation services.
(v) Cinergy will provide other fringe benefits in accordance with
Cinergy plans, practices, programs, and policies in effect from
time to time, commensurate with his position and at least
comparable to those received by other Cinergy Tier III
executives.
d. Expenses. Cinergy agrees to reimburse the Executive for all expenses,
including those for travel and entertainment, properly incurred by him
in the performance of his duties under this Agreement in accordance
with the policies established from time to time by the Board of
Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically upon
the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy (other
than any such failure resulting from the Executive's incapacity
due to physical or mental illness) that, if curable, has not been
cured within 30 days after the Board of Directors or the Chief
Executive Officer has delivered to the Executive a written demand
for substantial performance, which demand specifically identifies
the manner in which the Executive has not substantially performed
his duties. This event will constitute Cause even if the
Executive issues a Notice of Termination for Good Reason pursuant
to Subsection 4d after the Board of Directors or Chief Executive
Officer delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9.
(iii)The conviction of the Executive for the commission of a felony,
including the entry of a guilty or nolo contendere plea, or any
willful or grossly negligent action or inaction by the Executive
that has a materially adverse effect on Cinergy. For purposes of
this definition of Cause, no act, or failure to act, on the
Executive's part will be deemed "willful" unless it is done, or
omitted to be done, by the Executive in bad faith and without
reasonable belief that the Executive's act, or failure to act,
was in the best interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days advance
written notice to the Executive, terminate the Executive's employment
during the Employment Period for a reason other than Cause, but the
obligations placed upon Cinergy in Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except for
across-the-board salary reductions similarly affecting all
Cinergy management personnel, or a reduction in any other benefit
or payment described in Section 3 of this Agreement, except for
changes to the employee benefits programs generally affecting
Cinergy management personnel, provided that those changes, in the
aggregate, will not result in a material adverse change with
respect to the benefits to which the Executive was entitled as of
the Effective Date.
(ii) The material reduction without his consent of the Executive's
title, authority, duties, or responsibilities from those in
effect immediately prior to the reduction, or a material adverse
change in the Executive's reporting responsibilities.
(iii)Any breach by Cinergy of any other material provision of this
Agreement (including but not limited to the place of performance
as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness or
injury that precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience.
(v) A failure by the Company to require any successor entity to the
Company specifically to assume in writing all of the Company's
obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate his
employment without Good Reason upon prior written notice to the
Company.
f. Notice of Termination. Any termination of the Executive's employment
by Cinergy or by the Executive during the Employment Period (other
than a termination due to the Executive's death) will be communicated
by a written Notice of Termination to the other party to this
Agreement in accordance with Subsection 12b. For purposes of this
Agreement, a "Notice of Termination" means a written notice that
specifies the particular provision of this Agreement relied upon and
that sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for terminating the Executive's employment
under the specified provision. The failure by the Executive or Cinergy
to set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or preclude
the Executive or Cinergy from asserting that fact or circumstance in
enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment Period,
Cinergy will pay to the Executive a lump sum amount, in cash,
equal to the sum of the following Accrued Obligations:
(1) the pro-rated portion of the Executive's Annual Base Salary
payable through the Date of Termination, to the extent not
previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently completed
fiscal year, to the extent not theretofore paid.
(3) an amount equal to the AIP Benefit for the fiscal year that
includes the Date of Termination multiplied by a fraction,
the numerator of which is the number of days from the
beginning of that fiscal year to and including the Date of
Termination and the denominator of which is three hundred
and sixty-five (365). The AIP Benefit component of the
calculation will be equal to the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the date of determination,
determined by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable.
(4) the Accrued Obligations described in this Paragraph 5a(i)
will be paid within thirty (30) days after the Date of
Termination. These Accrued Obligations are payable to the
Executive regardless of whether a Change in Control has
occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four (24)
months following the occurrence of a Change in Control, Cinergy
will pay the Accrued Obligations, and Cinergy will have the
following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash, equal to three (3) times the sum of the Annual Base
Salary and the Annual Bonus. For this purpose, the Annual
Base Salary will be at the rate in effect at the time Notice
of Termination is given (without giving effect to any
reduction in Annual Base Salary, if any, prior to the
termination, other than across-the-board reductions), and
the Annual Bonus will be the higher of (A) the annual bonus
earned by the Executive pursuant to any annual bonus or
incentive plan maintained by Cinergy in respect of the year
ending immediately prior to the fiscal year in which occurs
the Date of Termination, and (B) the annual bonus that would
have been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of
the fiscal year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objectives for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be less
than the Target Annual Bonus, nor greater than the Maximum
Annual Bonus for the year in which the Date of Termination
occurs. This lump sum will be paid within thirty (30) days
of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period, medical and
dental benefits to the Executive and/or the Executive's
dependents at least equal to those that would have been
provided if the Executive's employment had not been
terminated (excluding benefits to which the Executive has
waived his rights in writing). The benefits described in the
preceding sentence will be in accordance with the medical
and welfare benefit plans, practices, programs, or policies
of Cinergy (the "M&W Plans") as then currently in effect and
applicable generally to other Cinergy senior executives and
their families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any related
insurance policies) or (2) violate any of the Code's
nondiscrimination requirements applicable to the M&W
Plans, then Cinergy, in its sole discretion, may elect
to pay the Executive, in lieu of the M&W Plan benefits
described under this Subparagraph 5a(ii)(2), a lump sum
cash payment equal to the total monthly premiums (or in
the case of a self funded plan, the cost of COBRA
continuation coverage) that would have been paid by
Cinergy for the Executive under the M&W Plans from the
Date of Termination through the end of the Employment
Period, grossed up for the effect of federal, state and
local income taxes. Nothing in this Clause will affect
the Executive's right to elect COBRA continuation
coverage under a M&W Plan in accordance with applicable
law, and Cinergy will make the payment described in
this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W Plans
will be secondary to those provided under the other
employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(iii)In the event of a Qualifying Termination during the twenty-four
(24) month period beginning upon the occurrence of a Change in
Control, Cinergy will pay the Accrued Obligations, and Cinergy
will also have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher of (x)
the sum of the Executive's current Annual Base Salary and
Target Annual Bonus and (y) the sum of the Executive's
Annual Base Salary in effect immediately prior to the Change
in Control and the Change in Control Bonus. For purposes of
this Agreement, the Change in Control Bonus shall mean the
higher of (A) the annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior to
the fiscal year in which occurs the Date of Termination or,
if higher, immediately prior to the fiscal year in which
occurs the Change in Control, and (B) the annual bonus that
would have been earned by the Executive pursuant to any
annual bonus or incentive plan maintained by Cinergy in
respect of the year in which occurs the Date of Termination,
calculated by projecting Cinergy's performance and other
applicable goals and objective for the entire fiscal year
based on Cinergy's performance during the period of such
fiscal year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy deems
reasonable, provided, however, that for purposes of this
Subsection 5a(iii)(1)(B), such Change in Control Annual
Bonus shall not be less than the Target Annual Bonus, nor
greater than the Maximum Annual Bonus. This lump sum will be
paid within thirty (30) days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present value
of any benefits under the Executive Supplemental Life
Program under the terms of the applicable plan or program as
of the Date of Termination, calculated as if the Executive
was fully vested as of the Date of Termination. The lump sum
present value, assuming commencement at age 50 or age as of
the Date of Termination if later, will be determined using
the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes the
Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under
section 417(e)(3) of the Code, or any successor provision
thereto, for the second full calendar month preceding the
first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued benefits
as of the Date of Termination under the Executive Retirement
Plans, and his accrued benefits thereunder will be
calculated as if the Executive was credited with three (3)
additional years of age and service as of the Date of
Termination. However, Cinergy will not commence payment of
such benefits until the Executive has attained age 50. For
purposes of determining benefits under the Executive
Retirement Plans, the definition of earnings will be the
same as defined in such plans. (4) For a thirty-six (36)
month period after the Date of Termination, Cinergy will
arrange to provide to the Executive and/or the Executive's
dependents life, disability, accident, and health insurance
benefits substantially similar to those that the Executive
and/or the Executive's dependents are receiving immediately
prior to the Notice of Termination at a substantially
similar cost to the Executive (without giving effect to any
reduction in those benefits subsequent to a Change in
Control that constitutes Good Reason), except for any
benefits that were waived by the Executive in writing. If
Cinergy arranges to provide the Executive and/or the
Executive's dependents with life, disability, accident, and
health insurance benefits, those benefits will be reduced to
the extent comparable benefits are actually received by or
made available to the Executive and/or the Executive's
dependents during the thirty-six (36) month period following
the Executive's Date of Termination. The Executive must
report to Cinergy any such benefits that he or his
dependents actually receives. In lieu of the benefits
described in the preceding sentences, Cinergy, in its sole
discretion, may elect to pay to the Executive a lump sum
cash payment equal to thirty-six (36) times the monthly
premiums (or in the case of a self funded plan, the cost of
COBRA continuation coverage) that would have been paid by
Cinergy to provide those benefits to the Executive and/or
the Executive's dependents, grossed up for the effect of
federal, state and local income taxes. Nothing in this
Subparagraph 5a(iii)(4) will affect the Executive's right to
elect COBRA continuation coverage in accordance with
applicable law, and Cinergy will make the payment described
in this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the Executive
within thirty (30) days of the Date of Termination. To the
extent there is imputed income to the Executive resulting
from the transfer of title, the Executive will receive a
cash payment equal to the amount of federal, state and local
income taxes resulting from this transfer as soon as
administratively feasible after the transfer is effective.
At Cinergy's discretion, a cash payment of an equivalent
value of the automobile and corresponding income taxes may
be paid in lieu of the assignment of the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by the
Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to the
Executive's position until the end of the Employment Period
or, if earlier, until the first acceptance by the Executive
of an offer of employment. At the Executive's discretion,
15% of Annual Base Salary may be paid in lieu of
outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than for
Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the Employment
Period, or if the Executive terminates employment during the
Employment Period other than a termination for Good Reason, Cinergy
will have no further obligations to the Executive under this Agreement
other than the obligation to pay to the Executive the Accrued
Obligations, plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to the
Executive or for his benefit pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, his
employment with Cinergy or a change in ownership or effective
control of Cinergy or of a substantial portion of its assets (a
"Payment" or "Payments") would be subject to any Excise Tax, then
the Executive will be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest, penalties,
additional tax, or similar items imposed with respect thereto and
the Excise Tax), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all determinations
required to be made under this Section 5c, including whether and
when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by the Accounting Firm,
which shall provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days of
the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this
Section 5c, shall be paid by Cinergy to the Executive within five
(5) days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
Cinergy and the Executive. However, as a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that Cinergy exhausts its remedies pursuant to
Section 5c(iii) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Cinergy to or for the
benefit of the Executive. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Executive's
employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment being
repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local
income or employment tax deduction) plus interest on the amount
of such repayment at the rate provided in Code section
1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment or
benefit paid or payable to the Executive will be determined in
accordance with the principles of Code sections 280G(d)(3) and
(4). For purposes of determining the amount of the Gross-Up
Payment, the Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes that would be obtained from
deduction of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting Firm's
determination, an Excise Tax will be imposed on any Payment or
Payments, Cinergy will pay to the applicable government taxing
authorities as Excise Tax withholding, the amount of the Excise
Tax that Cinergy has actually withheld from the Payment or
Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's entitlement
to restricted shares and performance shares under the Value Creation
Plan and any stock options granted under the Stock Option Plan or the
LTIP will be determined under the terms of the appropriate plan and
any applicable administrative guidelines and written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the Executive's
entitlements, if any, under the Non-Qualified Deferred Compensation
Plan and 401(k) Excess Plan shall be distributed under the terms of
such plans and any applicable administrative guidelines and written
agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the Executive for
all reasonable legal fees and expenses incurred by the Executive in
successfully disputing a Qualifying Termination that entitles the
Executive to Severance Benefits. Payment will be made within five (5)
business days after delivery of the Executive's written request for
payment accompanied by such evidence of fees and expenses incurred as
Cinergy reasonably may require.
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)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' 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.
10. Successors.
a. This Agreement is personal to the Executive and, without Cinergy's
prior written consent, cannot be assigned by the Executive other than
Executive's designation of a beneficiary of any amounts payable
hereunder after the Executive's death. This Agreement will inure to
the benefit of and be enforceable by the Executive's legal
representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Cinergy to assume expressly and
agree to perform this Agreement in the same manner and to the same
extent that Cinergy would be required to perform it if no succession
had taken place. Cinergy's failure to obtain such an assumption and
agreement prior to the effective date of a succession will be a breach
of this Agreement and will entitle the Executive to compensation from
Cinergy in the same amount and on the same terms as if the Executive
were to terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective will be deemed the
Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between Cinergy
and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan benefit
described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base salary
payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in Subsection
5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy Corp.
Annual Incentive Plan or any similar plan or successor to the Annual
Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of directors
of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the Effective
Date:
(i) Any "person" or "group" (within the meaning of subsection 13(d)
and paragraph 14(d)(2) of the 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 (2) consecutive years, individuals who
at the beginning of that period constitute the Board of Directors
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Company's
shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of that period or whose
appointment, election, or nomination for election was previously
so approved or recommended cease for any reason to constitute a
majority of the Board of Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least sixty percent (60%) of
the combined voting power of the voting securities of which are
owned by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior
to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the meaning set
forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the chief
executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or its
affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended, and
interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive with Good Reason, the date of receipt
of the Notice of Termination or any later date specified in the
notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on which the
Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company other
than for Cause, thirty (30) days after the date on which the
Company notifies the Executive of the termination; and
(iv) if the Executive's employment is terminated by reason of death,
the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means the
Cinergy Corp. Non-Qualified Deferred Incentive Compensation Plan or
any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means March 9, 2001.
t. Employment Period. "Employment Period" has the meaning set forth in
Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code section
4999, together with any interest, penalties, additional tax or similar
items that are incurred by the Executive with respect to the excise
tax imposed by Code section 4999.
v. Executive. "Executive" means Timothy J. Verhagen.
w. Executive Retirement Plans. "Executive Retirement Plans" means the
Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy Corp.
Supplemental Executive Retirement Plan and the Cinergy Corp. Excess
Pension Plan or any similar plans or successors to those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life Insurance
Program or any similar program or successor to the Executive
Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that plan.
z. Good Reason. "Good Reason" has the meaning set forth in Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or "LTIP"
means the long-term incentive plan implemented under the Cinergy Corp.
1996 Long-Term Incentive Compensation Plan or any successor to that
plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in Subparagraph
5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set forth
in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning set
forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set forth
in Subsection 5c.
gg. 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;
(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.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with Cinergy
other than a termination for Cause or (ii) the termination by the
Executive of the Executive's employment with Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination of
employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy Corp.
Retirees' Dental program or any similar program or successor to that
program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the Cinergy
Corp. Retirees' Medical program or any similar program or successor to
that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. 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.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set forth
in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth in
Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value Creation
Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of its
provisions and will have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended, or discharged except by
an agreement in writing signed by the party against whom enforcement
of the amendment, modification, repeal, waiver, extension, or
discharge is sought. Only the Chief Executive Officer or his designee
will have authority on behalf of Cinergy to agree to amend, modify,
repeal, waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be in
writing and will be given by hand delivery to the other party or by
Federal Express or other comparable national or international
overnight delivery service, addressed as follows:
If to the Executive:
-------------------
Timothy J. Verhagen
139 E. Fourth Street, EA029
Cincinnati, OH 45202
If to Cinergy:
-------------
Cinergy Corp.
221 East Fourth Street
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.
f. References in this Agreement to the masculine include the feminine
unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive and
Cinergy with respect to the subject matter of this Agreement; and
subject to any agreements evidencing stock option or restricted stock
grants described in Subsection 3b and the Stock Related Documents, all
promises, representations, understandings, arrangements, and prior
agreements are merged into this Agreement and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which will be
deemed to be an original but all of which together will constitute one
and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will be
authorized to act for Cinergy with respect to all aspects pertaining
to the administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_____________________________
James E. Rogers
Chairman and
Chief Executive Officer
EXECUTIVE
--------------------------------
FIFTY-THIRD SUPPLEMENTAL
INDENTURE
TO
INDENTURE DATED SEPTEMBER 1, 1939
---------------
PSI ENERGY, INC.
(FORMERLY NAMED "PUBLIC SERVICE COMPANY OF INDIANA, INC." AND
SUCCESSOR BY CONSOLIDATION TO PUBLIC SERVICE COMPANY OF INDIANA)
TO
LASALLE BANK NATIONAL ASSOCIATION
AS TRUSTEE
(FORMERLY NAMED "LASALLE NATIONAL BANK" AND THE
SUCCESSOR TRUSTEE TO THE FIRST NATIONAL BANK OF CHICAGO)
----------------
DATED AS OF JUNE 15, 2001
----------------
CREATING FIRST MORTGAGE BONDS, SERIES EEE, 6.65%, DUE JUNE 15, 2006
AND
OTHERWISE SUPPLEMENTING AND AMENDING THE INDENTURE
TABLE OF CONTENTS
-----------------
Page
PARTIES:
Company (PSI Energy, Inc. formerly named Public Service Company
of Indiana, Inc., successor by consolidation to Initial Mortgagor
(Public Service Company of Indiana)), and Trustee.................... 1
RECITALS:
Indenture of the Initial Mortgagor, dated September 1, 1939, and First
Supplemental Indenture thereto of the Initial Mortgagor, dated
as of March 1, 1941.................................................. 1
Consolidation of Initial Mortgagor (and four other companies) into the
Company.............................................................. 1
Execution by Company of Third Supplemental Indenture to the original
Indenture............................................................ 1
Company substituted for Initial Mortgagor under Indenture................ 1
Execution by Company of Third through the Fifty-Second Supplemental
Indentures to the original Indenture................................. 2
LaSalle Bank National Association, successor to original Trustee......... 2
Change of name of Company from Public Service Company of Indiana,
Inc. to PSI Energy, Inc.............................................. 3
Amount of bonds presently outstanding under the Indenture................ 3
Fifty-Third Supplemental Indenture and Bonds of Series EEE authorized 3
Conditions precedent performed........................................... 3
EXECUTING CLAUSE........................................................... 3
Page
ARTICLE I.
Section 1. Definitions........................................................ 4
ARTICLE II.
FIRST MORTGAGE BONDS, SERIES EEE, 6.65%, DUE JUNE 15, 2006.
Section 1. Creation and designation of Bonds of Series EEE.....................8
Section 2. Form of Bonds of Series EEE.........................................8
Form of face of Bonds of Series EEE................................9
Form of reverse of Bonds of Series EEE and Trustee's certificate..12
Section 3. Transfer and Exchange of Bonds of Series EEE.......................18
Section 4. Date of Bonds of Series EEE........................................30
Section 5. Maturity dates and interest rates of Bonds of Series EEE...........30
Section 6. Interest Rate Adjustments..........................................30
Section 7. Certain Rights to Require Repurchase of Bonds of Series EEE by the
Company...........................................................32
Section 8. Place and manner of payment of Bonds of Series EEE.................33
Section 9. Denominations and numbering of definitive Bonds of Series EEE......33
Temporary Bonds of Series EEE and exchange
thereof for definitive bonds......................................33
Section 10. Maintenance and Renewal Fund shall not apply to the Bonds
of Series EEE....................................................33
Section 11.Inspection requirements shall not apply to the Bonds of Series EEE.34
Section 12. Company's right to further amend the original Indenture...........34
ARTICLE III.
ISSUANCE OF BONDS OF SERIES EEE.
Section 1. Aggregate principal amount of Bonds of Series EEE issuable at once 35
Section 2. Issuance of additional Bonds of Series EEE........................ 35
ARTICLE IV.
INDENTURE AMENDMENTS.
Section 1. Amendments to Article I of the original Indenture................. 35
Section 2. Amendments to Article VII of the original Indenture............... 36
Page
ARTICLE V.
CONCERNING THE TRUSTEE.
Acceptance of trust by Trustee............................................... 38
Trustee not responsible for validity or sufficiency of Fifty-Third
Supplemental Indenture, etc................................................ 38
Terms and conditions of Article XVII of the original Indenture to be applied
to the Fifty-Third Supplemental Indenture.................................. 38
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
Section 1. References in any article or section of the original Indenture refer
to such article or section as amended by all Fifty-Three
Supplemental Indentures thereto.......................... 38
Section 2. Operation and construction of amendments to the original Indenture.38
Section 3. All covenants, etc., for sole benefit of parties to the Fifty-Third
Supplemental Indenture and holders of bonds.................38
Section 4. Table of contents and headings of articles not part of Fifty-Third
Supplemental Indenture......................................38
Section 5. Execution of Fifty-Third Supplemental Indenture in counterparts....39
Section 6. Payments Due on Legal Holidays.....................................39
ATTESTATION CLAUSE........................................................... 40
SIGNATURES................................................................... 40
ACKNOWLEDGMENT BY COMPANY.................................................... 41
ACKNOWLEDGMENT BY TRUSTEE.................................................... 42
EXHIBIT A................................................................... A-1
EXHIBIT B................................................................... B-1
FIFTY-THIRD SUPPLEMENTAL INDENTURE dated as of the fifteenth day of June
2001, made and entered into by and between PSI ENERGY, INC. (hereinafter
commonly referred to as the "Company"), a corporation organized and existing
under the laws of the State of Indiana, formerly named Public Service Company of
Indiana, Inc., and the successor by consolidation to Public Service Company of
Indiana, an Indiana corporation, party of the first part, and LASALLE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States and having its office or place of business
in the City of Chicago, State of Illinois, formerly named LaSalle National Bank,
and the successor trustee to The First National Bank of Chicago (hereinafter
commonly referred to as the "Trustee"), party of the second part,
WITNESSETH:
WHEREAS, Public Service Company of Indiana (hereinafter commonly referred
to as the "Initial Mortgagor"), prior to its consolidation with certain other
corporations to form the Company, executed and delivered to the Trustee a
certain indenture of mortgage or deed of trust (hereinafter called the "original
Indenture" when referred to as existing prior to any amendment thereto, and the
"Indenture" when referred to as heretofore, now or hereafter amended), dated
September 1, 1939, and a First Supplemental Indenture thereto, dated as of March
1, 1941, to secure the bonds of the Initial Mortgagor, its successors and
assigns, issued from time to time under the Indenture in series for the purposes
of and subject to the limitations specified in the Indenture; and
WHEREAS, the Company on September 6, 1941, became, through a consolidation,
the successor of the Initial Mortgagor (and four other companies) and succeeded
to all the rights and became liable for all the obligations of the Initial
Mortgagor (and such other companies); and
WHEREAS, after said consolidation, the Company executed and delivered a
Second Supplemental Indenture, dated as of November 1, 1941, to the original
Indenture for the purposes, among others, of (i) the making by the Company of an
agreement of assumption and adoption by it of the Indenture, (ii) the assumption
by the Company of the bonds (and interest and premium, if any, thereon) issued
or to be issued under the Indenture, and of all terms, covenants and conditions
binding upon it under the Indenture, and the agreeing by the Company to pay,
perform and fulfill the same, and (iii) the conveying to the Trustee upon the
trusts declared in the Indenture, but subject to any outstanding liens and
encumbrances, all the property which the Company then owned or which it might
thereafter acquire, except property of a character similar to the property of
the Initial Mortgagor which is excluded from the lien of the Indenture; and
WHEREAS, all conditions have been met and all acts and things necessary
have been done and performed to make the Indenture the valid and binding
agreement of the Company and to substitute the Company for the Initial Mortgagor
under the Indenture, and to vest the Company with each and every right and power
of the Initial Mortgagor, including the right and power to issue bonds
thereunder; and
WHEREAS, the Company has subsequently executed and delivered, for purposes
authorized under the Indenture, a Third Supplemental Indenture dated as of March
1, 1942, a Fourth Supplemental Indenture dated as of May 1, 1943, a Fifth
Supplemental Indenture dated as of August 1, 1944, a Sixth Supplemental
Indenture dated as of September 1, 1945, a Seventh Supplemental Indenture dated
as of November 1, 1947, an Eighth Supplemental Indenture dated as of January 1,
1949, a Ninth Supplemental Indenture dated as of May 1, 1950, a Tenth
Supplemental Indenture dated as of July 1, 1952, an Eleventh Supplemental
Indenture dated as of January 1, 1954, a Twelfth Supplemental Indenture dated as
of October 1, 1957, a Thirteenth Supplemental Indenture dated as of February 1,
1959, a Fourteenth Supplemental Indenture dated as of July 15, 1960, a Fifteenth
Supplemental Indenture dated as of June 15, 1964, a Sixteenth Supplemental
Indenture dated as of January 1, 1969, a Seventeenth Supplemental Indenture
dated as of March 1, 1970, an Eighteenth Supplemental Indenture dated as of
January 1, 1971, a Nineteenth Supplemental Indenture dated as of January 1,
1972, a Twentieth Supplemental Indenture dated as of February 1, 1974, a
Twenty-First Supplemental Indenture dated as of August 1, 1974, a Twenty-Second
Supplemental Indenture dated as of August 1, 1975, a Twenty-Third Supplemental
Indenture dated as of January 1, 1977, a Twenty-Fourth Supplemental Indenture
dated as of October 1, 1977, a Twenty-Fifth Supplemental Indenture dated as of
September 1, 1978, a Twenty-Sixth Supplemental Indenture dated as of September
1, 1978, a Twenty-Seventh Supplemental Indenture dated as of March 1, 1979, a
Twenty-Eighth Supplemental Indenture dated as of May 1, 1979, a Twenty-Ninth
Supplemental Indenture dated as of March 1, 1980, a Thirtieth Supplemental
Indenture dated as of August 1, 1980, a Thirty-First Supplemental Indenture
dated as of February 1, 1981, a Thirty-Second Supplemental Indenture dated as of
August 1, 1981, a Thirty-Third Supplemental Indenture dated as of December 1,
1981, a Thirty-Fourth Supplemental Indenture dated as of December 1, 1982, a
Thirty-Fifth Supplemental Indenture dated as of March 30, 1984, a Thirty-Sixth
Supplemental Indenture dated as of November 15, 1984, a Thirty-Seventh
Supplemental Indenture dated as of August 15, 1985, a Thirty-Eighth Supplemental
Indenture dated as of October 1, 1986, a Thirty-Ninth Supplemental Indenture
dated as of March 15, 1987, a Fortieth Supplemental Indenture dated as of June
1, 1987, a Forty-First Supplemental Indenture dated as of June 15, 1988, a
Forty-Second Supplemental Indenture dated as of August 1, 1988, a Forty-Third
Supplemental Indenture dated as of September 15, 1989, a Forty-Fourth
Supplemental Indenture dated as of March 15, 1990, a Forty-Fifth Supplemental
Indenture dated as of March 15, 1990, a Forty-Sixth Supplemental Indenture dated
as of June 1, 1990, a Forty-Seventh Supplemental Indenture dated as of July 15,
1991, a Forty-Eighth Supplemental Indenture dated as of July 15, 1992, a
Forty-Ninth Supplemental Indenture dated as of February 15, 1993, a Fiftieth
Supplemental Indenture dated as of February 15, 1993, a Fifty-First Supplemental
Indenture dated as of February 1, 1994, and a Fifty-Second Supplemental
Indenture dated as of April 30, 1999, each supplementing and amending the
Indenture; and
WHEREAS, the Thirty-Fifth Supplemental Indenture authorized and appointed
LaSalle Bank National Association, a national banking association duly organized
and existing under the law of the United States of America with its principal
office in Chicago, Illinois and formerly named LaSalle National Bank, as
Successor Trustee to The First National Bank of Chicago, which appointment was
accepted, and all trust powers under the Indenture were thereby transferred from
The First National Bank of Chicago to LaSalle Bank National Association; and
WHEREAS, the Forty-Sixth Supplemental Indenture amended the Indenture to
reflect a change in the name of the Company from Public Service Company of
Indiana, Inc. to PSI Energy, Inc. effective as of April 20, 1990; and
WHEREAS, as of June 15, 2001, the only bonds that have been heretofore
issued under the Indenture which are now outstanding are $300,000,000 aggregate
principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series VV, Due July
15, 2026" and $545,000,000 aggregate principal amount of "PSI Energy, Inc. First
Mortgage Bonds, Series WW, Due August 15, 2027" and $50,000,000 aggregate
principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series ZZ, 5 3/4%,
Due February 15, 2028" and $50,000,000 aggregate principal amount of "PSI
Energy, Inc. First Mortgage Bonds, Series AAA, 7 1/8%, Due February 1, 2024" and
$124,665,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage
Bonds, Series BBB, 8%, Due July 15, 2009" (such bonds being hereinafter referred
to as "Bonds of Series BBB") and $53,055,000 aggregate principal amount of "PSI
Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" and
$38,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage
Bonds, Series DDD, 8.31%, Due September 1, 2032"; and
WHEREAS, in accordance with the provisions of Section 1 of Article XVIII of
the Indenture, the Board of Directors has authorized the execution and delivery
by the Company of a Fifty-Third Supplemental Indenture, substantially in the
form of this Fifty-Third Supplemental Indenture, for the purpose of creating a
fiftieth series of bonds to be issued under the Indenture, to be known as "PSI
Energy, Inc. First Mortgage Bonds, Series EEE, 6.65%, Due June 15, 2006" (such
bonds being hereinafter referred to as "Bonds of Series EEE"), and prescribing
the form and substance of the Bonds of Series EEE and the terms, provisions and
characteristics thereof, and for the purpose of adding to the covenants and
agreements of the Company for the protection of the bondholders and of the trust
estate, of providing the terms and conditions for the redemption of the Bonds of
Series EEE, of adding certain other covenants and undertakings with respect to
the Bonds of Series EEE and of making such changes in the Indenture as are
deemed necessary or desirable and as are permitted by the Indenture; and
WHEREAS, all conditions and requirements necessary to make this Fifty-Third
Supplemental Indenture a valid, binding and legal instrument have been done,
performed and fulfilled and the execution and delivery hereof have been in all
respects duly authorized:
NOW, THEREFORE, in consideration of the premises, and of the acceptance and
purchase of the Bonds of Series EEE by the holders and registered owners
thereof, and of the sum of One Dollar ($1.00) duly paid by the Trustee to the
Company, the receipt whereof is hereby acknowledged, and in accordance with and
subject to the terms and provisions of the Indenture, the Company and the
Trustee, respectively, have entered into, executed and delivered this
Fifty-Third Supplemental Indenture for the uses and purposes hereinafter
expressed, that is to say:
ARTICLE I.
Section 1. Definitions.
For all purposes of this Fifty-Third Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the
singular; and
(2) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Supplemental Indenture as a whole
and not to any particular Article, Section or other subdivision.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Bond, the rules and procedures of the
Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
"Clearstream" means Clearstream Banking, S.A.
"Closing Date" means the date on which the Company delivers the Bonds of
Series EEE to the Initial Purchasers.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act.
"corporation" means a corporation, association, company, limited liability
company, joint-stock company or business trust.
"Definitive Bond" means a certificated Bond of Series EEE registered in the
name of the holder thereof and in the form set forth in Section 2(a) of Article
II, except that such Bonds of Series EEE shall not bear the Global Bond Legend.
"Depositary" means The Depository Trust Company until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Supplemental Indenture, and thereafter "Depositary" shall mean such successor
Depositary.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Bonds" means the Bonds of Series EEE issued in the Exchange Offer
pursuant to Section 3(f) of Article II.
"Exchange Offer" means an exchange offer pursuant to a registration
statement under the Securities Act, registering securities substantially
identical to the Bonds of Series EEE, as provided by the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Global Bond Legend" means the legend set forth in Section 3(g)(ii) of
Article II, which is required to be placed on all Global Bonds issued under this
Supplemental Indenture.
"Global Bonds" has the meaning specified in Section 2(b) of Article II.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Bond through a Participant or one or more other Indirect Participants.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, ABN AMRO Rothschild LLC and J.P. Morgan Securities, Inc.
"Issuer Order" means a written order of the Company, signed by its
President or a Vice President and by its Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all holders of the Bonds of Series EEE for use by such
holders in connection with the Exchange Offer.
"Non-U.S. Person" means a Person who is not a U.S. Person, as defined in
Regulation S.
"Offering Memorandum" means the Offering Memorandum dated June 15, 2001,
offering the Bonds of Series EEE for sale as provided therein.
"Officers' Certificate" means a certificate signed in the same manner and
by the same Persons as provided for in an Issuer Order, and delivered to the
Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Clearstream, a Person who has an account with the Depositary, Euroclear or
Clearstream, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Clearstream).
"Participating Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend set forth in Section 3(g)(i) of
Article II to be placed on all Bonds of Series EEE issued under this
Supplemental Indenture except where otherwise permitted by the provisions of
this Supplemental Indenture.
"Purchase Agreement" means the Purchase Agreement entered into by the
Company and the Initial Purchasers in connection with the sale of the Bonds.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registrable Bonds" has the meaning set forth in the Registration Rights
Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of June 22, 2001, between the Company and the Initial Purchasers, for
the benefit of themselves and the holders of the Bonds of Series EEE, as the
same may be amended or modified from time to time in accordance with the terms
thereof.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Bond" means a Regulation S Temporary Global Bond or
Regulation S Permanent Global Bond, as appropriate.
"Regulation S Permanent Global Bond" means a permanent Global Bond in the
form set forth in Section 2(a) of Article II bearing the Global Bond Legend and
the Private Placement Legend, if applicable, and deposited with or on behalf of
and registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Bond upon expiration of the Restricted Period.
"Regulation S Temporary Global Bond" means a temporary Global Bond in the
form set forth in Section 2(a) of Article II bearing the Global Bond Legend, the
Regulation S Temporary Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Bonds of Series EEE initially sold in reliance on Rule 903 of Regulation S.
"Regulation S Temporary Legend" means the legend set forth in Section
3(g)(iii) of Article II.
"Restricted Definitive Bond" means a Definitive Bond bearing the Private
Placement Legend.
"Restricted Global Bond" means a Global Bond bearing the Private Placement
Legend.
"Restricted Holders" has the meaning set forth in the Registration Rights
Agreement.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Bond" means the form of the Bonds of Series EEE initially
sold to QIBs.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Securities Act" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Unrestricted Global Bond" means a permanent Global Bond in the form set
forth in Section 2(a) of Article II that bears the Global Bond Legend, and that
is deposited with or on behalf of and registered in the name of the Depositary,
representing the Bonds of Series EEE that do not bear the Private Placement
Legend.
"Unrestricted Definitive Bond" means one or more Definitive Bonds that do
not bear and are not required to bear the Private Placement Legend.
"U.S. Person" means a U.S. Person as defined in Regulation S.
ARTICLE II.
FIRST MORTGAGE BONDS, SERIES EEE, 6.65%, DUE JUNE 15, 2006
Section 1. Creation and Designation of Bonds of Series EEE. There is hereby
created a fiftieth series of bonds to be issued under and secured by the
Indenture, to be designated as "PSI Energy, Inc. First Mortgage Bonds, Series
EEE, 6.65%, Due June 15, 2006", being the Bonds of Series EEE hereinbefore
referred to.
Section 2. Form of Bonds of Series EEE.
(a) The Bonds of Series EEE and the Trustee's certificate to be endorsed
thereon shall be substantially in the following forms, respectively:
(FORM OF FACE OF SERIES EEE BOND)
No. EEE- $............
PSI ENERGY, INC.
FIRST MORTGAGE BOND, SERIES EEE, 6.65%,
DUE JUNE 15, 2006
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED HOLDER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]1
[THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL BOND, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED BONDS, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). ONLY THE REGISTERED OWNER OF
THIS REGULATION S TEMPORARY GLOBAL BOND SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON.]2
THIS BOND (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT HAS ACQUIRED
THIS BOND IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
BOND EXCEPT (A) TO PSI ENERGY, INC. OR ANY OF ITS AFFILIATES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER
THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
BOND OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON"
AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE FIFTY-THIRD SUPPLEMENTAL INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS BOND
IN VIOLATION OF THE FOREGOING.
PSI Energy, Inc., an Indiana corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________________________ Dollars
($ ) on the fifteenth day of June, 2006 and to pay interest on said sum from the
date hereof, until said principal sum is paid, at the rate of 6.65% per annum,
payable semi-annually on the fifteenth day of June and December in each year.
Both the principal of and the interest on this bond shall be payable in any coin
or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts at the office or agency
of the Company in Plainfield, Indiana, or, at the option of the registered owner
hereof, at the office or agency of the Company in the Borough of Manhattan, the
City of New York, State of New York, except that interest on this bond may be
paid, at the option of the Company, by check or draft mailed to the address of
the person entitled thereto as it appears on the books of the Company maintained
for that purpose.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE
REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This bond shall not be valid or become obligatory for any purpose unless
and until it shall have been authenticated by the execution by the Trustee, or
its successor in trust under the Indenture, of the certificate endorsed hereon.
IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be executed in
its name by the manual or facsimile signature of its President or an Executive
Vice President or one of its Vice Presidents, and its corporate seal or a
facsimile thereof to be hereto affixed and attested by the manual or facsimile
signature of its Secretary or one of its Assistant Secretaries.
Dated as of:
PSI ENERGY, INC.
By.............................................
......................................President
ATTEST:
.............................................
..............................Secretary
(FORM OF REVERSE OF SERIES EEE BOND)
This bond is one of the bonds of the Company issued and to be issued from
time to time under and in accordance with and all secured by an indenture of
mortgage or deed of trust, dated September 1, 1939, from Public Service Company
of Indiana (predecessor of the Company) to The First National Bank of Chicago,
as Trustee, to which LaSalle Bank National Association is successor trustee
(which indenture as amended by all supplemental indentures is hereinafter
referred to as the "Indenture"). Said Trustee or its successor in trust under
the Indenture is hereinafter sometimes referred to as the "Trustee." Reference
is hereby made to the Indenture for a description of the property mortgaged and
pledged and the nature and extent of the security for said bonds. By the terms
of the Indenture, the bonds secured thereby are issuable in series which may
vary as to date, amount, date of maturity, rate of interest and in other
respects as in the Indenture provided.
This bond is one of a series designated as "PSI Energy, Inc. First Mortgage
Bonds, Series EEE, 6.65%, Due June 15, 2006" (hereinafter referred to as "Bonds
of Series EEE") of the Company issued under and secured by the Indenture and
created by a Fifty-Third Supplemental Indenture, dated as of June 15, 2001,
which also amends the Indenture.
The interest rate payable on the this bond will be subject to adjustment
from time to time if either Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P") reduces the rating ascribed to the bonds
of the Company issued under and secured by the Indenture below "Investment
Grade," which is Baa3 in the case of Moody's and BBB- in the case of S&P. In
this event, the interest rate payable on this bond will be increased by 0.25%
for such a reduction by either Moody's or S&P, as the case may be, with a
maximum increase of 0.50% if both such rating agencies reduce their ratings
below Investment Grade. If Moody's or S&P subsequently increases the rating
ascribed to the bonds of the Company issued under and secured by the Indenture
above Ba1 in the case of Moody's or above BB+ in the case of S&P, then the
interest rate payable on this bond will be decreased by 0.25% for such an
upgrade by either Moody's or S&P, as the case may be, with a maximum decrease of
0.50% if both such rating agencies upgrade their ratings to Investment Grade,
but in no event will the interest rate be reduced to below the initial interest
rate. Any such interest rate increase or decrease will take effect from the
interest payment date following the related rating downgrade or upgrade, as the
case may be. There is no limit to the number of times the interest rate payable
on this bond can be adjusted. However, the interest rate payable on this bond
will not exceed the initial interest rate of 6.65%, plus a maximum adjustment of
0.50% for rating agency downgrades, plus a maximum of 0.25% additional interest
assessed in connection with the Registration Rights Agreement (as defined in the
Fifty-Third Supplemental Indenture).
Except as is otherwise provided in the Indenture, the rights and
obligations of the Company and of the registered owners of bonds may be modified
or amended with the consent of the Company by an affirmative vote of the
registered owners entitled to vote of at least seventy-five per centum (75%) in
principal amount of the bonds then outstanding at a meeting of bondholders
called for the purpose (and by an affirmative vote of the bearers or registered
owners entitled to vote of at least seventy-five per centum (75%) in principal
amount of bonds of any series affected by such modification or amendment in case
one or more, but less than all, series of bonds are so affected), all in the
manner and subject to the limitations set forth in the Indenture, any consent by
the registered owner of any bond being conclusive and binding upon such
registered owner and upon all future registered owners of such bond,
irrespective of whether or not any notation of such consent is made on such
bond; provided that no such modification or amendment shall, among other things,
extend the maturity or reduce the amount of, or reduce the rate of interest on,
or otherwise modify the terms of the payment of the principal of, or interest or
premium (if any) on this bond, which obligations are absolute and unconditional,
or permit the creation of any lien ranking prior to or equal with the lien of
the Indenture on any of the mortgaged property.
The Bonds of Series EEE will be subject to redemption (the "Make-Whole
Redemption") at the option of the Company at any time in whole, or from time to
time in part, until maturity, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to the sum of (i) the principal amount of
the Bonds of Series EEE being redeemed plus accrued and unpaid interest thereon
to the redemption date, and (ii) the Make-Whole Amount (as defined below), if
any, with respect to such Bonds of Series EEE.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption of
any Bonds of Series EEE, the excess, if any, of (i) the sum, as determined by a
Quotation Agent (as defined herein), of the present value of the principal
amount of such Bonds of Series EEE, together with scheduled payments of interest
from the redemption date to the stated maturity of the Bonds of Series EEE (not
including any portion of such payments of interest accrued as of the redemption
date), in each case discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the
Bonds of Series EEE to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date for a
Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (as defined herein),
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined herein) for such redemption date, calculated on the third business day
preceding the redemption date, plus in each case 0.25% (25 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the stated maturity of the Bonds of Series EEE
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Bonds of Series EEE.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to any redemption date for
a Make-Whole Redemption, (i) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such redemption date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date for a Make-Whole Redemption,
the average, as determined by the Trustee (after consultation with the Company),
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
Notice of any redemption by the Company will be mailed at least 30 days but
not more than 60 days before any redemption date to each holder of Bonds of
Series EEE to be redeemed. If less than all the Bonds of Series EEE are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the Bonds of Series EEE to be redeemed in
whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any redemption date, interest will cease to accrue on the Bonds of Series
EEE or portions thereof called for redemption.
In the case of any of certain events of default specified in the Indenture,
the principal of this bond may be declared or may become due and payable prior
to the stated date of maturity hereof in the manner and with the effect provided
in the Indenture.
No recourse shall be had for the payment of the principal of or interest on
this bond, or for any claim based hereon, or otherwise in respect hereof or of
the Indenture, to or against any incorporator, shareholder, officer or director,
past, present or future, of the Company or of any predecessor or successor
company, either directly or through the Company or such predecessor or successor
company, under any constitution or statute or rule of law, or by the enforcement
of any assessment or penalty, or otherwise, all such liability of incorporators,
shareholders, directors and officers being waived and released by the registered
owner hereof by the acceptance of this bond and being likewise waived and
released by the terms of the Indenture.
The Bonds of Series EEE are issuable only in registered form without
coupons. This bond is transferable by the registered owner hereof, in person or
by an attorney duly authorized, at the principal office or place of business of
LaSalle Bank National Association, the Trustee, or its successor in trust under
the Indenture, or, at the option of the registered owner, at the office or
agency of the Company in the Borough of Manhattan, the City of New York, State
of New York, upon the surrender and cancellation of this bond, and upon any such
transfer a new registered bond or bonds of the same series and maturity date and
for the same aggregate principal amount will be issued to the transferee in
exchange herefor.
The Bonds of Series EEE are issuable in the denomination of $1,000 and in
such multiples thereof as shall from time to time be determined and authorized
by the Board of Directors of the Company. In the manner and subject to the
limitations provided in the Indenture, Bonds of Series EEE are exchangeable as
between authorized denominations, upon presentation thereof for such purpose by
the registered owner, at the principal office or place of business of LaSalle
Bank National Association, the Trustee, or its successor in trust under the
Indenture, or, at the option of the registered owner, at the office or agency of
the Company in the Borough of Manhattan, the City of New York, State of New
York.
No service charge will be made for any transfer or exchange of this bond,
but the Company may require a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This bond is one of the Bonds of Series EEE designated therein referred to
and described in the within mentioned Indenture and Fifty-Third Supplemental
Indenture.
LASALLE BANK NATIONAL ASSOCIATION,
AS TRUSTEE,
By.............................................
Authorized Officer
(b) Global Bonds. The Bonds of Series EEE, initially shall be issued in the
form of one or more separate, authenticated, fully registered bonds (each a
"Global Bond") which (i) need not be in the form of a lithographed or engraved
certificate, but may be typewritten or printed on ordinary paper or such paper
as the Trustee may reasonably request, (ii) shall represent such of the
outstanding Bonds of Series EEE as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of outstanding
Bonds of Series EEE from time to time endorsed thereon and that the aggregate
principal amount of outstanding Bonds of Series EEE represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges,
(iii) shall be executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Indenture, and (iv) shall contain the
legends required by Section 3(g) of this Article II. Any endorsement of a Global
Bond to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Bonds of Series EEE represented thereby shall be
made by the Trustee in accordance with instructions given by the holder thereof
as required by Section 3 hereof.
(c) Rule 144A Global Bonds. Upon issuance, the Rule 144A Global Bonds will
be deposited with the Trustee, as custodian for the Depositary, and registered
in the name of the Depositary or Cede & Co., its nominee, in each case for
credit to the accounts of the Depositary's Direct and Indirect Participants.
(d) Temporary Global Bonds. Bonds of Series EEE offered and sold in
reliance on Regulation S shall be deposited on behalf of the purchasers of the
Bonds of Series EEE represented thereby with the Trustee, as custodian for the
Depositary, and registered in the name of the Depositary or Cede & Co, its
nominee, for the accounts of designated agents holding on behalf of Euroclear or
Clearstream. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Clearstream certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Bond (except to
the extent of any beneficial owners thereof who acquired an interest therein
during the Restricted Period pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a Rule 144A Global Bond, all as contemplated by Section 3(b)(ii) of
this Article II), and (ii) an Officers' Certificate from the Company. Following
the termination of the Restricted Period, beneficial interests in the Regulation
S Temporary Global Bond shall be exchanged for beneficial interests in
Regulation S Permanent Global Bonds pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Bonds,
the Trustee shall cancel the Regulation S Temporary Global Bond. The aggregate
principal amount of the Regulation S Temporary Global Bond and the Regulation S
Permanent Global Bonds may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of beneficial
interests as hereinafter provided.
(e) Euroclear and Clearstream Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream
Banking, S.A." and "Customer Handbook" of Clearstream shall be applicable to
transfers of beneficial interests in the Regulation S Temporary Global Bond and
the Regulation S Permanent Global Bonds that are held by Participants through
Euroclear or Clearstream.
(f) The Trustee and the Company may treat the Depositary or Cede & Co., its
nominee, as the sole and exclusive owner of the Bonds of Series EEE registered
in its name for the purposes of payment of the principal or redemption price of
or interest on the Bonds of Series EEE, giving any notice permitted or required
to be given to holders of the Bonds of Series EEE under the Indenture or this
Supplemental Indenture, registering the transfer of the Bonds of Series EEE,
obtaining any consent or other action to be taken by holders of the Bonds of
Series EEE, and for all other purposes whatsoever and neither the Trustee nor
the Company shall be affected by any notice to the contrary. Neither the Company
nor the Trustee nor any registrar nor any paying agent shall have any
responsibility or obligation to any Participant, any person claiming a
beneficial ownership interest in the Bonds of Series EEE under or through the
Depositary or any Participant, or any other person which is not shown on the
registration books as being a holder of the Bonds of Series EEE with respect to
(i) the accuracy of any records maintained by the Depositary or any Participant;
(ii) the payment by the Depositary to any Participant of any amount in respect
of the principal or redemption price of or interest on the Bonds of Series EEE;
(iii) the payment by any Participant to any owner of a beneficial ownership
interest in the Bonds of Series EEE in respect of the principal or redemption
price of or interest on the Bonds of Series EEE; or (iv) any consent or other
action taken by the Depositary as owner of the Bonds of Series EEE. The Trustee
shall pay all principal and any redemption price of and interest on the Bonds of
Series EEE only to or upon the order of the registered holder or holders of the
Bonds of Series EEE, as shown on the registration books, and all such payments
shall be valid and effective to fully satisfy and discharge the Company's
obligations with respect to the principal or redemption price of and interest on
the Bonds of Series EEE, to the extent of the sum or sums so paid. No person
other than a holder of the Bonds of Series EEE, as shown on the registration
books of the Depositary, shall receive an authenticated Bond of Series EEE
evidencing the obligation of the Company to make payment of the principal and
any redemption price of and interest on the Bonds of Series EEE, pursuant to the
Indenture and this Supplemental Indenture. Upon delivery by the Depositary to
the Trustee of written notice to the effect that the Depositary has determined
to substitute a new nominee for Cede & Co., and subject to the provisions of the
Indenture and this Supplemental Indenture, the word "Cede & Co.," as used in
this Supplemental Indenture, shall refer to each new nominee of the Depositary.
(g) In connection with any notice or other communication to be provided to
holders of the Bonds of Series EEE pursuant to the Indenture and this
Supplemental Indenture by the Company or the Trustee with respect to any consent
or other action to be taken by holders of the Bonds of Series EEE, the Company
or the Trustee, as the case may be, shall establish a record date for such
consent or other action and give the Depositary notice of such record date not
less than 15 calendar days in advance of such record date to the extent
possible. Such notice to the Depositary shall be given only so long as the
Depositary or its nominee is the sole holder of the Bonds of Series EEE.
Section 3. Transfer and Exchange of Bonds of Series EEE.
(a) Transfer and Exchange of Global Bonds. A Global Bond may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Bonds will be exchanged by the
Company for Definitive Bonds if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 90 days after the date of such notice from the Depositary or (ii)
the Company in its sole discretion determines that the Global Bonds (in whole
but not in part) should be exchanged for Definitive Bonds and delivers a written
notice to such effect to the Trustee; provided that in no event shall the
Regulation S Temporary Global Bond be exchanged by the Company for Definitive
Bonds prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Trustee of any certificates required pursuant to Rule 903(c)(3)(ii)(B)
under the Securities Act or (iii) there shall have occurred and be continuing a
default or an event of default and the Trustee receives a request from the
Depositary to issue Definitive Bonds. Upon the occurrence of any of the
preceding events, Definitive Bonds shall be issued in such names as the
Depositary shall instruct the Trustee. A Global Bond may not be exchanged for
another Bond of Series EEE other than as provided in this Section 3(a), however,
beneficial interests in a Global Bond may be transferred and exchanged as
provided in Section 3(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Bonds. The
transfer and exchange of beneficial interests in the Global Bonds shall be
effected through the Depositary, in accordance with the provisions of this
Supplemental Indenture and the Applicable Procedures. Beneficial interests in
the Restricted Global Bonds shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Bonds also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Bond.
Beneficial interests in any Restricted Global Bond may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Bond in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Regulation S Temporary Global Bonds may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Bond may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Bond. No written orders or
instructions shall be required to be delivered to the Trustee to effect the
transfers described in this Section 3(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Bonds. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 3(b)(i) above, the transferor of
such beneficial interest must deliver to the Trustee either (A)(1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Bond in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B)(1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Bond in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Trustee containing information regarding the Person in
whose name such Definitive Bond shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Bonds be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Bond prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Trustee of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance with
Section 3(f) hereof, the requirements of this Section 3(b)(ii) shall be
deemed to have been satisfied upon receipt by the Trustee of the
instructions contained in the Letter of Transmittal delivered by the holder
of such beneficial interest in the Restricted Global Bonds. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Bonds contained in this Supplemental
Indenture and the Bonds or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Bond(s) pursuant to Section 3(h).
(iii) Transfer of Beneficial Interests to Another Restricted Global
Bond. A beneficial interest in any Restricted Global Bond may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Bond if the transfer
complies with the requirements of Section 3(b)(ii) above and the Trustee
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the Rule 144A Global Bond, then the transferor
must deliver a certificate in the form of Exhibit A hereto, including
the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Bond or the
Regulation S Permanent Global Bond, then the transferor must deliver a
certificate in the form of Exhibit A hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Bond for Beneficial Interests in the Unrestricted Global Bond. A
beneficial interest in any Restricted Global Bond may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Bond or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Bond if the exchange or
transfer complies with the requirements of Section 3(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Bonds or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Trustee receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Bond, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Bond proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Bond, a
certificate from such holder in the form of Exhibit A hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Trustee so requests or if the Applicable Procedures so require,
an opinion of counsel in form reasonably acceptable to the
Trustee to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Bond has not yet
been issued, the Company shall issue and the Trustee shall
authenticate one or more Unrestricted Global Bonds in an
aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
A beneficial interest in an Unrestricted Global Bond cannot be
exchanged for, or transferred to a Person who takes delivery
thereof in the form of, a beneficial interest in a Restricted
Global Bond.
(c) Transfer or Exchange of Beneficial Interests for Definitive Bonds.
(i) Beneficial Interests in Restricted Global Bonds to
Restricted Definitive Bonds. If any holder of a beneficial interest in
a Restricted Global Bond proposes to exchange such beneficial interest
for a Restricted Definitive Bond or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Bond, then, upon receipt by the Trustee of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial
interest for a Restricted Definitive Bond, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A, a certificate to the effect set
forth in Exhibit A hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit A hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in Exhibit
A hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its subsidiaries, a certificate to the effect
set forth in Exhibit A hereto, including the certifications in
item (3)(b) thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
A hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Bond to be reduced accordingly pursuant to
Section 3(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated
in the instructions a Definitive Bond in the appropriate
principal amount. Any Definitive Bond issued in exchange for a
beneficial interest in a Restricted Global Bond pursuant to this
Section 3(c) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Trustee through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Bonds to
the Persons in whose names such Bonds are so registered. Any
Definitive Bond issued in exchange for a beneficial interest in a
Restricted Global Bond pursuant to this Section 3(c)(i) shall
bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Restrictions on Exchanges of Regulation S Temporary Global Bonds.
Notwithstanding Sections 3(c)(i)(A) and (C) hereof, a beneficial interest
in the Regulation S Temporary Global Bond may not be exchanged for a
Definitive Bond or transferred to a Person who takes delivery thereof in
the form of a Definitive Bond prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Trustee of any certificates required
pursuant to Rule 903 under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Bonds to Unrestricted
Definitive Bonds. A holder of a beneficial interest in a Restricted Global
Bond may exchange such beneficial interest for an Unrestricted Definitive
Bond or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Bond only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Bonds or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Trustee receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Bond proposes to exchange such beneficial
interest for a Definitive Bond that does not bear the
Private Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the certifications
in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Bond proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a Definitive Bond that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit A hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D),
if the Trustee so requests or if the Applicable Procedures
so require, an opinion of counsel in form reasonably
acceptable to the Trustee to the effect that such exchange
or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Bonds to Unrestricted
Definitive Bonds. If any holder of a beneficial interest in an Unrestricted
Global Bond proposes to exchange such beneficial interest for a Definitive
Bond or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Bond, then, upon satisfaction of the
conditions set forth in Section 3(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Bond to be reduced
accordingly pursuant to Section 3(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in
the instructions a Definitive Bond in the appropriate principal amount. Any
Definitive Bond issued in exchange for a beneficial interest pursuant to
this Section 3(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Trustee through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Bonds to the Persons in whose names such Bonds are
so registered. Any Definitive Bond issued in exchange for a beneficial
interest pursuant to this Section 3(c)(iv) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Bonds for Beneficial Interests.
(i) Restricted Definitive Bonds to Beneficial Interests in Restricted
Global Bonds. If any holder of a Restricted Definitive Bond proposes to
exchange such Bond for a beneficial interest in a Restricted Global Bond or
to transfer such Restricted Definitive Bonds to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Bond,
then, upon receipt by the Trustee of the following documentation:
(A) if the holder of such Restricted Definitive Bond proposes to
exchange such Bond for a beneficial interest in a Restricted Global
Bond, a certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (2)(b) thereof;
(B) if such Definitive Bond is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit A hereto, including the certifications
in item (1) thereof;
(C) if such Restricted Definitive Bond is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit A hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Bond is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit A hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Bond is being transferred to
the Company or any of its subsidiaries, a certificate to the effect
set forth in Exhibit A hereto, including the certifications in item
(3)(b) thereof; or
(F) if such Restricted Definitive Bond is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit A hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Bond, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Bond, in the case
of clause (B) above, the Rule 144A Global Bond, and in the case of
clause (C) above, the Regulation S Global Bond.
(ii) Restricted Definitive Bonds to Beneficial Interests in
Unrestricted Global Bonds. A holder of a Restricted Definitive Bond may
exchange such Bond for a beneficial interest in an Unrestricted Global Bond
or transfer such Restricted Definitive Bond to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Bond
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Bonds or (3) a Person who is an affiliate
(as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Trustee receives the following:
(1) If the holder of such Definitive Bonds proposes to
exchange such Bonds for a beneficial interest in the Unrestricted
Global Bond, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (1)(c)
thereof; or
(2) If the holder of such Definitive Bonds proposes to
transfer such Bonds to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Bond, a certificate from such holder in the form of Exhibit A
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), and if
the Trustee so requests or if the Applicable Procedures so
require, an opinion of counsel in form reasonably acceptable to
the Trustee to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs
in this Section 3(d)(ii), the Trustee shall cancel the Definitive
Bonds and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Bond.
(iii) Unrestricted Definitive Bonds to Beneficial Interests in
Unrestricted Global Bonds. A holder of an Unrestricted Definitive Bond may
exchange such Bond for a beneficial interest in an Unrestricted Global Bond
or transfer such Definitive Bonds to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Bond at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Bond and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Bonds.
If any such exchange or transfer from a Definitive Bond to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii)
above at a time when an Unrestricted Global Bond has not yet been issued,
the Company shall issue and the Trustee shall authenticate one or more
Unrestricted Global Bonds in an aggregate principal amount equal to the
principal amount of Definitive Bonds so transferred.
(e) Transfer and Exchange of Definitive Bonds for Definitive Bonds. Upon
request by a holder of Definitive Bonds and such holder's compliance with the
provisions of this Section 3(e), the Trustee shall register the transfer or
exchange of Definitive Bonds. Prior to such registration of transfer or
exchange, the requesting holder shall present or surrender to the Trustee the
Definitive Bonds duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Trustee duly executed by such holder or by
the holder's attorney, duly authorized in writing. In addition, the requesting
holder shall provide any additional certifications, documents and information,
as applicable, required pursuant to the following provisions of this Section
3(e).
(i) Restricted Definitive Bonds to Restricted Definitive Bonds. Any
Restricted Definitive Bond may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Bond if the Trustee receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit A hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit A hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit A hereto,
including the certifications, certificates and opinion of counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Bonds to Unrestricted Definitive Bonds. Any
Restricted Definitive Bond may be exchanged by the holder thereof for an
Unrestricted Definitive Bond or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Bond if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Bonds or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Trustee receives the following:
(1) if the holder of such Restricted Definitive Bonds
proposes to exchange such Bonds for an Unrestricted Definitive
Bond, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (1)(d) thereof; or
(2) if the holder of such Restricted Definitive Bonds
proposes to transfer such Bonds to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Bond,
a certificate from such holder in the form of Exhibit A hereto,
including the certifications in item (4) thereof;
and in each such case set forth in this subparagraph (D), if the
Trustee so requests, an opinion of counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Bonds to Unrestricted Definitive Bonds.
A holder of Unrestricted Definitive Bonds may transfer such Bonds to a
Person who takes delivery thereof in the form of Unrestricted Definitive
Bonds. Upon receipt of a request to register such a transfer, the Trustee
shall register the Unrestricted Definitive Bonds pursuant to the
instructions from the holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and the Trustee
shall authenticate (i) one or more Unrestricted Global Bonds in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Bonds tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Exchange Bonds and (z) they
are not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Bonds in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Bonds accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Bonds, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Bonds to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the holders of Definitive Bonds so accepted Definitive
Bonds in the appropriate principal amounts.
(g) Legends. The following legends shall appear on the face of all Global
Bonds and Definitive Bonds issued under this Supplemental Indenture unless
specifically stated otherwise in the applicable provisions of this Supplemental
Indenture.
(i) Private Placement Legend. (A) Except as permitted by subparagraph
(B) below, each Global Bond and each Definitive Bond (and all Bonds of
Series EEE issued in exchange therefor or substitution thereof) shall bear
the legend in substantially the following form:
"THIS BOND (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB"), OR (B) IT HAS ACQUIRED THIS BOND IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS BOND
EXCEPT (A) TO PSI ENERGY, INC. OR ANY OF ITS AFFILIATES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR 904 UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS BOND OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE FIFTY-THIRD SUPPLEMENTAL INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS BOND IN
VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Bond or
Definitive Bond issued pursuant to subparagraphs (b)(iv),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this
Section 3 (and all Bonds of Series EEE issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Bond Legend. Each Global Bond shall bear a legend in
substantially the following form:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(iii) Regulation S Temporary Global Bond Legend. The Regulation S
Temporary Global Bond shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL BOND, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED BONDS,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). ONLY THE REGISTERED
OWNER OF THIS REGULATION S TEMPORARY GLOBAL BOND SHALL BE ENTITLED TO
RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Bonds. At such time as all
beneficial interests in a particular Global Bond have been exchanged for
Definitive Bonds or a particular Global Bond has been redeemed, repurchased or
canceled in whole and not in part, each such Global Bond shall be returned to or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Bond is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Bond or for Definitive Bonds, the principal amount of Bonds
represented by such Global Bond shall be reduced accordingly and an endorsement
shall be made on such Global Bond by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Bond,
such other Global Bond shall be increased accordingly and an endorsement shall
be made on such Global Bond by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
Section 4. Date of Bonds of Series EEE. Each Bond of Series EEE issued
prior to the first interest payment date shall be dated as of June 22, 2001, and
otherwise shall be dated as provided in Section 1 of Article II of the
Indenture.
Section 5. Maturity Dates and Interest Rates of Bonds of Series EEE. All
Bonds of Series EEE shall be due and payable on June 15, 2006, and shall bear
interest from June 22, 2001 initially at the rate of 6.65% per annum, payable
semi-annually on the fifteenth day of June and December in each year, commencing
December 15, 2001.
Section 6. Interest Rate Adjustments.
(a) Rating Agency Downgrades. The interest rate payable on the Bonds
of Series EEE will be subject to adjustment from time to time if either
Moody's Investor Service, Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P") reduces the rating ascribed to the bonds of the Company
issued under and secured by the Indenture below "Investment Grade," which
is Baa3 in the case of Moody's and BBB- in the case of S&P. In this event,
the interest rate payable on the Bonds of Series EEE will be increased by
0.25% for such a reduction by either Moody's or S&P, as the case may be,
with a maximum increase of 0.50% if both such rating agencies reduce their
ratings below Investment Grade. If Moody's or S&P subsequently increases
the rating ascribed to the bonds of the Company issued under and secured by
the Indenture above Ba1 in the case of Moody's or above BB+ in the case of
S&P, then the interest rate payable on the Bonds of Series EEE will be
decreased by 0.25% for such an upgrade by either Moody's or S&P, as the
case may be, with a maximum decrease of 0.50% if both such rating agencies
upgrade their ratings to Investment Grade, but in no event will the
interest rate be reduced to below the initial interest rate. Any such
interest rate increase or decrease will take effect from the interest
payment date following the related rating downgrade or upgrade, as the case
may be. The Company shall notify the Trustee promptly of any changes in the
rate of interest due to a related ratings downgrade or upgrade. There is no
limit to the number of times the interest rate payable on the Bonds of
Series EEE can be adjusted. However, the interest rate payable on the Bonds
of Series EEE will not exceed the initial interest rate of 6.65%, plus a
maximum adjustment of 0.50% for rating agency downgrades, plus a maximum of
0.25% additional interest assessed in connection with the Registration
Rights Agreement.
(b) Registration Rights Agreement. If the Company fails to comply with
certain provisions of the Registration Rights Agreement, additional
interest (the "Additional Interest") shall be assessed as follows:
(i) If the Exchange Offer Registration Statement or the Shelf
Registration Statement is not filed within 120 days following the
Closing Date, then commencing on the 121st day after the Closing Date,
Additional Interest shall be accrued on the Bonds of Series EEE at a
rate of 0.25% per annum; or
(ii) If an Exchange Offer Registration Statement or Shelf
Registration Statement is filed pursuant to (i) above and is not
declared effective within 180 days following the Closing Date, then
commencing on the 181st day after the Closing Date, Additional
Interest shall be accrued on the Bonds of Series EEE at a rate of
0.25% per annum; or
(iii) If either (A) the Company has not completed the Exchange
Offer on or prior to 35 days after the date on which the Exchange
Offer Registration Statement was declared effective, or (B) if
applicable, the Shelf Registration Statement has been declared
effective but such Shelf Registration Statement ceases to be effective
at any time prior to two years from the Closing Date, then Additional
Interest shall be accrued on the Bonds of Series EEE at a rate of
0.25% per annum immediately following the (x) 36th day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B)
above,
provided, however, that the Additional Interest rate on the Bonds of
Series EEE may not exceed 0.25% per annum; and, provided, further,
that (1) upon the filing of the Exchange Offer Registration Statement
or Shelf Registration Statement (in the case of (i) above), (2) upon
the effectiveness of the Exchange Offer Registration Statement or
Shelf Registration Statement (in the case of (ii) above), or (3) upon
the completion of the Exchange Offer or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective
prior to two years from the Closing Date (in the case of (iii) above),
Additional Interest on the Bonds of Series EEE as a result of such
clause (i), (ii) or (iii) shall cease to accrue.
The Company shall notify the Trustee promptly if any Additional Interest
shall be assessed.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original payment dates of the
Bonds of Series EEE. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Bonds of Series EEE, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
If the Company effects the Exchange Offer, the Exchange Offer will be
deemed completed only (i) if the Exchange Bonds received by holders (other than
Restricted Holders) in the Exchange Offer are, upon receipt, transferable by
each such holder without restriction imposed thereon by the Securities Act or
the Exchange Act and without material restrictions imposed thereon by the blue
sky or securities laws of a substantial majority of the States of the United
States of America and (ii) upon the Company having exchanged, pursuant to the
Exchange Offer, Exchange Bonds for all Bonds of Series EEE that have been
properly tendered and not withdrawn. Bonds of Series EEE not validly tendered in
the Exchange Offer shall bear interest at the same rates as would otherwise be
in effect.
The terms and provisions of the Registration Rights Agreement shall be
binding upon, shall inure to the benefit of and shall be enforceable by the
respective successors and assigns of the parties thereto. In the event that any
transferee of any holder of Registrable Bonds shall acquire Registrable Bonds,
in any manner, whether by gift, bequest, purchase, operation of law or
otherwise, such transferee shall, without any further writing or action of any
kind, be deemed a party thereto for all purposes and such Registrable Bonds
shall be held subject to all of the terms of the Registration Rights Agreement,
and by taking and holding such Registrable Bonds such transferee shall be
entitled to receive the benefits of, and be conclusively deemed to have agreed
to be bound by and to perform, all of the applicable terms and provisions of the
Registration Rights Agreement.
Section 7. Certain Rights to Require Repurchase of Bonds of Series EEE by
the Company. In the event an unaffiliated third party acquires the Company or
its parent company, Cinergy Corp. (an "Acquisition Event"), and both Moody's and
S&P reduce the rating ascribed to the Bonds of Series EEE below Investment Grade
within 30 calendar days of the Acquisition Event (an "Acquisition Downgrade"),
then each holder of the Bonds of Series EEE will have the right, at the holder's
option, to require the Company to repurchase all or any part of the holder's
Bonds of Series EEE. The Company will purchase the Bonds of Series EEE on the
Repurchase Date at a price equal to 100% of the principal amount of the Bonds of
Series EEE, plus accrued and unpaid interest, to the Repurchase Date.
The Company shall give notice to the Trustee and holders of the Bonds of
Series EEE within 30 calendar days after the Acquisition Downgrade. The date on
which notice is given to the Trustee shall be the "Notice Date." To require the
Company to repurchase the Bonds of Series EEE, a holder must, on or before the
close of business 20 Business Days prior to the Repurchase Date, notify the
Trustee of such holder's exercise of this option and complete and submit
appropriate documentation.
For purposes of this Section 7, the "Repurchase Date" means the 45th
calendar day after the Notice Date and a "Business Day" is any day other than a
Saturday or Sunday or a day that banking institutions in the City of New York or
the City of Chicago are authorized or obligated to close.
The Company's failure to repurchase the Bonds on the Repurchase Date will
be an event of default under the Indenture upon 60 days following notice to the
Company from the Trustee of such failure to perform or observe the Company's
covenant to repurchase the Bonds.
Section 8. Subject to agreements with or the rules of the Depositary or any
successor book-entry security system or similar system with respect to Global
Bonds, both the principal of and the interest on the Bonds of Series EEE shall
be payable in any coin or currency of the United States of America which at the
time of payment is legal tender for the payment of public and private debts, at
the office or agency of the Company in Plainfield, Indiana, or, at the option of
the holder thereof, at the office or agency of the Company in the Borough of
Manhattan, the City of New York, State of New York, except that interest on the
Bonds of Series EEE may be paid, at the option of the Company, by check or draft
mailed to the address of the person entitled thereto as it appears on the books
of the Company maintained for that purpose.
Section 9. Definitive Bonds of Series EEE shall be issuable in any
denomination which is a multiple of $1,000 numbered consecutively from "EEE-1"
upward.
All Bonds of Series EEE shall be executed on behalf of the Company by the
manual or facsimile signature of its President or an Executive Vice President or
one of its Vice Presidents and shall have affixed thereto the seal of the
Company or a facsimile thereof attested by the manual or facsimile signature of
its Secretary or one of its Assistant Secretaries and shall be authenticated by
the execution by the Trustee of the certificate endorsed on said bonds.
No service charge will be made by the Company for the transfer or for the
exchange of Bonds of Series EEE except, in the case of transfer, a charge
sufficient to reimburse the Company for any tax or other governmental charge
payable in connection therewith.
Pursuant to the provisions of Section 11 of Article II of the Indenture,
Bonds of Series EEE may be issued in temporary form, and if temporary bonds be
issued, the Company shall, at such time as the Company may elect, at its own
expense and without charge to the holders of the temporary bonds, prepare and
execute definitive Bonds of Series EEE and exchange the temporary bonds for such
definitive bonds in the manner provided for in said section, provided, however,
no presentation or surrender of temporary Bonds of Series EEE shall be necessary
in order for the holders entitled to interest thereon to receive such interest.
Section 10. Article IX of the Indenture, "Maintenance and Renewal Fund and
Sinking Fund Provisions" as heretofore amended or supplemented shall not apply
to the Bonds of Series BBB or to any subsequently created series of bonds (which
includes the Bonds of Series EEE) from and after the date on which no series of
bonds created under the Indenture prior to the Bonds of Series BBB are
outstanding.
Section 11. Section 22 of Article V of the Indenture as heretofore amended
or supplemented which, among other things, requires an inspection of the
mortgaged property every two years by an independent engineer, shall not apply
to the Bonds of Series BBB or to any subsequently created series of bonds (which
includes the Bonds of Series EEE), from and after the date in which no series of
bonds created under the Indenture prior to the Bonds of Series BBB are
outstanding.
Section 12. The Company reserves the right, without consent or other action
by the holders of the Bonds of Series BBB or of any subsequently created series
of bonds (which includes the Bonds of Series EEE), to amend the Indenture, as
heretofore amended or supplemented, at any time after all bonds of any series
created prior to the Bonds of Series BBB are no longer outstanding under the
Indenture, as follows:
(a) by substituting for the words "in principal amount not greater
than sixty per centum (60%) of" in Section 3 of Article IV thereof the
following:
"in principal amount not greater than sixty-six and two-thirds
per centum (66-2/3%) of ".
(b) by substituting for the words "shall exceed sixty per centum (60%)
of the value of bondable property so acquired" in Section 9 of Article V
thereof the following:
"shall exceed sixty-six and two-thirds per centum (66-2/3%) of
the value of bondable property so acquired".
(c) by substituting for the words "shall be deemed to be paid within
the meaning of this article; provided, that the date for the payment or
redemption of such bonds shall be not more than one (1) year after such
moneys shall have been so set apart or paid." in the first paragraph of
Article XIV thereof the following:
"shall be deemed to be paid within the meaning of this article.".
(d) by substituting for the words "with the consent of holders of at
least seventy-five per centum (75%) in aggregate principal amount of the
bonds at the time outstanding;" in sub-section (a) of Section 3 of Article
XVIII thereof the following:
"with the consent of holders of at least sixty-six and two-thirds
per centum (66-2/3%) in aggregate principal amount of the bonds at the
time outstanding;".
(e) by substituting for the words "holders (or persons entitled to
vote the bonds) of not less than seventy-five per centum (75%) in aggregate
principal amount of the bonds entitled to be voted" in sub-section (l) of
Section 3 of Article XVIII thereof the following:
"holders (or persons entitled to vote the bonds) of not less than
sixty-six and two-thirds per centum (66-2/3%) in aggregate principal
amount of the bonds entitled to be voted".
(f) by substituting for the words "holders (or persons entitled to
vote the bonds) of at least seventy-five per centum (75%) in principal
amount of the bonds outstanding" in sub-section (m) of Section 3 of Article
XVIII thereof the following:
"holders (or persons entitled to vote the bonds) of at least
sixty-six and two-thirds per centum (66-2/3%) in principal amount of
the bonds outstanding".
ARTICLE III.
ISSUANCE OF BONDS OF SERIES EEE.
Section 1. An initial issue of Bonds of Series EEE in the aggregate
principal amount not exceeding three hundred twenty-five million dollars
($325,000,000) may be executed by the Company and delivered to the Trustee for
authentication, and shall be authenticated and delivered by the Trustee to or
upon the order of the Company (which authentication and delivery may be made
without awaiting the filing or recording of this Fifty-Third Supplemental
Indenture), upon receipt by the Trustee of the resolutions, certificates,
orders, opinions and other instruments required by the provisions of Section 3
of Article IV of the Indenture to be received by the Trustee as a condition to
the authentication and delivery by the Trustee of bonds pursuant to said Section
3.
Section 2. Subject to the limitations provided in Section 24 of Article V
of the Indenture, additional Bonds of Series EEE may be issued by the Company
under the provisions of Sections 2, 3 or 4 of Article IV of the Indenture.
ARTICLE IV.
INDENTURE AMENDMENTS.
Section 1. Article I of the Indenture, as heretofore amended, is hereby
further amended (i) by adding immediately after subdivision "(92)" thereof an
additional subdivision numbered "(93)" and reading as follows:
"(93) The term `Fifty-Third Supplemental Indenture' shall mean the
Fifty-Third Supplemental Indenture executed by the Company and the
Trustee, dated as of June 15, 2001, supplementing and amending the
Indenture, and the terms `Bonds of Series EEE' shall mean the `PSI
Energy, Inc. First Mortgage Bonds, Series EEE, 6.65%, Due June 15,
2006,', created by the Fifty-Third Supplemental Indenture."
and (ii) by changing the numbering of the present subdivision "(93)"
thereof to "(94)".
Section 2. Article VII of the Indenture, as heretofore amended, is hereby
further amended by inserting therein immediately after Section 37 thereof, a new
section designated "Section 38" and reading as follows:
"Section 38. Each of the Bonds of Series EEE will be subject to
redemption (the `Make-Whole Redemption') at the option of the Company at
any time in whole, or from time to time in part, until maturity, upon not
less than 30 nor more than 60 days' notice to the holders of such Series,
at a redemption price equal to the sum of (i) the principal amount of the
Bonds of such Series being redeemed, plus accrued and unpaid interest
thereon to the redemption date, and (ii) the Make-Whole Amount (as defined
below), if any, with respect to such Bonds.
`Make-Whole Amount' means, in connection with any Make-Whole
Redemption of any Bonds of Series EEE, the excess, if any, of (i) the sum,
as determined by a Quotation Agent (as defined herein), of the present
value of the principal amount of such Bonds being redeemed, together with
scheduled payments of interest from the redemption date to the stated
maturity of such Bonds (not including any portion of such payments of
interest accrued as of the redemption date), in each case discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein)
over (ii) 100% of the principal amount of the Bonds of Series EEE to be
redeemed.
`Adjusted Treasury Rate' means, with respect to any redemption date
for a Make-Whole Redemption, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue (as defined
herein), calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price (as defined herein) for such redemption date, calculated on
the third business day preceding the redemption date for the Bonds of
Series EEE, plus in each case 0.25% (25 basis points).
`Comparable Treasury Issue' means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term from the redemption date to the stated maturity of the Bonds
of Series EEE that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of
the Bonds of Series EEE.
`Quotation Agent' means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. `Reference Treasury Dealer'
means a primary U.S. Government securities dealer.
`Comparable Treasury Price' means, with respect to any redemption date
for a Make-Whole Redemption, (i) the average of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) on the third business day preceding such
redemption date, as set forth in the daily statistical release designated
`H.15' (or any successor release) published by the Board of Governors of
the Federal Reserve System or (ii) if such release (or any successor
release) is not published or does not contain such prices on such business
day, (A) the average of the Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three
such Reference Treasury Dealer Quotations, the average of such Quotations.
`Reference Treasury Dealer Quotations' means, with respect to each
Reference Treasury Dealer and any redemption date for a Make-Whole
Redemption, the average, as determined by the Trustee (after consultation
with the Company), of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third business day preceding such
redemption date.
Notice of any redemption by the Company will be mailed at least 30
days but not more than 60 days before any redemption date to each holder of
Bonds of Series EEE to be redeemed. If less than all the Bonds of Series
EEE are to be redeemed at the option of the Company, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the Bonds of
Series EEE to be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any redemption date, interest will cease to accrue on the Bonds of
Series EEE or portions thereof called for redemption.
The Company shall indemnify and hold harmless the Trustee from any and
all losses, costs, damages, expenses, fees (including attorneys' fees),
court costs, judgments, penalties, obligations, suits, disbursements and
liabilities of any kind or character whatsoever which may at any time be
imposed upon, incurred by or asserted against the Trustee by reason of or
arising out of or caused, directly or indirectly by any act or omission of
the Trustee with respect to the foregoing Section 38, including without
limitation selection of any Reference Treasury Dealer or determination of
any Reference Treasury Dealer Quotations, except for such that would arise
out of the willful misconduct or gross negligence of the Trustee and except
for costs and expenses arising in the ordinary course of the Trustee's
business."
ARTICLE V.
CONCERNING THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and agrees to perform
the same upon the terms and conditions in the Indenture and in this Fifty-Third
Supplemental Indenture set forth. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Fifty-Third Supplemental Indenture or the due execution hereof by the Company or
for or in respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and condition
contained in Article XVII of the Indenture shall apply to this Fifty-Third
Supplemental Indenture.
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
Section 1. Wherever in the original Indenture or in any of the fifty-three
supplemental indentures thereto reference is made to any article or section of
the original Indenture, such reference shall be deemed to refer to such article
or section as amended by such supplemental indentures.
Section 2. Upon the execution and delivery hereof, the Indenture shall
thereupon be deemed to be amended as hereinabove set forth as fully and with the
same effect as if the amendments made hereby were set forth in the original
Indenture and each of the fifty-three supplemental indentures to the Indenture
shall henceforth be read, taken and construed as one and the same instrument;
but such amendments shall not operate so as to render invalid or improper any
action heretofore taken under the original Indenture or said supplemental
indentures.
Section 3. All the covenants, stipulations and agreements in this
Fifty-Third Supplemental Indenture contained are and shall be for the sole and
exclusive benefit of the parties hereto, their successors and assigns, and of
the holders from time to time of the bonds.
Section 4. The table of contents to, and the headings of the different
articles of, this Fifty-Third Supplemental Indenture are inserted for
convenience of reference, and are not to be taken to be any part of the
provisions hereof, nor to control or affect the meaning, construction or effect
of the same.
Section 5. This Fifty-Third Supplemental Indenture may be simultaneously
executed in any number of counterparts, and all such counterparts shall
constitute but one and the same instrument.
Section 6. Whenever a payment of principal or interest in respect of the
Bonds of Series EEE are due on any day other than a business day (as hereinafter
defined), such payment shall be payable on the first business day next following
such date, and, in the case of a principal payment, interest on such principal
payment shall accrue to the date of such principal payment. For the purposes of
this Section 6 the term business day shall mean any day other than a day on
which the Trustee is authorized by law to close.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]
IN WITNESS WHEREOF, said PSI Energy, Inc. has caused this instrument to be
executed in its corporate name by its President or one of its Vice Presidents
and to be attested by its Secretary or one of its Assistant Secretaries and said
LaSalle Bank National Association has caused this instrument to be executed in
its corporate name by one of its Senior Vice Presidents and to be attested by
one of its Assistant Secretaries, in several counterparts, all as of the day and
year first above written.
PSI ENERGY, INC.
(CORPORATE SEAL) By ________________________
Lisa D. Gamblin
Vice President and Treasurer
ATTEST:
----------------------
Julia S. Janson, Secretary
Signed and delivered by PSI Energy, Inc.
in the presence of:
---------------------------
Witness
---------------------------
Witness
LASALLE BANK NATIONAL ASSOCIATION
(CORPORATE SEAL) By ________________________
Sarah H. Webb
Senior Vice President
ATTEST:
----------------------
Victoria Y. Douyon, Assistant Secretary
Signed and delivered by LaSalle Bank National Association in the presence of:
---------------------------
Witness
---------------------------
Witness
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 20th day of June, 2001, before me, the
undersigned, a notary public in and for the County and State aforesaid, duly
commissioned and qualified, personally appeared Lisa D. Gamblin and Julia S.
Janson, personally known to me to be the same persons whose names are subscribed
to the foregoing instrument, and personally known to me to be the Vice President
and Treasurer, and the Secretary, respectively, of PSI Energy, Inc., an Indiana
corporation, and acknowledged that they signed and delivered said instrument as
their free and voluntary act as such Vice President and Treasurer, and
Secretary, respectively, and as the free and voluntary act of said PSI Energy,
Inc., for the uses and purposes therein set forth; in pursuance of the power and
authority granted to them by resolution of the Board of Directors of said
Company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year aforesaid.
(NOTARIAL SEAL)
-------------------------
Notary Public
My commission expires _________________.
County of residence: Hamilton
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
BE IT REMEMBERED, that on this 19th day of June, 2001, before me, the
undersigned, a notary public in and for the County and State aforesaid, duly
commissioned and qualified, personally appeared Sarah H. Webb and Victoria Y.
Douyon, personally known to me to be the same persons whose names are subscribed
to the foregoing instrument, and personally known to me to be a Senior Vice
President and an Assistant Secretary, respectively, of LaSalle Bank National
Association, a national banking association, and acknowledged that they signed
and delivered said instrument as their free and voluntary act as such Senior
Vice President and Assistant Secretary, respectively, and as the free and
voluntary act of said LaSalle Bank National Association, for the uses and
purposes therein set forth; in pursuance of the power and authority granted to
them by the bylaws of said association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year aforesaid.
(NOTARIAL SEAL)
-------------------------
Notary Public
My commission expires _________________.
County of residence: Cook
EXHIBIT A
FORM OF CERTIFICATE OF TRANSFER
PSI Energy, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
Attention: Treasurer
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Corporate Trust Administration
Re: PSI Energy, Inc. First Mortgage Bonds, Series EEE, 6.65%, Due June 15, 2006
Reference is hereby made to the Fifty-Third Supplemental Indenture, dated
as of the fifteenth day of June 2001, by and between PSI Energy, Inc. (the
"Company") and LaSalle Bank National Association (the "Trustee"). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Supplemental Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Bond[s] or interest in such Bond[s] specified in Annex A hereto, in the
principal amount of $___________ in such Bond[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in
the 144A Global Bond or a Definitive Bond Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Bond is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Bond for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable Blue Sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Bond
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Rule 144A Global Bond and/or the Definitive Bond
and in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest in
the Regulation S Temporary Global Bond, the Regulation S Permanent Global Bond
or a Definitive Bond pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed Transfer is being
made prior to the expiration of the Restricted Period, the Transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Bond will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Regulation S Permanent Global Bond,
the Regulation S Temporary Global Bond and/or the Definitive Bond and in the
Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Bond pursuant to any provision of the Securities Act
other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Bonds and Restricted Definitive Bonds and pursuant to and in
accordance with the Securities Act and any applicable Blue Sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Bond or an Unrestricted Definitive Bond.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144
under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable Blue
Sky securities laws of any state of the United States and (ii)
the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture,
the transferred beneficial interest or Definitive Bond will no
longer be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Global
Bonds, on Restricted Definitive Bonds and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act and in compliance
with the transfer restrictions contained in the Indenture and any
applicable Blue Sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or
Definitive Bond will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on
the Restricted Global Bonds, on Restricted Definitive Bonds and
in the Indenture.
5. |_| Check if Transfer is pursuant to another agreement with the Company.
An identification of the agreement and all other certificates, opinions and
other documents required by such agreement are attached hereto.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Bond (CUSIP __________), or
(ii) |_| Regulation S Global Bond (CUSIP __________); or
(b) |_| a Restricted Definitive Bond.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Bond (CUSIP __________), or
(ii) |_| Regulation S Global Bond (CUSIP __________), or
(iii)|_| Unrestricted Global Bond without Transfer restrictions
(CUSIP __________); or
(b) |_| a Restricted Definitive Bond; or
(c) |_| an Unrestricted Definitive Bond,
in accordance with the terms of the Indenture.
EXHIBIT B
FORM OF CERTIFICATE OF EXCHANGE
PSI Energy, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
Attention: Treasurer
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Corporate Trust Administration
Re: PSI Energy, Inc. First Mortgage Bonds, Series EEE, 6.65%, Due June 15, 2006
(CUSIP: )
Reference is hereby made to the Fifty-Third Supplemental Indenture,
dated as of the fifteenth day of June 2001, by and between PSI Energy, Inc. (the
"Company") and LaSalle Bank National Association (the "Trustee"). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Supplemental Indenture.
____________________, (the "Owner") owns and proposes to exchange the
Bond[s] or interest in such Bond[s] specified herein, in the principal amount of
$_______________ in such Bond[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Bonds or Beneficial Interests in a
Restricted Global Bond for Unrestricted Definitive Bonds or Beneficial
Interests in an Unrestricted Global Bond
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Bond to beneficial interest in an Unrestricted Global
Bond. In connection with the Exchange of the Owner's beneficial
interest in a Restricted Global Bond for a beneficial interest in
an Unrestricted Global Bond in an equal principal amount, the
Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Bonds and pursuant to and
in accordance with the United States Securities Act of 1933, as
amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an
Unrestricted Global Bond is being acquired in compliance with any
applicable Blue Sky securities laws of any state of the United
States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Bond to Unrestricted Definitive Bond. In connection with
the Exchange of the Owner's beneficial interest in a Restricted
Global Bond for an Unrestricted Definitive Bond, the Owner hereby
certifies (i) the Definitive Bond is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable
to the Restricted Global Bonds and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities
Act and (iv) the Definitive Bond is being acquired in compliance
with any applicable Blue Sky securities laws of any state of the
United States.
(c) |_| Check if Exchange is from Restricted Definitive Bond to
beneficial interest in an Unrestricted Global Bond. In connection
with the Owner's Exchange of a Restricted Definitive Bond for a
beneficial interest in an Unrestricted Global Bond, the Owner
hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Bonds and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest is being acquired
in compliance with any applicable Blue Sky securities laws of any
state of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Bond to
Unrestricted Definitive Bond. In connection with the Owner's
Exchange of a Restricted Definitive Bond for an Unrestricted
Definitive Bond, the Owner hereby certifies (i) the Unrestricted
Definitive Bond is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to
Restricted Definitive Bonds and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities
Act and (iv) the Unrestricted Definitive Bond is being acquired
in compliance with any applicable Blue Sky securities laws of any
state of the United States.
2. Exchange of Restricted Definitive Bonds or Beneficial Interests in
Restricted Global Bonds for Restricted Definitive Bonds or Beneficial
Interests in Restricted Global Bonds.
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Bond to Restricted Definitive Bond. In connection with the
Exchange of the Owner's beneficial interest in a Restricted
Global Bond for a Restricted Definitive Bond with an equal
principal amount, the Owner hereby certifies that the Restricted
Definitive Bond is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted
Definitive Bond issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Definitive Bond and in the
Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Bond to
beneficial interest in a Restricted Global Bond. In connection
with the Exchange of the Owner's Restricted Definitive Bond for a
beneficial interest in the [CHECK ONE] |_| "144A Global Bond,"
|_| "Regulation S Global Bond," with an equal principal amount,
the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Bonds and
pursuant to and in accordance with the Securities Act, and in
compliance with any applicable Blue Sky securities laws of any
state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Bond and in the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
[Insert Name of Owner]
By:
Name:
Title:
1 This should be included only if the Bonds of Series EEE are being issued in
global form.
2 This should only be included on Regulation S Temporary Global Bonds.
Doc. #78277 - Template 73834
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of
May, 2001 (the "Effective Date"), by and between Cinergy and J. Joseph Hale, Jr.
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for
and hold the position of President, CG & E and President, Cinergy Foundation,
Inc., & VP, Corporate Communications. Cinergy desires to secure the employment
of the Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ
of Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set
forth below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive
agrees to 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 premises, 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 President, CG &E
and President, Cinergy Foundation, Inc. & VP -------- Corporate
Communications, and he will have such responsibilities, duties,
and authority as are customary for someone of that position and
such additional duties, consistent with his position, as may be
assigned to him from time to time during the Employment Period by
the Board of Directors, the
Chief Executive Officer, or the senior executive officer to whom
he directly reports. Executive shall devote substantially all of
Executive's business time, efforts and attention to the
performance of Executive's duties under this Agreement; provided,
however, that this requirement shall not preclude Executive from
reasonable participation in civic, charitable or professional
activities or the management of Executive's passive investments,
so long as such activities do not materially interfere with the
performance of Executive's duties under this Agreement.
b. Place of Performance. In connection with the Executive's
employment, the Executive will be based at the principal
executive offices of Cinergy, 221 East Fourth Street, Cincinnati,
Ohio. Except for required business travel to an extent
substantially consistent with the present business travel
obligations of Cinergy executives who have positions of authority
comparable to that of the Executive, the Executive will not be
required to relocate to a new principal place of business that is
more than thirty (30) miles from Cinergy's principal executive
offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the
annual rate of not less than $294,000 (subject to
across-the-board salary reductions described below). Any increase
in the Annual Base Salary will not serve to limit or reduce any
other obligation of Cinergy under this Agreement. The Annual Base
Salary will not be reduced except for across-the-board salary
reductions similarly affecting all Cinergy management personnel.
If Annual Base Salary is increased or reduced during the
Employment Period, then such adjusted salary will thereafter be
the Annual Base Salary for all purposes under this Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will
be eligible, and Cinergy will take all necessary action to cause
the Executive to become eligible, to participate in 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 other
senior executives of Cinergy who are considered Tier III
executives for compensation purposes, except with respect to any
plan, practice, policy or program to which the Executive has
waived his rights in writing. Executive will participate in the
senior executive supplement portion of the Supplemental Executive
Retirement Plan, and for purposes of that plan, the Executive's
service as an officer of
PSI Energy, Inc. will be treated as combined with his service as
an officer of Cinergy.
Upon his retirement on or after having attained age fifty (50),
the Executive will be eligible for comprehensive medical and
dental benefits which are not materially different from the
benefits provided under the Retirees' Medical Plan and the
Retirees' Dental Plan. The Executive, however, will receive the
maximum level of subsidy currently applicable to similarly
situated active Cinergy employees that is provided by Cinergy to
retirees, as of the Effective Date of this Agreement, for
purposes of determining the amount of monthly premiums due from
the Executive.
The Executive will be a participant in the Annual Incentive Plan,
and the Executive will be paid pursuant to the terms and
conditions of that plan an annual benefit of up to fifty-two and
one-half percent (52.5%) of the Executive's Annual Base Salary
(the "Maximum Annual Bonus"), with a target of no less than
thirty percent (30%) of the Executive's Annual Base Salary (the
"Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive
Plan (the "LTIP"), and the Executive's annualized target award
opportunity under the LTIP will be equal to no less than
seventy-five percent (75%) of his Annual Base Salary (the "Target
LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period,
the Executive will be entitled to the following additional fringe
benefits in accordance with the terms and conditions of Cinergy's
policies for such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile
appropriate for the Executive's level of position, or, at
Cinergy's discretion, a cash allowance of equivalent value.
Cinergy will also pay all of the related expenses for
gasoline, insurance, maintenance, and repairs, or provide
for such expenses within the cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive
for membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per
year (or such longer period for which Executive is otherwise
eligible under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial
planning and tax preparation services.
(v) Cinergy will provide other fringe benefits in accordance
with Cinergy plans, practices, programs, and policies in
effect from time to time, commensurate with his position and
at least comparable to those received by other Cinergy Tier
III executives.
(vi) Cinergy will provide reasonable costs of relocating from the
Cincinnati, Ohio area to a new primary residence in a manner
that is consistent with the terms of the Relocation Program,
following termination of the Executive's employment for any
reason (other than death
d. Expenses. Cinergy agrees to reimburse the Executive for all
expenses, including those for travel and entertainment,
properly incurred by him in the performance of his duties under
this Agreement in accordance with the policies established from
time to time by the Board of Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically
upon the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) that, if
curable, has not been cured within 30 days after the Board
of Directors or the Chief Executive Officer has delivered to
the Executive a written demand for substantial performance,
which demand specifically identifies the manner in which the
Executive has not substantially performed his duties. This
event will constitute Cause even if the Executive issues a
Notice of Termination for Good Reason pursuant to Subsection
4d after the Board of Directors or Chief Executive Officer
delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality
provisions set forth in Section 9.
(iii)The conviction of the Executive for the commission of a
felony, including the entry of a guilty or nolo contendere
plea, or any willful or grossly negligent action or inaction
by the Executive that has a materially adverse effect on
Cinergy. For purposes of this definition of Cause, no act,
or failure to act, on the Executive's part will be deemed
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that
the Executive's act, or failure to act, was in the best
interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days
advance written notice to the Executive, terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon Cinergy in
Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except
for across-the-board salary reductions similarly affecting
all Cinergy management personnel, or a reduction in any
other benefit or payment described in Section 3 of this
Agreement, except for changes to the employee benefits
programs generally affecting Cinergy management personnel,
provided that those changes, in the aggregate, will not
result in a material adverse change with respect to the
benefits to which the Executive was entitled as of the
Effective Date.
(ii) The material reduction without his consent of the
Executive's title, authority, duties, or responsibilities
from those in effect immediately prior to the reduction, or
a material adverse change in the Executive's reporting
responsibilities.
(iii)Any breach by Cinergy of any other material provision of
this Agreement (including but not limited to the place of
performance as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness
or injury that precludes the Executive from performing any
job for which he is qualified and able to perform based upon
his education, training or experience.
(v) A failure by the Company to require any successor entity to
the Company specifically to assume in writing all of the
Company's obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate
his employment without Good Reason upon prior
written notice to the Company.
f. Notice of Termination. Any termination of the Executive's
employment by Cinergy or by the Executive during the Employment
Period (other than a termination due to the Executive's death)
will be communicated by a written Notice of Termination to the
other party to this Agreement in accordance with Subsection 12b.
For purposes of this Agreement, a "Notice of Termination" means a
written notice that specifies the particular provision of this
Agreement relied upon and that sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
terminating the Executive's employment under the specified
provision. The failure by the Executive or Cinergy to set forth
in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or
preclude the Executive or Cinergy from asserting that fact or
circumstance in enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
---------------------------------------
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment
Period, Cinergy will pay to the Executive a lump sum amount,
in cash, equal to the sum of the following Accrued
Obligations:
(1) the pro-rated portion of the Executive's Annual Base
Salary payable through the Date of Termination, to the
extent not previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently
completed fiscal year, to the extent not theretofore
paid.
(3) an amount equal to the AIP Benefit for the fiscal year
that includes the Date of Termination multiplied by a
fraction, the numerator of which is the number of days
from the beginning of that fiscal year to and including
the Date of Termination and the denominator of which is
three hundred and sixty-five (365). The AIP Benefit
component of the calculation will be equal to the
annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the fiscal
year in which occurs the date of determination,
determined by projecting Cinergy's performance and
other applicable goals and objectives for the entire
fiscal year based on Cinergy's performance during the
period of such fiscal year occurring prior to the Date
of Termination, and based on such other assumptions and
rates as Cinergy deems reasonable.
(4) the Accrued Obligations described in this Paragraph
5a(i) will be paid within thirty (30) days after the
Date of Termination. These Accrued Obligations are
payable to the Executive regardless of whether a Change
in Control has occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four
(24) months following the occurrence of a Change in Control,
Cinergy will pay the Accrued Obligations, and Cinergy will
have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash; equal to three (3) times the sum of the Annual
Base Salary and the Annual Bonus. For this purpose, the
Annual Base Salary will be at the rate in effect at the
time Notice of Termination is given (without giving
effect to any reduction in Annual Base Salary, if any,
prior to the termination, other than across-the-board
reductions), and the Annual Bonus will be the higher of
(A) the annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination, and (B) the annual bonus that would have
been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in
respect of the fiscal year in which occurs the Date of
Termination, calculated by projecting Cinergy's
performance and other applicable goals and objectives
for the entire fiscal year based on Cinergy's
performance during the period of such fiscal year
occurring prior to the Date of Termination, and based
on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be
less than the Annual Target Bonus, nor greater than the
Maximum Target Bonus for the year in which the Date of
Termination occurs. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period,
medical and dental benefits to the Executive and/or the
Executive's dependents at least equal to those that
would have been provided if the Executive's employment
had not been terminated (excluding benefits to which
the Executive has waived his rights in writing). The
benefits described in the preceding sentence will be in
accordance with the medical and welfare benefit plans,
practices, programs, or policies of Cinergy (the "M&W
Plans") as then currently in effect and applicable
generally to other Cinergy senior executives and their
families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any related
insurance policies) or (2) violate any of the Code's
nondiscrimination requirements applicable to the M&W
Plans, then Cinergy, in its sole discretion, may elect
to pay the Executive, in lieu of the M&W Plan benefits
described under this Subparagraph 5a(ii)(2), a lump sum
cash payment equal to the total monthly premiums (or in
the case of a self funded plan, the cost of COBRA
continuation coverage) that would have been paid by
Cinergy for the Executive under the M&W Plans from the
Date of Termination through the end of the Employment
Period, grossed up for the effect of federal, state and
local income taxes. Nothing in this Clause will affect
the Executive's right to elect COBRA continuation
coverage under a M&W Plan in accordance with applicable
law, and Cinergy will make the payment described in
this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W Plans
will be secondary to those provided under the other
employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax-counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(4) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(iii)In the event of a Qualifying Termination during the
twenty-four (24) month period beginning upon the occurrence
of a Change in Control, Cinergy will pay the Accrued
Obligations, and Cinergy will also have the following
additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher
of (x) the sum of the Executive's current Annual Base
Salary and Target Annual Bonus and (y) the sum of the
Executive's Annual Base Salary in effect immediately
prior to the Change in Control and the Change in
Control Bonus. For purposes of this Agreement, the
Change in Control Bonus shall mean the higher of (A)
the annual bonus earned by the Executive pursuant to
any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the
fiscal year in which occurs the Change in Control, and
(B) the annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the year in
which occurs the Date of Termination, calculated by
projecting Cinergy's performance and other applicable
goals and objective for the entire fiscal year based on
Cinergy's performance during the period of such fiscal
year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy
deems reasonable, provided, however, that for purposes
of this Subsection 5a(iii)(1)(B), such Change in
Control Annual Bonus shall not be less than the Annual
Target Bonus, nor greater than the Maximum Target
Bonus. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present
value of any benefits under the Executive Supplemental
Life Program under the terms of the applicable plan or
program as of the Date of Termination, calculated as if
the Executive was fully vested as of the Date of
Termination. The lump sum present value, assuming
commencement at age 50 or age as of the Date of
Termination if later, will be determined using the
interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes
the Date of Termination. To the extent no such interest
rate is provided therein, the annual interest rate
applicable under section 417(e)(3) of the Code, or any
successor provision thereto, for the second full
calendar month preceding the first day of the calendar
year that includes the Date of Termination will be
used. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued
benefits as of the Date of Termination under the
Executive Retirement Plans, and his accrued benefits
thereunder will be calculated as if the Executive was
credited with three (3) additional years of age and
service as of the Date of Termination. However, Cinergy
will not commence payment of such benefits until the
Executive has attained age 50. For purposes of
determining benefits under the Executive Retirement
Plans, the definition of earnings will be the same as
defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive
and/or the Executive's dependents are receiving
immediately prior to the Notice of Termination at a
substantially similar cost to the Executive (without
giving effect to any reduction in those benefits
subsequent to a Change in Control that constitutes Good
Reason), except for any benefits that were waived by
the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents
with life, disability, accident, and health insurance
benefits, those benefits will be reduced to the extent
comparable benefits are actually received by or made
available to the Executive and/or the Executive's
dependents during the thirty-six (36) month period
following the Executive's Date of Termination. The
Executive must report to Cinergy any such benefits that
he or his dependents actually receives. In lieu of the
benefits described in the preceding sentences, Cinergy,
in its sole discretion, may elect to pay to the
Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a
self funded plan, the cost of COBRA continuation
coverage) that would have been paid by Cinergy to
provide those benefits to the Executive and/or the
Executive's dependents, grossed up for the effect of
federal, state and local income taxes. Nothing in this
Subparagraph 5a(iii)(4) will affect the Executive's
right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by
the Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to
the Executive's position until the end of the
Employment Period or, if earlier, until the first
acceptance by the Executive of an offer of employment.
At the Executive's discretion, 15% of Annual Base
Salary may be paid in lieu of outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the
Employment Period, or if the Executive terminates employment
during the Employment Period other than a termination for Good
Reason, Cinergy will have no further obligations to the Executive
under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations, plus any other earned but
unpaid compensation, in each case to the extent not previously
paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to
the Executive or for his benefit pursuant to the terms of
this Agreement or otherwise in connection with, or arising
out of, his employment with Cinergy or a change in ownership
or effective control of Cinergy or of a substantial portion
of its assets (a "Payment" or "Payments") would be subject
to any Excise Tax, then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest, penalties, additional tax, or
similar items imposed with respect thereto and the Excise
Tax), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all
determinations required to be made under this Section 5c,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by the Accounting Firm, which shall provide detailed
supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5c, shall be paid by Cinergy to the
Executive within five (5) days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Cinergy and the
Executive. However, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that Cinergy exhausts its remedies
pursuant to Section 5c(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
Cinergy to or for the benefit of the Executive. In the event
that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at the rate
provided in Code section 1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment
or benefit paid or payable to the Executive will be
determined in accordance with the principles of Code
sections 280G(d)(3) and (4). For purposes of determining the
amount of the Gross-Up Payment, the Executive will be deemed
to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and applicable state and
local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on
the Date of Termination, net of the maximum reduction in
federal income taxes that would be obtained from deduction
of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting
Firm's determination, an Excise Tax will be imposed on any
Payment or Payments, Cinergy will pay to the applicable
government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that Cinergy has actually withheld
from the Payment or Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's
entitlement to restricted shares and performance shares under the
Value Creation Plan and any stock options granted under the Stock
Option Plan or the LTIP will be determined under the terms of the
appropriate plan and any applicable administrative guidelines and
written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the
Executive's entitlements, if any, under the Non-Qualified
Deferred Compensation Plan and 401(k) Excess Plan shall be
distributed under the terms of such plans and any applicable
administrative guidelines and written agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the
Executive for all reasonable legal fees and expenses incurred by
the Executive in successfully disputing a Qualifying Termination
that entitles the Executive to Severance Benefits. Payment will
be made within five (5) business days after delivery of the
Executive's written request for payment accompanied by such
evidence of fees and expenses incurred as Cinergy reasonably may
require.
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)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' 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.
10. Successors.
a. This Agreement is personal to the Executive and, without
Cinergy's prior written consent, cannot be assigned by the
Executive other than Executive's designation of a beneficiary of
any amounts payable hereunder after the Executive's death. This
Agreement will inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Cinergy to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Cinergy would be required to
perform it if no succession had taken place. Cinergy's failure to
obtain such an assumption and agreement prior to the effective
date of a succession will be a breach of this Agreement and will
entitle the Executive to compensation from Cinergy in the same
amount and on the same terms as if the Executive were to
terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing,
the date on which any such succession becomes effective will be
deemed the Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between
Cinergy and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan
benefit described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base
salary payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in
Subsection 5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy
Corp. Annual Incentive Plan or any similar plan or
successor to the Annual Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of
directors of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the
Effective Date:
(i) Any "person" or "group" (within the meaning of subsection
13(d) and paragraph 14(d)(2) of the 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 (2) consecutive years, individuals
who at the beginning of that period constitute the Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by
the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of that period or whose appointment, election, or nomination
for election was previously so approved or recommended cease
for any reason to constitute a majority of the Board of
Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the
meaning set forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the
chief executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or
its affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended,
and interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive with Good Reason, the date of
receipt of the Notice of Termination or any later date
specified in the notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on
which the Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company
other than for Cause, thirty (30) days after the date on
which the Company notifies the Executive of the termination;
and
(iv) if the Executive's employment is terminated by reason of
death, the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means
the Cinergy Corp. Non-Qualified Deferred Incentive
Compensation Plan or any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means May 15, 2001.
t. Employment Period. "Employment Period" has the meaning set forth
in Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code
section 4999, together with any interest, penalties, additional
tax or similar items that are incurred by the Executive
with respect to the excise tax imposed by Code section 4999.
v. Executive. "Executive" means J. Joseph Hale, Jr.
w. Executive Retirement Plans. "Executive Retirement Plans" means
the Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy
Corp. Supplemental Executive Retirement Plan and the Cinergy
Corp. Excess Pension Plan or any similar plans or successors to
those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life
Insurance Program or any similar program or successor to the
Executive Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that
plan.
z. Good Reason. "Good Reason" has the meaning set forth in
Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or
"LTIP" means the long-term incentive plan implemented under the
Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any
successor to that plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in Subparagraph
5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set
forth in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning
set forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set
forth in Subsection 5c.
gg. 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;
(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.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with
Cinergy other than a termination for Cause or (ii) the
termination by the Executive of the Executive's employment with
Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination
of employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy
Corp. Retirees' Dental program or any similar program or
successor to that program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical program or any similar
program or successor to that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. 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.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth
in Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value
Creation Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of its provisions and will have no force or effect.
This Agreement may not be amended, modified, repealed, waived,
extended, or discharged except by an agreement in writing signed
by the party against whom enforcement of the amendment,
modification, repeal, waiver, extension, or discharge is sought.
Only the Chief Executive Officer or his designee will have
authority on behalf of Cinergy to agree to amend, modify, repeal,
waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be
in writing and will be given by hand delivery to the other party
or by Federal Express or other comparable national or
international overnight delivery service, addressed as follows:
If to the Executive:
-------------------
J. Joseph Hale, Jr.
Cinergy Corp.
221 East Fourth Street
Cincinnati, OH 45201-0960
If to Cinergy:
-------------
Cinergy Corp.
221 East Fourth Street
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.
f. References in this Agreement to the masculine include the
feminine unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive
and Cinergy with respect to the subject matter of this Agreement;
and subject to any agreements evidencing stock option or
restricted stock grants described in Subsection 3b and the Stock
Related Documents, all promises, representations, understandings,
arrangements, and prior agreements are merged into this Agreement
and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which together will
constitute one and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will
be authorized to act for Cinergy with respect to all aspects
pertaining to the administration and interpretation of this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_____________________________
James E. Rogers
Chairman and
Chief Executive Officer
EXECUTIVE
--------------------------------
J. Joseph Hale, Jr.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 9th day of
March, 2001 (the "Effective Date"), by and between Cinergy and Lisa D. Gamblin
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for and
hold the position of Treasurer. Cinergy desires to secure the employment of the
Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ of
Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set forth
below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive agrees
to 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 premises,
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 Treasurer, and he
will have such responsibilities, duties, and authority as are
customary for someone of that position and such additional
duties, consistent with his position, as may be assigned to him
from time to time during the Employment Period by the Board of
Directors, the Chief Executive Officer, or the senior executive
officer to whom he directly reports. Executive shall devote
substantially all of Executive's business time, efforts and
attention to the performance of Executive's duties under this
Agreement; provided, however, that this requirement shall not
preclude Executive from reasonable participation in civic,
charitable or professional activities or the management of
Executive's passive investments, so long as such activities do
not materially interfere with the performance of Executive's
duties under this Agreement.
b. Place of Performance. In connection with the Executive's
employment, the Executive will be based at 221 East Fourth
Street, Cincinnati, OH 45202. Except for required business travel
to an extent substantially consistent with the present business
travel obligations of Cinergy executives who have positions of
authority comparable to that of the Executive, the Executive will
not be required to relocate to a new principal place of business
that is more than thirty (30) miles from Cinergy's principal
executive offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the
annual rate of not less than $200,004.00 (subject to
across-the-board salary reductions described below). Any increase
in the Annual Base Salary will not serve to limit or reduce any
other obligation of Cinergy under this Agreement. The Annual Base
Salary will not be reduced except for across-the-board salary
reductions similarly affecting all Cinergy management personnel.
If Annual Base Salary is increased or reduced during the
Employment Period, then such adjusted salary will thereafter be
the Annual Base Salary for all purposes under this Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will be eligible, and
Cinergy will take all necessary action to cause the Executive to
become eligible, to participate in 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 other senior executives of
Cinergy who are considered Tier III executives for compensation
purposes, except with respect to any plan, practice, policy or
program to which the Executive has waived his rights in writing.
Upon his retirement on or after having attained age fifty (50),
the Executive will be eligible for comprehensive medical and
dental benefits which are not materially different from the
benefits provided under the Retirees' Medical Plan and the
Retirees' Dental Plan. The Executive, however, will receive the
maximum level of subsidy currently applicable to similarly
situated active Cinergy employees that is provided by Cinergy to
retirees, as of the Effective Date of this Agreement, for
purposes of determining the amount of monthly premiums due from
the Executive.
The Executive will be a participant in the Annual Incentive Plan,
and the Executive will be paid pursuant to the terms and
conditions of that plan an annual benefit of up to fifty-two and
one-half percent (52.5%) of the Executive's Annual Base Salary
(the "Maximum Annual Bonus"), with a target of no less than
thirty percent (30%) of the Executive's Annual Base Salary (the
"Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive
Plan (the "LTIP"), and the Executive's annualized target award
opportunity under the LTIP will be equal to no less than
seventy-five percent (75%) of his Annual Base Salary (the "Target
LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period,
the Executive will be entitled to the following additional fringe
benefits in accordance with the terms and conditions of Cinergy's
policies for such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile
appropriate for the Executive's level of position, or, at
Cinergy's discretion, a cash allowance of equivalent value.
Cinergy will also pay all of the related expenses for
gasoline, insurance, maintenance, and repairs, or provide
for such expenses within the cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive
for membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per
year (or such longer period for which Executive is otherwise
eligible under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial
planning and tax preparation services.
(v) Cinergy will provide other fringe benefits in accordance
with Cinergy plans, practices, programs, and policies in
effect from time to time, commensurate with his position and
at least comparable to those received by other Cinergy Tier
III executives.
d. Expenses. Cinergy agrees to reimburse the Executive for all
expenses, including those for travel and entertainment, properly
incurred by him in the performance of his duties under this
Agreement in accordance with the policies established from time
to time by the Board of Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically
upon the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) that, if
curable, has not been cured within 30 days after the Board
of Directors or the Chief Executive Officer has delivered to
the Executive a written demand for substantial performance,
which demand specifically identifies the manner in which the
Executive has not substantially performed his duties. This
event will constitute Cause even if the Executive issues a
Notice of Termination for Good Reason pursuant to Subsection
4d after the Board of Directors or Chief Executive Officer
delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality
provisions set forth in Section 9.
(iii)The conviction of the Executive for the commission of a
felony, including the entry of a guilty or nolo contendere
plea, or any willful or grossly negligent action or inaction
by the Executive that has a materially adverse effect on
Cinergy. For purposes of this definition of Cause, no act,
or failure to act, on the Executive's part will be deemed
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that
the Executive's act, or failure to act, was in the best
interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days
advance written notice to the Executive, terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon Cinergy in
Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except
for across-the-board salary reductions similarly affecting
all Cinergy management personnel, or a reduction in any
other benefit or payment described in Section 3 of this
Agreement, except for changes to the employee benefits
programs generally affecting Cinergy management personnel,
provided that those changes, in the aggregate, will not
result in a material adverse change with respect to the
benefits to which the Executive was entitled as of the
Effective Date.
(ii) The material reduction without his consent of the
Executive's title, authority, duties, or responsibilities
from those in effect immediately prior to the reduction, or
a material adverse change in the Executive's reporting
responsibilities.
(iii)Any breach by Cinergy of any other material provision of
this Agreement (including but not limited to the place of
performance as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness
or injury that precludes the Executive from performing any
job for which he is qualified and able to perform based upon
his education, training or experience.
(v) A failure by the Company to require any successor entity to
the Company specifically to assume in writing all of the
Company's obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate
his employment without Good Reason upon prior written notice to
the Company.
f. Notice of Termination. Any termination of the Executive's
employment by Cinergy or by the Executive during the Employment
Period (other than a termination due to the Executive's death)
will be communicated by a written Notice of Termination to the
other party to this Agreement in accordance with Subsection 12b.
For purposes of this Agreement, a "Notice of Termination" means a
written notice that specifies the particular provision of this
Agreement relied upon and that sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
terminating the Executive's employment under the specified
provision. The failure by the Executive or Cinergy to set forth
in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or
preclude the Executive or Cinergy from asserting that fact or
circumstance in enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment
Period, Cinergy will pay to the Executive a lump sum amount,
in cash, equal to the sum of the following Accrued
Obligations:
(1) the pro-rated portion of the Executive's
Annual Base Salary payable through the Date
of Termination, to the extent not previously
paid.
(2) any amount payable to the Executive under
the Annual Incentive Plan in respect of the
most recently completed fiscal year, to the
extent not theretofore paid.
(3) an amount equal to the AIP Benefit for the
fiscal year that includes the Date of
Termination multiplied by a fraction, the
numerator of which is the number of days
from the beginning of that fiscal year to
and including the Date of Termination and
the denominator of which is three hundred
and sixty-five (365). The AIP Benefit
component of the calculation will be equal
to the annual bonus that would have been
earned by the Executive pursuant to any
annual bonus or incentive plan maintained by
Cinergy in respect of the fiscal year in
which occurs the date of determination,
determined by projecting Cinergy's
performance and other applicable goals and
objectives for the entire fiscal year based
on Cinergy's performance during the period
of such fiscal year occurring prior to the
Date of Termination, and based on such other
assumptions and rates as Cinergy deems
reasonable.
(4) the Accrued Obligations described in this
Paragraph 5a(i) will be paid within thirty
(30) days after the Date of Termination.
These Accrued Obligations are payable to the
Executive regardless of whether a Change in
Control has occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four
(24) months following the occurrence of a Change in Control,
Cinergy will pay the Accrued Obligations, and Cinergy will
have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash, equal to three (3) times the sum of the Annual
Base Salary and the Annual Bonus. For this purpose, the
Annual Base Salary will be at the rate in effect at the
time Notice of Termination is given (without giving
effect to any reduction in Annual Base Salary, if any,
prior to the termination, other than across-the-board
reductions), and the Annual Bonus will be the higher of
(A) the annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination, and (B) the annual bonus that would have
been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in
respect of the fiscal year in which occurs the Date of
Termination, calculated by projecting Cinergy's
performance and other applicable goals and objectives
for the entire fiscal year based on Cinergy's
performance during the period of such fiscal year
occurring prior to the Date of Termination, and based
on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be
less than the Target Annual Bonus, nor greater than the
Maximum Annual Bonus for the year in which the Date of
Termination occurs. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period,
medical and dental benefits to the Executive and/or the
Executive's dependents at least equal to those that
would have been provided if the Executive's employment
had not been terminated (excluding benefits to which
the Executive has waived his rights in writing). The
benefits described in the preceding sentence will be in
accordance with the medical and welfare benefit plans,
practices, programs, or policies of Cinergy (the "M&W
Plans") as then currently in effect and applicable
generally to other Cinergy senior executives and their
families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any related
insurance policies) or (2) violate any of the Code's
nondiscrimination requirements applicable to the M&W
Plans, then Cinergy, in its sole discretion, may elect
to pay the Executive, in lieu of the M&W Plan benefits
described under this Subparagraph 5a(ii)(2), a lump sum
cash payment equal to the total monthly premiums (or in
the case of a self funded plan, the cost of COBRA
continuation coverage) that would have been paid by
Cinergy for the Executive under the M&W Plans from the
Date of Termination through the end of the Employment
Period, grossed up for the effect of federal, state and
local income taxes. Nothing in this Clause will affect
the Executive's right to elect COBRA continuation
coverage under a M&W Plan in accordance with applicable
law, and Cinergy will make the payment described in
this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W Plans
will be secondary to those provided under the other
employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(iii)In the event of a Qualifying Termination during the
twenty-four (24) month period beginning upon the occurrence
of a Change in Control, Cinergy will pay the Accrued
Obligations, and Cinergy will also have the following
additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher
of (x) the sum of the Executive's current Annual Base
Salary and Target Annual Bonus and (y) the sum of the
Executive's Annual Base Salary in effect immediately
prior to the Change in Control and the Change in
Control Bonus. For purposes of this Agreement, the
Change in Control Bonus shall mean the higher of (A)
the annual bonus earned by the Executive pursuant to
any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the
fiscal year in which occurs the Change in Control, and
(B) the annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the year in
which occurs the Date of Termination, calculated by
projecting Cinergy's performance and other applicable
goals and objective for the entire fiscal year based on
Cinergy's performance during the period of such fiscal
year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy
deems reasonable, provided, however, that for purposes
of this Subsection 5a(iii)(1)(B), such Change in
Control Annual Bonus shall not be less than the Target
Annual Bonus, nor greater than the Maximum Annual
Bonus. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present
value of any benefits under the Executive Supplemental
Life Program under the terms of the applicable plan or
program as of the Date of Termination, calculated as if
the Executive was fully vested as of the Date of
Termination. The lump sum present value, assuming
commencement at age 50 or age as of the Date of
Termination if later, will be determined using the
interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes
the Date of Termination. To the extent no such interest
rate is provided therein, the annual interest rate
applicable under section 417(e)(3) of the Code, or any
successor provision thereto, for the second full
calendar month preceding the first day of the calendar
year that includes the Date of Termination will be
used. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued
benefits as of the Date of Termination under the
Executive Retirement Plans, and his accrued benefits
thereunder will be calculated as if the Executive was
credited with three (3) additional years of age and
service as of the Date of Termination. However, Cinergy
will not commence payment of such benefits until the
Executive has attained age 50. For purposes of
determining benefits under the Executive Retirement
Plans, the definition of earnings will be the same as
defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive
and/or the Executive's dependents are receiving
immediately prior to the Notice of Termination at a
substantially similar cost to the Executive (without
giving effect to any reduction in those benefits
subsequent to a Change in Control that constitutes Good
Reason), except for any benefits that were waived by
the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents
with life, disability, accident, and health insurance
benefits, those benefits will be reduced to the extent
comparable benefits are actually received by or made
available to the Executive and/or the Executive's
dependents during the thirty-six (36) month period
following the Executive's Date of Termination. The
Executive must report to Cinergy any such benefits that
he or his dependents actually receives. In lieu of the
benefits described in the preceding sentences, Cinergy,
in its sole discretion, may elect to pay to the
Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a
self funded plan, the cost of COBRA continuation
coverage) that would have been paid by Cinergy to
provide those benefits to the Executive and/or the
Executive's dependents, grossed up for the effect of
federal, state and local income taxes. Nothing in this
Subparagraph 5a(iii)(4) will affect the Executive's
right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by
the Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to
the Executive's position until the end of the
Employment Period or, if earlier, until the first
acceptance by the Executive of an offer of employment.
At the Executive's discretion, 15% of Annual Base
Salary may be paid in lieu of outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the
Employment Period, or if the Executive terminates employment
during the Employment Period other than a termination for Good
Reason, Cinergy will have no further obligations to the Executive
under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations, plus any other earned but
unpaid compensation, in each case to the extent not previously
paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to
the Executive or for his benefit pursuant to the terms of
this Agreement or otherwise in connection with, or arising
out of, his employment with Cinergy or a change in ownership
or effective control of Cinergy or of a substantial portion
of its assets (a "Payment" or "Payments") would be subject
to any Excise Tax, then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest, penalties, additional tax, or
similar items imposed with respect thereto and the Excise
Tax), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all
determinations required to be made under this Section 5c,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by the Accounting Firm, which shall provide detailed
supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5c, shall be paid by Cinergy to the
Executive within five (5) days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Cinergy and the
Executive. However, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that Cinergy exhausts its remedies
pursuant to Section 5c(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
Cinergy to or for the benefit of the Executive. In the event
that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at the rate
provided in Code section 1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment
or benefit paid or payable to the Executive will be
determined in accordance with the principles of Code
sections 280G(d)(3) and (4). For purposes of determining the
amount of the Gross-Up Payment, the Executive will be deemed
to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and applicable state and
local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on
the Date of Termination, net of the maximum reduction in
federal income taxes that would be obtained from deduction
of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting
Firm's determination, an Excise Tax will be imposed on any
Payment or Payments, Cinergy will pay to the applicable
government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that Cinergy has actually withheld
from the Payment or Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's
entitlement to restricted shares and performance shares under the
Value Creation Plan and any stock options granted under the Stock
Option Plan or the LTIP will be determined under the terms of the
appropriate plan and any applicable administrative guidelines and
written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the
Executive's entitlements, if any, under the Non-Qualified
Deferred Compensation Plan and 401(k) Excess Plan shall be
distributed under the terms of such plans and any applicable
administrative guidelines and written agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the
Executive for all reasonable legal fees and expenses incurred by
the Executive in successfully disputing a Qualifying Termination
that entitles the Executive to Severance Benefits. Payment will
be made within five (5) business days after delivery of the
Executive's written request for payment accompanied by such
evidence of fees and expenses incurred as Cinergy reasonably may
require.
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)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' 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.
10. Successors.
a. This Agreement is personal to the Executive and, without
Cinergy's prior written consent, cannot be assigned by the
Executive other than Executive's designation of a beneficiary of
any amounts payable hereunder after the Executive's death. This
Agreement will inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Cinergy to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Cinergy would be required to
perform it if no succession had taken place. Cinergy's failure to
obtain such an assumption and agreement prior to the effective
date of a succession will be a breach of this Agreement and will
entitle the Executive to compensation from Cinergy in the same
amount and on the same terms as if the Executive were to
terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing,
the date on which any such succession becomes effective will be
deemed the Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between
Cinergy and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan
benefit described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base
salary payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in
Subsection 5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy
Corp. Annual Incentive Plan or any similar plan or successor to
the Annual Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of
directors of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the
Effective Date:
(i) Any "person" or "group" (within the meaning of subsection
13(d) and paragraph 14(d)(2) of the 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 (2) consecutive years, individuals
who at the beginning of that period constitute the Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by
the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of that period or whose appointment, election, or nomination
for election was previously so approved or recommended cease
for any reason to constitute a majority of the Board of
Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the
meaning set forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the
chief executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or
its affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended,
and interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive with Good Reason, the date of
receipt of the Notice of Termination or any later date
specified in the notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on
which the Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company
other than for Cause, thirty (30) days after the date on
which the Company notifies the Executive of the termination;
and
(iv) if the Executive's employment is terminated by reason of
death, the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means
the Cinergy Corp. Non-Qualified Deferred Incentive Compensation
Plan or any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means March 9, 2001.
t. Employment Period. "Employment Period" has the meaning set forth
in Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code
section 4999, together with any interest, penalties, additional
tax or similar items that are incurred by the Executive with
respect to the excise tax imposed by Code section 4999.
v. Executive. "Executive" means Lisa D. Gamblin.
w. Executive Retirement Plans. "Executive Retirement Plans" means
the Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy
Corp. Supplemental Executive Retirement Plan and the Cinergy
Corp. Excess Pension Plan or any similar plans or successors to
those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life
Insurance Program or any similar program or successor to the
Executive Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that
plan.
z. Good Reason. "Good Reason" has the meaning set forth in
Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or
"LTIP" means the long-term incentive plan implemented under the
Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any
successor to that plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in Subparagraph
5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set
forth in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning
set forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set
forth in Subsection 5c.
gg. 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;
(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.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with
Cinergy other than a termination for Cause or (ii) the
termination by the Executive of the Executive's employment with
Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination
of employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy
Corp. Retirees' Dental program or any similar program or
successor to that program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical program or any similar program or
successor to that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. 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.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth
in Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value
Creation Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of its provisions and will have no force or effect.
This Agreement may not be amended, modified, repealed, waived,
extended, or discharged except by an agreement in writing signed
by the party against whom enforcement of the amendment,
modification, repeal, waiver, extension, or discharge is sought.
Only the Chief Executive Officer or his designee will have
authority on behalf of Cinergy to agree to amend, modify, repeal,
waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be
in writing and will be given by hand delivery to the other party
or by Federal Express or other comparable national or
international overnight delivery service, addressed as follows:
If to the Executive:
-------------------
Lisa D. Gamblin
11692 Grandstone Lane
Cincinnati, OH 45249
If to Cinergy:
-------------
Cinergy Corp.
221 East Fourth Street
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.
f. References in this Agreement to the masculine include the
feminine unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive
and Cinergy with respect to the subject matter of this Agreement;
and subject to any agreements evidencing stock option or
restricted stock grants described in Subsection 3b and the Stock
Related Documents, all promises, representations, understandings,
arrangements, and prior agreements are merged into this Agreement
and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which together will
constitute one and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will
be authorized to act for Cinergy with respect to all aspects
pertaining to the administration and interpretation of this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By: ------------------------
James E. Rogers
Chairman and
Chief Executive Officer
EXECUTIVE
---------------------------
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of
May, 2001(the "Effective Date"), by and between Cinergy and M. Stephen Harkness
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for and
hold the position of President and Chief Operating Officer, Cinergy Solutions,
Inc. Cinergy desires to secure the employment of the Executive in accordance
with this Agreement.
The Executive is willing to enter and continue to remain in the employ of
Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set forth
below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive agrees
to 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 premises,
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 President and Chief
Operating Officer, Cinergy Solutions, Inc., and he will have such
responsibilities, duties, and authority as are customary for
someone of that position and such additional duties, consistent
with his position, as may be assigned to him from time to time
during the Employment Period by the Board of Directors, the Chief
Executive Officer, or the senior executive officer to whom he
directly reports. Executive shall devote substantially all of
Executive's business time, efforts and attention to the
performance of Executive's duties under this Agreement; provided,
however, that this requirement shall not preclude Executive from
reasonable participation in civic, charitable or professional
activities or the management of Executive's passive investments,
so long as such activities do not materially interfere with the
performance of Executive's duties under this Agreement.
b. Place of Performance. In connection with the Executive's
employment, the Executive will be based at the principal
executive offices of Cinergy at 1000 East Main Street,
Plainfield, Indiana. Except for required business travel to an
extent substantially consistent with the present business travel
obligations of Cinergy executives who have positions of authority
comparable to that of the Executive, the Executive will not be
required to relocate to a new principal place of business that is
more than thirty (30) miles from Cinergy's principal executive
offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the
annual rate of not less than $247,500 (subject to
across-the-board salary reductions described below). Any increase
in the Annual Base Salary will not serve to limit or reduce any
other obligation of Cinergy under this Agreement. The Annual Base
Salary will not be reduced except for across-the-board salary
reductions similarly affecting all Cinergy management personnel.
If Annual Base Salary is increased or reduced during the
Employment Period, then such adjusted salary will thereafter be
the Annual Base Salary for all purposes under this Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will be eligible, and
Cinergy will take all necessary action to cause the Executive to
become eligible, to participate in 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 other senior executives of
Cinergy who are considered Tier III executives for compensation
purposes, except with respect to any plan, practice, policy or
program to which the Executive has waived his rights in writing.
Executive will participate in the senior executive supplement
portion of the Supplement Executive Retirement Plan, and for
purposes of that plan, the Executive's service as an officer of
PSI Energy, Inc. will be treated as and combined with his service
as an officer of Cinergy.
Upon his retirement on or after having attained age fifty (50),
the Executive will be eligible for comprehensive medical and
dental benefits which are not materially different from the
benefits provided under the Retirees' Medical Plan and the
Retirees' Dental Plan. The Executive, however, will receive the
maximum level of subsidy currently applicable to similarly
situated active Cinergy employees that is provided by Cinergy to
retirees, as of the Effective Date of this Agreement, for
purposes of determining the amount of monthly premiums due from
the Executive.
The Executive will be a participant in the Annual Incentive Plan,
and the Executive will be paid pursuant to the terms and
conditions of that plan an annual benefit of up to fifty-two and
one-half percent (52.5%) of the Executive's Annual Base Salary
(the "Maximum Annual Bonus"), with a target of no less than
thirty percent (30%) of the Executive's Annual Base Salary (the
"Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive
Plan (the "LTIP"), and the Executive's annualized target award
opportunity under the LTIP will be equal to no less than
seventy-five percent (75%) of his Annual Base Salary (the "Target
LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period,
the Executive will be entitled to the following additional fringe
benefits in accordance with the terms and conditions of Cinergy's
policies for such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile
appropriate for the Executive's level of position, or, at
Cinergy's discretion, a cash allowance of equivalent value.
Cinergy will also pay all of the related expenses for
gasoline, insurance, maintenance, and repairs, or provide
for such expenses within the cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive
for membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per
year (or such longer period for which Executive is otherwise
eligible under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial
planing and tax preparation services.
(v) Cinergy will provide other fringe benefits in accordance
with Cinergy plans, practices, programs, and policies in
effect from time to time, commensurate with his position and
at least comparable to those received by other Cinergy Tier
III executives.
d. Expenses. Cinergy agrees to reimburse the Executive for all
expenses, including those for travel and entertainment, properly
incurred by him in the performance of his duties under this
Agreement in accordance with the policies established from time
to time by the Board of Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically
upon the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) that, if
curable, has not been cured within 30 days after the Board
of Directors or the Chief Executive Officer has delivered to
the Executive a written demand for substantial performance,
which demand specifically identifies the manner in which the
Executive has not substantially performed his duties. This
event will constitute Cause even if the Executive issues a
Notice of Termination for Good Reason pursuant to Subsection
4d after the Board of Directors or Chief Executive Officer
delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality
provisions set forth in Section 9.
(iii)The conviction of the Executive for the commission of a
felony, including the entry of a guilty or nolo contendere
plea, or any willful or grossly negligent action or inaction
by the Executive that has a materially adverse effect on
Cinergy. For purposes of this definition of Cause, no act,
or failure to act, on the Executive's part will be deemed
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that
the Executive's act, or failure to act, was in the best
interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days
advance written notice to the Executive, terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon Cinergy in
Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except
for across-the-board salary reductions similarly affecting
all Cinergy management personnel, or a reduction in any
other benefit or payment described in Section 3 of this
Agreement, except for changes to the employee benefits
programs generally affecting Cinergy management personnel,
provided that those changes, in the aggregate, will not
result in a material adverse change with respect to the
benefits to which the Executive was entitled as of the
Effective Date.
(ii) The material reduction without his consent of the
Executive's title, authority, duties, or responsibilities
from those in effect immediately prior to the reduction, or
a material adverse change in the Executive's reporting
responsibilities.
(iii)Any breach by Cinergy of any other material provision of
this Agreement (including but not limited to the place of
performance as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness
or injury that precludes the Executive from performing any
job for which he is qualified and able to perform based upon
his education, training or experience.
(v) A failure by the Company to require any successor entity to
the Company specifically to assume in writing all of the
Company's obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate
his employment without Good Reason upon prior written notice to
the Company.
f. Notice of Termination. Any termination of the Executive's
employment by Cinergy or by the Executive during the Employment
Period (other than a termination due to the Executive's death)
will be communicated by a written Notice of Termination to the
other party to this Agreement in accordance with Subsection 12b.
For purposes of this Agreement, a "Notice of Termination" means a
written notice that specifies the particular provision of this
Agreement relied upon and that sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
terminating the Executive's employment under the specified
provision. The failure by the Executive or Cinergy to set forth
in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or
preclude the Executive or Cinergy from asserting that fact or
circumstance in enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment
Period, Cinergy will pay to the Executive a lump sum amount,
in cash, equal to the sum of the following Accrued
Obligations:
(1) the pro-rated portion of the Executive's Annual Base
Salary payable through the Date of Termination, to the
extent not previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently
completed fiscal year, to the extent not theretofore
paid.
(3) an amount equal to the AIP Benefit for the fiscal year
that includes the Date of Termination multiplied by a
fraction, the numerator of which is the number of days
from the beginning of that fiscal year to and including
the Date of Termination and the denominator of which is
three hundred and sixty-five (365). The AIP Benefit
component of the calculation will be equal to the
annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the fiscal
year in which occurs the date of determination,
determined by projecting Cinergy's performance and
other applicable goals and objectives for the entire
fiscal year based on Cinergy's performance during the
period of such fiscal year occurring prior to the Date
of Termination, and based on such other assumptions and
rates as Cinergy deems reasonable.
(4) the Accrued Obligations described in this Paragraph
5a(i) will be paid within thirty (30) days after the
Date of Termination. These Accrued Obligations are
payable to the Executive regardless of whether a Change
in Control has occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four
(24) months following the occurrence of a Change in Control,
Cinergy will pay the Accrued Obligations, and Cinergy will
have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash, equal to three (3) times the sum of the Annual
Base Salary and the Annual Bonus. For this purpose, the
Annual Base Salary will be at the rate in effect at the
time Notice of Termination is given (without giving
effect to any reduction in Annual Base Salary, if any,
prior to the termination, other than across-the-board
reductions), and the Annual Bonus will be the higher of
(A) the annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination, and (B) the annual bonus that would have
been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in
respect of the fiscal year in which occurs the Date of
Termination, calculated by projecting Cinergy's
performance and other applicable goals and objectives
for the entire fiscal year based on Cinergy's
performance during the period of such fiscal year
occurring prior to the Date of Termination, and based
on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be
less than the Annual Target Bonus, nor greater than the
Maximum Target Bonus for the year in which the Date of
Termination occurs. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period,
medical and dental benefits to the Executive and/or the
Executive's dependents at least equal to those that
would have been provided if the Executive's employment
had not been terminated (excluding benefits to which
the Executive has waived his rights in writing). The
benefits described in the preceding sentence will be in
accordance with the medical and welfare benefit plans,
practices, programs, or policies of Cinergy (the "M&W
Plans") as then currently in effect and applicable
generally to other Cinergy senior executives and their
families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any related
insurance policies) or (2) violate any of the Code's
nondiscrimination requirements applicable to the M&W
Plans, then Cinergy, in its sole discretion, may elect
to pay the Executive, in lieu of the M&W Plan benefits
described under this Subparagraph 5a(ii)(2), a lump sum
cash payment equal to the total monthly premiums (or in
the case of a self funded plan, the cost of COBRA
continuation coverage) that would have been paid by
Cinergy for the Executive under the M&W Plans from the
Date of Termination through the end of the Employment
Period, grossed up for the effect of federal, state and
local income taxes. Nothing in this Clause will affect
the Executive's right to elect COBRA continuation
coverage under a M&W Plan in accordance with applicable
law, and Cinergy will make the payment described in
this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W Plans
will be secondary to those provided under the other
employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax-counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(4) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(iii)In the event of a Qualifying Termination during the
twenty-four (24) month period beginning upon the occurrence
of a Change in Control, Cinergy will pay the Accrued
Obligations, and Cinergy will also have the following
additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher
of (x) the sum of the Executive's current Annual Base
Salary and Target Annual Bonus and (y) the sum of the
Executive's Annual Base Salary in effect immediately
prior to the Change in Control and the Change in
Control Bonus. For purposes of this Agreement, the
Change in Control Bonus shall mean the higher of (A)
the annual bonus earned by the Executive pursuant to
any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the
fiscal year in which occurs the Change in Control, and
(B) the annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the year in
which occurs the Date of Termination, calculated by
projecting Cinergy's performance and other applicable
goals and objective for the entire fiscal year based on
Cinergy's performance during the period of such fiscal
year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy
deems reasonable, provided, however, that for purposes
of this Subsection 5a(iii)(1)(B), such Change in
Control Annual Bonus shall not be less than the Annual
Target Bonus, nor greater than the Maximum Target
Bonus. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present
value of any benefits under the Executive Supplemental
Life Program under the terms of the applicable plan or
program as of the Date of Termination, calculated as if
the Executive was fully vested as of the Date of
Termination. The lump sum present value, assuming
commencement at age 50 or age as of the Date of
Termination if later, will be determined using the
interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes
the Date of Termination. To the extent no such interest
rate is provided therein, the annual interest rate
applicable under section 417(e)(3) of the Code, or any
successor provision thereto, for the second full
calendar month preceding the first day of the calendar
year that includes the Date of Termination will be
used. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued
benefits as of the Date of Termination under the
Executive Retirement Plans, and his accrued benefits
thereunder will be calculated as if the Executive was
credited with three (3) additional years of age and
service as of the Date of Termination. However, Cinergy
will not commence payment of such benefits until the
Executive has attained age 50. For purposes of
determining benefits under the Executive Retirement
Plans, the definition of earnings will be the same as
defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive
and/or the Executive's dependents are receiving
immediately prior to the Notice of Termination at a
substantially similar cost to the Executive (without
giving effect to any reduction in those benefits
subsequent to a Change in Control that constitutes Good
Reason), except for any benefits that were waived by
the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents
with life, disability, accident, and health insurance
benefits, those benefits will be reduced to the extent
comparable benefits are actually received by or made
available to the Executive and/or the Executive's
dependents during the thirty-six (36) month period
following the Executive's Date of Termination. The
Executive must report to Cinergy any such benefits that
he or his dependents actually receives. In lieu of the
benefits described in the preceding sentences, Cinergy,
in its sole discretion, may elect to pay to the
Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a
self funded plan, the cost of COBRA continuation
coverage) that would have been paid by Cinergy to
provide those benefits to the Executive and/or the
Executive's dependents, grossed up for the effect of
federal, state and local income taxes. Nothing in this
Subparagraph 5a(iii)(4) will affect the Executive's
right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by
the Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to
the Executive's position until the end of the
Employment Period or, if earlier, until the first
acceptance by the Executive of an offer of employment.
At the Executive's discretion, 15% of Annual Base
Salary may be paid in lieu of outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the
Employment Period, or if the Executive terminates employment
during the Employment Period other than a termination for Good
Reason, Cinergy will have no further obligations to the Executive
under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations, plus any other earned but
unpaid compensation, in each case to the extent not previously
paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to
the Executive or for his benefit pursuant to the terms of
this Agreement or otherwise in connection with, or arising
out of, his employment with Cinergy or a change in ownership
or effective control of Cinergy or of a substantial portion
of its assets (a "Payment" or "Payments") would be subject
to any Excise Tax, then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest, penalties, additional tax, or
similar items imposed with respect thereto and the Excise
Tax), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all
determinations required to be made under this Section 5c,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by the Accounting Firm, which shall provide detailed
supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5c, shall be paid by Cinergy to the
Executive within five (5) days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Cinergy and the
Executive. However, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that Cinergy exhausts its remedies
pursuant to Section 5c(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
Cinergy to or for the benefit of the Executive. In the event
that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at the rate
provided in Code section 1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment
or benefit paid or payable to the Executive will be
determined in accordance with the principles of Code
sections 280G(d)(3) and (4). For purposes of determining the
amount of the Gross-Up Payment, the Executive will be deemed
to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and applicable state and
local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on
the Date of Termination, net of the maximum reduction in
federal income taxes that would be obtained from deduction
of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting
Firm's determination, an Excise Tax will be imposed on any
Payment or Payments, Cinergy will pay to the applicable
government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that Cinergy has actually withheld
from the Payment or Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's
entitlement to restricted shares and performance shares under the
Value Creation Plan and any stock options granted under the Stock
Option Plan or the LTIP will be determined under the terms of the
appropriate plan and any applicable administrative guidelines and
written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the
Executive's entitlements, if any, under the Non-Qualified
Deferred Compensation Plan and 401(k) Excess Plan shall be
distributed under the terms of such plans and any applicable
administrative guidelines and written agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the
Executive for all reasonable legal fees and expenses incurred by
the Executive in successfully disputing a Qualifying Termination
that entitles the Executive to Severance Benefits. Payment will
be made within five (5) business days after delivery of the
Executive's written request for payment accompanied by such
evidence of fees and expenses incurred as Cinergy reasonably may
require.
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)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' 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.
10. Successors.
a. This Agreement is personal to the Executive and, without
Cinergy's prior written consent, cannot be assigned by the
Executive other than Executive's designation of a beneficiary of
any amounts payable hereunder after the Executive's death. This
Agreement will inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Cinergy to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Cinergy would be required to
perform it if no succession had taken place. Cinergy's failure to
obtain such an assumption and agreement prior to the effective
date of a succession will be a breach of this Agreement and will
entitle the Executive to compensation from Cinergy in the same
amount and on the same terms as if the Executive were to
terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing,
the date on which any such succession becomes effective will be
deemed the Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between
Cinergy and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan
benefit described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base
salary payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in
Subsection 5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy
Corp. Annual Incentive Plan or any similar plan or successor to
the Annual Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of
directors of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the
Effective Date:
(i) Any "person" or "group" (within the meaning of subsection
13(d) and paragraph 14(d)(2) of the 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 (2) consecutive years, individuals
who at the beginning of that period constitute the Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by
the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of that period or whose appointment, election, or nomination
for election was previously so approved or recommended cease
for any reason to constitute a majority of the Board of
Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the
meaning set forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the
chief executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or
its affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended,
and interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive with Good Reason, the date of
receipt of the Notice of Termination or any later date
specified in the notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on
which the Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company
other than for Cause, thirty (30) days after the date on
which the Company notifies the Executive of the termination;
and
(iv) if the Executive's employment is terminated by reason of
death, the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means
the Cinergy Corp. Non-Qualified Deferred Incentive Compensation
Plan or any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means May 15, 2001.
t. Employment Period. "Employment Period" has the meaning set forth
in Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code
section 4999, together with any interest, penalties, additional
tax or similar items that are incurred by the Executive with
respect to the excise tax imposed by Code section 4999.
v. Executive. "Executive" means M. Stephen Harkness.
w. Executive Retirement Plans. "Executive Retirement Plans" means
the Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy
Corp. Supplemental Executive Retirement Plan and the Cinergy
Corp. Excess Pension Plan or any similar plans or successors to
those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life
Insurance Program or any similar program or successor to the
Executive Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that
plan.
z. Good Reason. "Good Reason" has the meaning set forth in
Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or
"LTIP" means the long-term incentive plan implemented under the
Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any
successor to that plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in Subparagraph
5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set
forth in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning
set forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set
forth in Subsection 5c.
gg. 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;
(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.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with
Cinergy other than a termination for Cause or (ii) the
termination by the Executive of the Executive's employment with
Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination
of employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy
Corp. Retirees' Dental program or any similar program or
successor to that program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical program or any similar program or
successor to that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. 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.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth
in Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value
Creation Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of its provisions and will have no force or effect.
This Agreement may not be amended, modified, repealed, waived,
extended, or discharged except by an agreement in writing signed
by the party against whom enforcement of the amendment,
modification, repeal, waiver, extension, or discharge is sought.
Only the Chief Executive Officer or his designee will have
authority on behalf of Cinergy to agree to amend, modify, repeal,
waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be
in writing and will be given by hand delivery to the other party
or by Federal Express or other comparable national or
international overnight delivery service, addressed as follows:
If to the Executive:
-------------------
M. Stephen Harkness
Cinergy, Corp.
1000 East Main Street
Plainfield, Indiana 46168
If to Cinergy:
-------------
Cinergy Corp.
221 East Fourth Street
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.
f. References in this Agreement to the masculine include the
feminine unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive
and Cinergy with respect to the subject matter of this Agreement;
and subject to any agreements evidencing stock option or
restricted stock grants described in Subsection 3b and the Stock
Related Documents, all promises, representations, understandings,
arrangements, and prior agreements are merged into this Agreement
and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which together will
constitute one and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will
be authorized to act for Cinergy with respect to all aspects
pertaining to the administration and interpretation of this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC
By:_____________________________
James E. Rogers
Chairman and
Chief Executive Officer
EXECUTIVE
--------------------------------
M. Stephen Harkness
Effective June 1, 1996
AS AMENDED
AND RESTATED EFFECTIVE
June 1, 2001
Severance Opportunity Plan
Cinergy Plan #503
3/02/00
73202 v6
PAGE
Introduction...................................................................1
Document Type
Plan Interpretation
The Future of the Plan
Career Transition Status Opportunity
Opening/Closing Date .................................................2
Eligibility...........................................................2
Participation.........................................................2
Career Transition Status Time.........................................3
Severance Benefit.....................................................3
Taxation of Severance Benefits........................................3
Other Benefits......................................................3-5
Educational Reimbursement
Outplacement Services
Medical/Dental Coverage
Life Insurance for CG&E Employees
Life Insurance for PSI Employees
Payment of the Severance Benefit...............................................5
Limitation on Amount of Benefits
Loss of Benefits.............................................................5-7
Filing A Claim
Claims Appeal Procedure
ERISA Rights
Plan Facts ....................................................................8
Severance Opportunity Plan
Cinergy Plan #503
73202 v6
| The Severance Opportunity Plan is a severance plan designed to encompass varying severance opportunities for non-union employees of the subsidiaries and/or affiliates of Cinergy Corp. (collectively, "Cinergy" or "Company") as the need for those opportunities arises. The plan administrator designates those subsidiaries which have participating employees in the plan or any program offered within the plan. It is intended to encompass severance offerings with varying eligibility, participation, benefits, and periods of availability. | Introduction | |
|---|---|---|
| This document is a summary of the severance plan provisions - a "summary plan description" of the Cinergy Corp. Severance Opportunity Plan (the "plan"). Summaries are designed to give you the information you need about your benefits under the plan. This booklet also serves as the plan itself. Throughout the plan, those eligible are called "you". "We" refers to the Human Resource Services personnel of Cinergy. We have tried to make it as readable as possible. The statements made in this plan must be read in light of the entire document. A single statement, read out of context, may be misleading. | Document Type | |
| The plan administrator has discretionary authority to interpret any ambiguities in the plan, and will also make decisions on any points that are not clear or have been inadvertently omitted. The plan administrator must be consistent in interpreting the plan. To be fair to all eligible employees, the administrator will treat individuals who are in the same circumstances in the same manner. | Plan Interpretation | |
| Cinergy intends to offer various severance programs under the umbrella of this plan indefinitely. However, Cinergy reserves the right to amend or terminate the plan at any time. | The Future of the Plan | |
| You are not guaranteed employment rights or employment status by this plan. |
| Opening/Closing Date | The Redeployment Status Opportunity ("RSO") was initially offered on June 1, 1996 and ended midnight May 31, 2001. The Career Transition Status Opportunity ("CTSO") begins June 1, 2001 and applies to non-union employees who are employed by Cinergy as of June 1, 2001, and those whose employment dates are after that date. | |
|---|---|---|
| Eligibility | Any full-time or part-time non-union employee of a Cinergy subsidiary designated
by the plan administrator as a participating employer who meets any of the
following criteria is eligible to participate in the CTSO:
| |
| Participation | If you are eligible for and wish to participate in the CTSO you must:
|
| For those employed after June 1, 2001: If you are eligible for the CTSO and elect to participate, you will be allowed to remain in career transition status as an active employee for up to 60 days. Your severance benefit will be based on your full years of service and your weekly or monthly base salary. Your employment will be automatically terminated after 60 days in career transition status, or when you obtain new employment outside the Company, whichever is sooner. | Career Transition Status Time | |
|---|---|---|
| For those employed as of June 1, 2001: Severance benefits under this program for eligible exempt, non-union and non-exempt non-union employees are based on your full years of service calculated at two (2) weeks of severance pay for each full year of service. Your weekly base severance salary is based on your base salary and does not include any allowances, premiums, bonuses, overtime or other types of compensation. If you are a part-time employee, your weekly base salary is based on the average number of hours you worked during the 12 months before your termination date. Years of service begin on your hire date or adjusted hire date, whichever is earlier. If you have previously received severance or retirement benefits under any plan previously or currently offered by Cinergy, your severance benefit will be calculated from the date of your rehire. | Severance Benefit | |
| You will be entitled to a minimum of 8 weeks of pay as a severance benefit if you
elect to participate while you are in career transition status. Note: Any employee holding the title of "General Manager" or that title's equivalent, will receive a severance benefit equal to 78 weeks of weekly base salary if s/he terminates employment, and meets the eligibility requirements of the plan. | ||
| Your severance benefit is subject to federal and state income tax and FICA tax. Depending on where you live, they may also be subject to municipal taxes. Tax withholding by your employer is required. Severance benefits paid from this plan are not eligible for rollover into individual retirement accounts or other qualified retirement plans. | Taxation of Severance Benefits | |
| For information purposes, the other benefits available to employees terminating under this plan are described in this document for your convenience. These benefits are available to any non-union employee in career transition status. | Other Benefits |
| Educational Reimbursement | Cinergy will provide a lump sum benefit of $2,500 for educational or vocational training. This payment is subject to applicable federal, state, and local taxation. | |
|---|---|---|
| Outplacement Services | Cinergy will make group outplacement services available to those who are assigned to career transition status. | |
| Medical/Dental Coverage | Medical and dental insurance coverage is extended up to 18 months beyond
termination. Effective June 1, 2001, for non-union employees who are in career
transition status, premiums will remain at the active-employee subsidized level
for a period equal to one month for each whole year of service up to the
maximum of 18 months. Once this subsidy expires, employees who have less than
18 years of service may continue to receive benefits for the remainder of the
18 months by paying 102% of the "full" premium in accordance with the federal
law known as the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). The period of subsidized coverage runs concurrently with, and does
not extend, the employee's maximum COBRA coverage period. Employees who terminate under this plan and are eligible for post-retirement medical or dental benefits will have applicable retiree coverage following the subsidized period of coverage. |
| Non-union employees who are in career transition status will be eligible to continue employer-subsidized life insurance coverage equal to one or two times annual base salary for one month for each whole year of service up to a maximum of 18 months. For these employees, coverage greater than two times annual base salary can be continued beyond their termination date at the employees' cost up to the maximum 18 month period. | Life Insurance | |
|---|---|---|
| Generally, you will be paid your severance benefit in a lump sum approximately 30 days after the rescission period set forth in the waiver expires, or as soon thereafter as administratively feasible. | Payment of the Severance Benefit | |
| The total value of an employee's severance benefits cannot exceed two times the employee's "annual compensation". "Annual compensation" means W-2 income plus before-tax deferrals under the applicable Internal Revenue Code Section 401(k) plan and flexible benefits plan of your employer plus the value of fringe benefits for the year prior to the termination date. If your benefits under this plan exceed this number, the severance benefit will be reduced. | Limitation on Amount of Benefits | |
| If you elect to participate in the plan, and have submitted your signed waiver, but die before receiving your severance benefit, it will be paid to your estate. Other benefits payable under The Severance Opportunity Plan, such as medical/dental/life premium subsidies, cease as of your death. If you die and have not submitted your signed resignation and waiver, your eligibility for participation in this plan ends and you lose any benefit you might otherwise have been entitled to under the terms of this plan. If you submit a signed waiver and revoke it within the rescission period, you will lose any benefit under this plan. | Loss of Benefits |
| Filing a Claim | Separation benefits under the plan will be paid automatically by your employer
to you if you elect to participate in the plan and meet all eligibility
requirements. If you question the amount of benefits calculated by Cinergy, you
may file a written claim with Ms. Karen R. Feld, General Manager, Human
Resources, Mezzanine 65, Cinergy Corp., P.O. Box 960, Cincinnati, Ohio
45201-0960. Once the claim has been documented and all necessary forms
completed, the plan administrator must process it within 90 days. However, in
some cases, the plan administrator may require additional time. If this
happens, you will be notified that an additional 90-day processing period is
required. If the claim is denied, you will be notified in writing. This written notice will set forth the reason for the denial. It will also seek any additional information that could affect the decision to deny the claim. Finally, the notice will tell you the process by which you can have the decision reviewed. | |
|---|---|---|
| Claims Appeal Procedure | If your claim has been denied, or if you have not received a response within 90
days after it was submitted, you can appeal the denial and the claim will be
reviewed. You have 60 days to appeal from the time you are notified of the
denial. You can also submit in writing reasons why the claim should not have
been denied. The plan administrator will generally act within 60 days of receiving an appeal. However, in special cases, the plan administrator may be allowed 120 days. The final decision will be sent to you in writing. | |
| ERISA Rights | As a participant in this plan, which is governed by the Employee Retirement
Income Security Act of 1974 (ERISA), you are entitled to examine, without
charge, all plan documents at the plan administrator's office. You also have
the right to obtain copies of all plan documents upon written request to the
plan administrator. The plan administrator reserves the right to charge
reasonable copying costs for any documents requested. The plan administrator must furnish you with any materials you request from the plan within 30 days of the date of request and receipt of payment. If the materials are not furnished in a timely manner, you may file suit in federal district court. The court is likely to require the plan administrator to provide you with the materials and may require the plan administrator to pay you up to $110 a day (as adjusted from time to time for increases in the cost of living) until the day you receive the materials. |
| ERISA also requires those people who are responsible for the operation of the plan - fiduciaries - to operate the plan prudently and in the best interests of plan participants. Cinergy, its agents and/or employees may not discriminate against you in any way to prevent you from obtaining a benefit under this plan or from exercising your ERISA rights. | ERISA Rights (Continued) | |
|---|---|---|
| If you believe you have been discriminated against for asserting your ERISA rights under the plan, you may seek assistance from the U.S. Department of Labor, or you may file suit directly in federal district court. The court will decide who should pay court costs and legal fees. If you lose, the court may order you to pay these costs and fees. | ||
| The courts are particularly likely to order you to pay costs and fees if it finds that your claim is frivolous. If you are successful, the court may order the defendant you have sued to pay these costs and fees. | ||
| If you have questions about this plan, you should contact Karen Feld at (513) 287-2729. If you have questions about your rights under ERISA, you should contact the Pension Benefit Guaranty Corporation's Technical Assistance Division, 1200 K Street, N. W., Suite 930, Washington, D.C. 20005-4026, or call (202) 326-4000. |
| Plan Name | The Severance Opportunity Plan | Plan Facts |
|---|---|---|
| Plan Sponsor | Cinergy Corp. | |
| Employer Identification Number | 31-1385023 | |
| Plan Number | 503 | |
| Type of Plan | Severance Plan | |
| Plan Year | January 1 to December 31 | |
| Plan Funding | General assets of the Cinergy Corp. subsidiaries and/or affiliates whose employees participate in the plan | |
| Plan Administrator | Timothy J. Verhagen Vice President, Human Resources Department Cinergy Corp. 139 East Fourth Street, Room 29 AT II P.O. Box 960 Cincinnati, Ohio 45201-0960 | |
| Agent for Service of Legal Process | Jerome A. Vennemann Vice President, General Counsel and Assistant Secretary Cinergy Corp. 139 East Fourth Street, Room 29 AT II P.O. Box 960 Cincinnati, Ohio 45201-0960 |