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Exhibit 10.4
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated as of August 26, 2008, is made by and
between Duke Energy Corporation, a Delaware corporation (the
"Company"), and
(the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of
key management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control
exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company
and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and
dedication of members of the Company’s management, including
the Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a Change in Control; and
WHEREAS, the Company and the Executive are parties to a Change
in Control Agreement dated as of
(the "Effective Date"), which agreement is hereby amended, restated
and replaced in its entirety with this Agreement in order to comply
with Section 409A of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive,
intending to be legally bound, do hereby agree as follows:
1.
Definitions . For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A)
"Accrued Rights" shall have the meaning set forth in Section 3
hereof.
(B)
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(C)
"Auditor" shall have the meaning set forth in Section 4.2
hereof.
(D)
"Base Amount" shall have the meaning set forth in
Section 280G(b)(3) of the Code.
(E)
"Beneficial Ownership" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
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(F)
"Board" shall mean the Board of Directors of the Company.
(G)
"Cause" for termination by the Company of the Executive’s
employment shall mean (i) a material failure by the Executive
to carry out, or malfeasance or gross insubordination in carrying
out, reasonably assigned duties or instructions consistent with the
Executive’s position, (ii) the final conviction of the
Executive of a felony or crime involving moral turpitude,
(iii) an egregious act of dishonesty by the Executive
(including, without limitation, theft or embezzlement) in
connection with employment, or a malicious action by the Executive
toward the customers or employees of the Company or any Affiliate,
(iv) a material breach by the Executive of the Company’s
Code of Business Ethics, or (v) the failure of the Executive
to cooperate fully with governmental investigations involving the
Company or its Affiliates; provided, however, that the Company
shall not have reason to terminate the Executive’s employment
for Cause pursuant to this Agreement unless the Executive receives
written notice from the Company identifying the acts or omissions
constituting Cause and gives the Executive a 30-day opportunity to
cure, if such acts or omissions are capable of cure.
(H) A
"Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have
occurred:
(a)
an acquisition subsequent to the Effective Date by any Person of
Beneficial Ownership of thirty percent (30%) or more of either
(A) the then outstanding shares of common stock of the Company
or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors; excluding, however, the following:
(1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company and
(3) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any
Subsidiary;
(b)
during any period of two (2) consecutive years (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board (and any new
directors whose election by the Board or nomination for election by
the Company’s shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was so approved) cease for any reason
(except for death, disability or voluntary retirement) to
constitute a majority thereof;
(c)
the consummation of a merger, consolidation, reorganization or
similar corporate transaction which has been approved by the
shareholders of the Company, whether or not the Company is the
surviving corporation in such transaction, other than a merger,
consolidation, or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into
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voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities
of the Company (or such surviving entity) outstanding immediately
after such merger, consolidation, or reorganization;
(d)
the consummation of (A) the sale or other disposition of all
or substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company, which has been
approved by the shareholders of the Company (in each case,
exclusive of any transactions or events resulting from the
separation of the Company’s gas and electric businesses);
or
(e)
adoption by the Board of a resolution to the effect that any person
has acquired effective control of the business and affairs of the
Company.
(I)
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(J)
"Company" shall mean Duke Energy Corporation, a Delaware
corporation, and, except in determining under Section 1.H
hereof whether or not any Change in Control of the Company has
occurred, shall include any successor to its business and/or assets
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(K)
"Confidential Information" shall have the meaning set forth in
Section 8 hereof.
(L)
"DB Pension Plan" shall mean any tax-qualified, supplemental or
excess defined benefit pension plan maintained by the Company (or a
Subsidiary) and any other defined benefit plan or agreement entered
into between the Executive and the Company (or a Subsidiary) which
is designed to provide the Executive with supplemental retirement
benefits.
(M) "DC
Pension Plan" shall mean any tax-qualified, supplemental or excess
defined contribution plan maintained by the Company (or a
Subsidiary) and any other defined contribution plan or agreement
entered into between the Executive and the Company (or a
Subsidiary) which is designed to provide the executive with
supplemental retirement benefits.
(N)
"Date of Termination" with respect to any purported termination of
the Executive’s employment after a Change in Control and
during the Term, shall mean (i) if the Executive’s
employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall
not have returned to the full-time performance of the
Executive’s duties during such thirty (30) day period), and
(ii) if the Executive’s employment is terminated for any
other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor (without the consent of the
Company) more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
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(O)
"Disability" shall be deemed the reason for the termination by the
Company of the Executive’s employment, if, as a result of the
Executive’s incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of
the Executive’s duties with the Company for a period of six
(6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive’s duties.
(P)
"Effective Date" shall have the meaning given to such term in the
Preamble to this Agreement.
(Q)
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(R)
"Excise Tax" shall mean any excise tax imposed under
Section 4999 of the Code.
(S)
"Executive" shall mean the individual named in the first paragraph
of this Agreement.
(T)
"Good Reason" for termination by the Executive of the
Executive’s employment shall mean the occurrence (without the
Executive’s express written consent which specifically
references this Agreement) after any Change in Control of any one
of the following acts by the Company, or failures by the Company to
act, unless such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in
respect thereof: (i) a reduction in the Executive’s
annual base salary as in effect immediately prior to the Change in
Control (exclusive of any across the board reduction similarly
affecting all or substantially all similarly situated employees
determined without regard to whether or not an otherwise similarly
situated employee’s employment was with the Company prior to
the Change in Control), (ii) a reduction in the
Executive’s target annual bonus as in effect immediately
prior to the Change in Control (exclusive of any across the board
reduction similarly affecting all or substantially all similarly
situated employees determined without regard to whether or not an
otherwise similarly situated employee’s employment was with
the Company prior to the Change in Control), or (iii) the
assignment to the Executive of a job position with a total point
value under the Hay Point Factor Job Evaluation System that is less
than seventy percent (70%) of the total point value of the job
position held by the Executive immediately before the Change in
Control; provided , however , that in the event there
is a claim by the Executive that there has been such an assignment
and the Company disputes such claim, whether there has been such an
assignment shall be conclusively determined by the HayGroup (or any
successor thereto) or if such entity (or any successor) is no
longer in existence or will not serve, a consulting firm mutually
selected by the Company and the Executive or, if none, a consulting
firm drawn by lot from two nationally recognized consulting firms
that agree to serve and that are nominated by the Company and the
Executive, respectively (such consulting firm, the "Consulting
Firm") under such procedures as the Consulting Firm shall in its
sole
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discretion establish; provided further that such procedures
shall afford both the Company and the Executive an opportunity to
be heard; and further provided , however , that the
Company and the Executive shall use their best efforts to enable
and cause the Consulting Firm to make such determination within
thirty (30) days of the Executive’s claim of such an
assignment. The Executive’s continued employment shall
not constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason hereunder.
(U)
"Notice of Termination" shall have the meaning set forth in
Section 5 hereof.
(V)
"Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of
its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(W)
"Release Deadline" shall mean the 55th day immediately following
the date that the Executive incurs a "separation from service"
within the meaning of Section 409A of the Code.
(X)
"Repayment Amount" shall have the meaning set forth in
Section 7.3 hereof.
(Y)
"Restricted Period" shall have the meaning set forth in
Section 7.2 hereof.
(Z)
"Severance Payments" shall have the meaning set forth in
Section 4.1 hereof.
(AA)
"Severance Period" shall have the meaning set forth in
Section 4.1(C) hereof.
(BB) "Subsidiary"
means an entity that is wholly owned, directly or indirectly, by
the Company, or any other affiliate of the Company that is so
designated from time to time by the Company.
(CC) "Term" shall
mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described
therein).
(DD)
"Total Payments" shall mean those payments so described in
Section 4.2 hereof.
2. Term of
Agreement . The Term of this Agreement shall commence on the
Effective Date and shall continue in effect through the second
anniversary of the
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Effective Date; provided , however , that
commencing on the date that is twenty-four (24) months following
the Effective Date and each subsequent monthly anniversary, the
Term shall automatically be extended for one additional month;
further provided , however , the Company or the
Executive may terminate this Agreement effective at any time
following the second anniversary of the Effective Date only with
six (6) months advance written notice (which such notice may
be given before such second anniversary); and further provided,
however, that, notwithstanding the above, if a Change in Control
shall have occurred during the Term, the Term shall in no case
expire earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
3.
Compensation Other Than Severance Payments . If the
Executive’s employment shall be terminated for any reason
following a Change in Control and during the Term, the Company
shall pay the Executive (A) the salary amounts payable in the
normal course for service through the Date of Termination within 30
days after the Date of Termination, and (B) and any rights or
payments that have become vested or that are otherwise due in
accordance with the terms of any employee benefit, incentive, or
compensation plan or arrangement maintained by the Company that the
Executive participated in at the time of his or her termination of
employment (together, the "Accrued Rights").
4.
Severance Payments .
4.1
Subject to Section 4.2 hereof, and further subject to the
Executive executing a release of claims substantially in the form
set forth as Exhibit A to this Agreement and the
release becoming effective and irrevocable in accordance with its
terms by the Release Deadline, if the Executive’s employment
is terminated following a Change in Control and during the Term
(but in any event not later than twenty-four (24) months following
a Change in Control), other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the
Executive without Good Reason, then, in either such case, in
addition to the payments and benefits representing the
Executive’s Accrued Rights, the Company shall pay the
Executive the amounts, and provide the Executive the benefits,
described in this Section 4.1 ("Severance Payments").
(A) A
lump-sum payment equal to (i) the Executive’s annual
bonus payment earned for any completed bonus year prior to
termination of employment, if not previously paid, plus (ii) a
pro-rata amount of the Executive’s target bonus under any
performance-based bonus plan, program, or arrangement in which the
Executive participates for the year in which the termination
occurs, determined as if all program goals had been met, pro-rated
based on the number of days of service during the bonus year
occurring prior to termination of employment. The amount
described in clause (i) shall be paid pursuant to the terms of
the applicable short-term incentive plan and shall not be
conditioned on signing a release described in
Section 4.1. The amounts described in clause
(ii) shall be paid within 30 calendar days after the Release
Deadline, or such later date as may be required under Section
13.1.
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(B)
In lieu of any severance benefit otherwise payable to the
Executive, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (or, if less, the number
of years (including partial years) until the Executive reaches the
Company’s mandatory retirement age, provided that the Company
adopts a mandatory retirement age pursuant to 29 USC §631(c))
times the sum of (i) the Executive’s base salary as in
effect immediately prior to the Date of Termination or, if higher,
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, and (ii) the
Executive’s target short-term incentive bonus opportunity for
the fiscal year in which the Date of Termination occurs or, if
higher, the fiscal year in which the first event or circumstance
constituting Good Reason occurs. The amount described in this
Section 4.1(B) shall be paid within 30 calendar days
after the Release Deadline, or such later date as may be required
under Section 13.1.
(C)
For a period of two years immediately following the Date of
Termination (or, if less, the period until the Executive reaches
the Company’s mandatory retirement age, provided that the
Company adopts a mandatory retirement age pursuant to 29 USC
§631(c)) (the "Severance Period"), the Company shall arrange
to provide the Executive and his or her dependents medical and
dental insurance benefits substantially similar to those provided
to the Executive and his or her dependents immediately prior to the
Date of Termination or, if more favorable to the Executive, those
provided to the Executive and his or her dependents immediately
prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater after tax cost to the
Executive than the after tax cost to the Executive immediately
prior to such date or occurrence. Benefits otherwise
receivable by the Executive pursuant to this
Section 4.1(C) shall be reduced to the extent benefits of
the same type are received by or made available to the Executive
during the Severance Period as a result of subsequent employment
(and any such benefits received by or made available to the
Executive shall be reported to the Company by the Executive).
In addition, the Company shall make a lump sum cash payment,
payable within 30 calendar days after the Release Deadline or such
later date as may be required under Section 13.1, in an amount
equal to the anticipated cost of basic life insurance coverage for
the Severance Period, based on the Company’s assumed cost for
such coverage for internal accounting purposes at the Date of
Termination. The continued benefits described in this
paragraph 4.1(C) that are taxable benefits (and that are not
disability pay or death benefit plans within the meaning of
Section 409A of the Code) are intended to comply, to the
maximum extent possible, with the exception to Section 409A of
the Code set forth in Section 1.409A-1(b)(9)(v) of the
Treasury Regulations. To the extent that any of those
benefits either do not qualify for that exception, or are provided
beyond the applicable time periods set forth in
Section 1.409A-1(b)(9)(v) of the Treasury Regulations,
then they shall be subject to the following additional rules:
(1) any reimbursement of eligible expenses shall be paid
within 10 calendar days following Executive’s written request
for reimbursement, or such later date as may be required under
Section 13.1; provided that the Executive provides
written notice no later than 15 calendar days prior to the last day
of the calendar year following the calendar year in which the
expense was incurred; (2) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during any calendar
year shall not affect
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the amount of expenses eligible for reimbursement, or in-kind
benefits to be provided, during any other calendar year; and
(3) the right to reimbursement or in-kind benefits shall not
be subject to liquidation or exchange for another benefit.
(D)
Executive’s benefits accrued or credited through the Date of
Termination under the DC Pension Plan that are not vested as of the
Date of Termination but that would have vested had Executive
remained employed by the Company for the remainder of the Term
shall be fully vested as of the Date of Termination and paid in
accordance with the terms of the applicable plan. In addition
to the benefits to which the Executive is entitled under the DC
Pension Plan, the Company shall pay the Executive a lump sum
amount, in cash, equal to the amount that would have been
contributed thereto by the Company on the Executive’s behalf
during the Severance Period, determined (x) as if the
Executive made the maximum permissible contributions thereto during
such period, (y) as if the Executive earned compensation
during such period equal to the sum of the Executive’s base
salary and target bonus as in effect immediately prior to the Date
of Termination, or, if higher, as in effect immediately prior to
the occurrence of the first event or circumstance constituting Good
Reason, and (z) without regard to any amendment to the DC
Pension Plan made subsequent to a Change in Control and on or prior
to the Date of Termination, which amendment adversely affects in
any manner the computation of benefits thereunder. The amount
described in the immediately preceding sentence shall be paid
within 30 calendar days after the Release Deadline, or such later
date as may be required under Section 13.1.
(E)
Executive’s benefits accrued or credited through the Date of
Termination of employment under the DB Pension Plan that are not
vested as of the Date of Termination but that would have vested had
Executive remained employed by the Company for the remainder of the
Term shall be fully vested as of the Date of Termination and paid
in accordance with the terms of the applicable plan. In addition to
the benefits to which the Executive is entitled under the DB
Pension Plan, the Company shall pay the Executive a lump sum
amount, in cash, equal to the amount that would have been allocated
thereunder by the Company in respect of the Executive (or accrued
by the Executive, which accrual shall be calculated based on the
actuarial assumptions contained in the DB Pension Plan) during the
Severance Period, determined (x) as if the Executive earned
compensation during such period equal to the sum of the
Executive’s base salary and target bonus as in effect
immediately prior to the Date of Termination, or, if higher, as in
effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason, and (y) without regard
to any amendment to the DB Pension Plan made subsequent to a Change
in Control and on or prior to the Date of Termination, which
amendment adversely affects in any manner the computation of
benefits thereunder. The amount described in the immediately
preceding sentence shall be paid within 30 calendar days after the
Release Deadline, or such later date as may be required under
Section 13.1.
(F)
Notwithstanding the terms of any award agreement or plan document
to the contrary, the Executive shall be entitled to receive
continued vesting of any long term incentive awards, including
awards of stock options but excluding awards
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of restricted stock, held by the Executive at the time of his or
her termination of employment that are not vested or exercisable on
such date, in accordance with their terms as if the
Executive’s employment had not terminated, for the duration
of the Severance Period, with any options or similar rights to
remain exercisable (to the extent exercisable at the end of the
Severance Period) for a period of 90 days following the close of
the Severance Period, but not beyond the maximum original term of
such options or rights.
4.2
(A)
Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the
Executive (including any payment or benefit received in connection
with a Change in Control or the termination of the
Executive’s employment, whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement) (all such
payments and benefits, including the Severance Payments, being
hereinafter referred to as the "Total Payments") would be subject
(in whole or part), to the Excise Tax, then, after taking into
account any reduction in the Total Payments provided by reason of
Section 280G of the Code in such other plan, arrangement or
agreement, the Severance Payments shall be reduced to the extent
necessary so that no portion of the Total Payments is subject to
the Excise Tax but only if (i) the net amount of such Total
Payments, as so reduced (and after subtracting the net amount of
federal, state and local income taxes on such reduced Total
Payments and after taking into account the phase out of itemized
deductions and personal exemptions attributable to such reduced
Total Payments) is greater than or equal to (ii) the net
amount of such Total Payments without such reduction (but after
subtracting the net amount of federal, state and local income taxes
on such Total Payments and the amount of Excise Tax to which the
Executive would be subject in respect of such unreduced Total
Payments and after taking into account the phase out of itemized
deductions and personal exemptions attributable to such unreduced
Total Payments). If a reduction in Severance
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