Exhibit 10(ff)
CHANGE IN CONTROL AGREEMENT
THIS
CHANGE IN CONTROL AGREEMENT (“Agreement”) is made as of
this ___ day of December 2007, by and between
CENTERPOINT ENERGY, INC., a Texas corporation (the
“Company”), and [NAME]
(“Executive”).
1. Definitions :
All
terms defined in this Section 1 shall, throughout this
Agreement, have the meanings given herein:
“Affiliate” means any company controlled by,
controlling or under common control with the Company within the
meaning of Section 414 of the Code.
“Board” means the board of directors of the
Company.
“Cause” means Executive’s (a) gross
negligence in the performance of Executive’s duties, (b)
intentional and continued failure to perform Executive’s
duties, (c) intentional engagement in conduct which is
materially injurious to the Company or its Affiliates (monetarily
or otherwise) or (d) conviction of a felony or a misdemeanor
involving moral turpitude. For this purpose, an act or failure to
act on the part of Executive will be deemed
“intentional” only if done or omitted to be done by
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company, and no
act or failure to act on the part of Executive will be deemed
“intentional” if it was due primarily to an error in
judgment or negligence.
A
“Change in Control” shall be deemed to have
occurred upon the occurrence of any of the following events:
(a) 30% Ownership
Change : Any Person makes an acquisition of Beneficial
Ownership of Outstanding Voting Stock (including any acquisition of
Beneficial Ownership deemed to have occurred pursuant to
Rule 13d-5 under the Exchange Act) and is, immediately
thereafter, the Beneficial Owner of 30% or more of the then
Outstanding Voting Stock, unless such acquisition is made by a
Parent Corporation resulting from a Business Combination (other
than the Company) if, following such Business Combination, the
conditions specified in clauses (i), (ii), (iii) and (iv) of
subsection (c) of this definition are satisfied; or any Group
is formed that is the Beneficial Owner of 30% or more of the
Outstanding Voting Stock; or
(b) Board Majority
Change : Individuals who are Incumbent Directors cease for
any reason to constitute a majority of the members of the Board;
or
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(c) Major Mergers and
Acquisitions : Approval by the shareholders of the Company
of a Business Combination (or if there is no such approval by
shareholders, consummation of such Business Combination) unless,
immediately following such Business Combination, (i) all or
substantially all of the individuals and entities that were the
Beneficial Owners of the Outstanding Voting Stock immediately prior
to such Business Combination will (or do) beneficially own,
directly or indirectly, more than 70% of the then outstanding
shares of voting stock of the Parent Corporation resulting from
such Business Combination in substantially the same relative
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Voting Stock, (ii) if the
Business Combination involves the issuance or payment by the
Company of consideration to another entity or its shareholders, the
total fair market value of such consideration plus the principal
amount of the consolidated long-term debt of the entity or business
being acquired (in each case, determined as of the date of
consummation of such Business Combination by a majority of the
Incumbent Directors) will not (or does not) exceed 50% of the sum
of the fair market value of the Outstanding Voting Stock plus the
principal amount of the Company’s consolidated long-term debt
(in each case, determined immediately prior to such consummation by
a majority of the Incumbent Directors), (iii) no Person (other
than any Parent Corporation resulting from a Business Combination)
will (or does) beneficially own, directly or indirectly, 30% or
more of the then outstanding shares of voting stock of the Parent
Corporation resulting from such Business Combination and
(iv) a majority of the members of the board of directors of
the Parent Corporation resulting from such Business Combination
were Incumbent Directors immediately prior to consummation of such
Business Combination; or
(d) Major Asset
Dispositions : Approval by the shareholders of the Company
of a Major Asset Disposition (or if there is no such approval by
shareholders consummation of such Major Asset Disposition) unless,
immediately following such Major Asset Disposition,
(i) individuals and entities that were Beneficial Owners of
the Outstanding Voting Stock immediately prior to such Major Asset
Disposition will (or do) beneficially own, directly or indirectly,
more than 70% of the then outstanding shares of voting stock of the
Company (if it continues to exist) and of the entity that acquires
the largest portion of such assets (or the entity, if any, that
owns a majority of the outstanding voting stock of such acquiring
entity) and (ii) a majority of the members of the board of
directors of the Company (if it continues to exist) and of the
entity that acquires the largest portion of such assets (or the
entity, if any, that owns a majority of the outstanding voting
stock of such acquiring entity) were Incumbent Directors
immediately prior to consummation of such Major Asset
Disposition.
For
purposes of the foregoing, the term:
(1) “Beneficial Owner,”
“Beneficial Ownership” and “Beneficially
Own” are used as defined for purposes of
Section 13(d)(3) under the Exchange Act.
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(2) “Business
Combination” means (x) a merger or consolidation
involving the Company or its stock or (y) an acquisition by
the Company, directly or through one or more subsidiaries, of
another entity or its stock or assets.
(3) “Election Contest” is
used as it is defined for purposes of Rule 14a-11 under the
Exchange Act.
(4) “Exchange Act” means
the Securities Exchange Act of 1934, as amended.
(5) “Group” is used as it
is defined for purposes of Section 13(d)(3) of the Exchange
Act.
(6) “Incumbent Director”
means a director of the Company (x) who was a director of the
Company on the date of this Agreement, or (y) who becomes a
director subsequent to such date and whose election, or nomination
for election by the Company’s shareholders, was approved by a
vote of a majority of the Incumbent Directors at the time of such
election or nomination, except that any such director shall not be
deemed an Incumbent Director if his initial assumption of office
occurs as a result of an actual or threatened Election Contest or
other actual or threatened solicitation of proxies by or on behalf
of a Person other than the Board.
(7) “Major Asset
Disposition” means the sale or other disposition in one
transaction or a series of related transactions of 70% or more of
the assets of the Company and its subsidiaries on a consolidated
basis; and any specified percentage or portion of the assets of the
Company shall be based on fair market value, as determined by a
majority of the Incumbent Directors.
(8) “Outstanding Voting
Stock” means outstanding voting securities of the Company
entitled to vote generally in the election of directors; and any
specified percentage or portion of the Outstanding Voting Stock (or
of other voting stock) shall be determined based on the combined
voting power of such securities.
(9) “Parent Corporation
resulting from a Business Combination” means the Company if
its stock is not acquired or converted in the Business Combination
and otherwise means the entity which as a result of such Business
Combination owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries.
(10) “Person” means an
individual, entity or Group.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Common Stock”
means the common stock, $0.01 par value, of the Company.
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“Company” means CenterPoint Energy, Inc., a
Texas corporation, and any successor thereto.
“Compensation” means the greater of (a) the
sum of Executive’s annual base salary plus Target Bonus
determined immediately prior to the date on which a Change in
Control occurs, or (b) the sum of Executive’s annual
base salary plus Target Bonus determined immediately prior to the
date of his Covered Termination.
“Covered Termination” means any termination of
Executive’s employment with the Company or any Affiliate that
is a “Separation from Service” within the meaning of
Code Section 409A and Treasury Regulation §
1.409A-1(h)(3) (or any successor regulations or guidance thereto)
thereof:
(a) that
does not result from any of the following:
(i) death;
(ii) disability entitling Executive
to benefits under the Company’s long-term disability
plan;
(iii) termination on or after age
65;
(iv) involuntary termination for
Cause; or
(v) resignation by Executive, unless
such resignation is for Good Reason; and
(b) that
occurs:
(i) after the execution of a binding
agreement to effect a Change in Control, subject to the Change in
Control occurring; or
(ii) within two years after the date
upon which a Change in Control occurs.
“Good Reason” means any one or more of the
following:
(a) a failure to maintain Executive
in the position, or a substantially equivalent position, with the
Company and/or an Affiliate, as the case may be, which Executive
held immediately prior to the Change in Control;
(b) a significant adverse change in
the authorities, powers, functions, responsibilities or duties
which Executive held immediately prior to the Change in
Control;
(c) a reduction in Executive’s
annual base salary as in effect immediately prior to the date on
which a Change in Control occurs;
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(d) a significant reduction in
Executive’s qualified retirement benefits, nonqualified
benefits and welfare benefits provided to Executive immediately
prior to the date on which a Change in Control occurs; provided,
however , that a contemporaneous diminution of or reduction in
qualified retirement benefits and/or welfare benefits which is of
general application and which uniformly and contemporaneously
reduces or diminishes the benefits of all covered employees shall
be ignored and not be considered a reduction in remuneration for
purposes of this paragraph (d);
(e) a reduction in Executive’s
overall compensation opportunities (as contrasted with overall
compensation actually paid or awarded) under the STI Plan, a
long-term incentive plan or other equity plan (or in such
substitute or alternative plans) from that provided to Executive
immediately prior to the date on which a Change in Control
occurs;
(f) a change in the location of
Executive’s principal place of employment with the Company by
more than 50 miles from the location where Executive was
principally employed immediately prior to the date on which a
Change in Control occurs; or
(g) a failure by the Company to
provide directors and officers liability insurance covering
Executive comparable to that provided to Executive immediately
prior to the date on which a Change in Control occurs;
provided, however , that no later than 15 days after
learning of the action (or inaction) described herein as the basis
for a termination of employment for Good Reason, Executive shall
advise the Company in writing that the action (or inaction)
constitutes grounds for a termination of his employment for Good
Reason, in which event the Company shall have 30 days to correct
such action (or inaction) and if such action (or inaction) is
timely corrected, then Executive shall not be entitled to terminate
his employment for Good Reason as a result of such action (or
inaction).
“Retirement Plan” mean the CenterPoint Energy,
Inc. Retirement Plan, as amended and restated effective
January 1, 1999, and as thereafter amended.
“STI Plan” means the CenterPoint Energy, Inc.
Short Term Incentive Plan or any successor plan or program
thereto.
“Target Bonus” means Executive’s target
incentive award opportunity under the STI Plan in effect for the
year with respect to which the target bonus amount is being
determined or, if no such plan is then in effect, for the last year
in which such a plan was in effect, expressed as a dollar amount
based upon Executive’s annual base salary for the year of
such determination.
“Waiver and Release” means a legal document, in
the form attached hereto as Exhibit A or such other
form as may be prescribed by the Company, but which form may not be
altered, amended or modified after execution of a binding agreement
to effect a Change in Control without the consent of Executive, in
which Executive, in exchange for severance benefits described in
Section 2, among other things, releases the Company, the
Affiliates, their
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directors, officers, employees and agents, their employee benefit
plans and the fiduciaries and agents of said plans from liability
and damages in any way related to Executive’s employment with
or separation from the Company or any of its Affiliates.
“Welfare Benefit Coverage” means each of
medical, dental and vision benefit coverage.
2. Severance Benefits: If
Executive experiences a Covered Termination, then Executive shall
be entitled to receive, as additional compensation for services
rendered to the Company (including its Affiliates), subject to the
execution and return to the Company of a Waiver and Release within
50 days following the date of Executive’s Covered
Termination that is not revoked within the seven-day period
following such execution date (the “Waiver and Release
Revocation Period”), the following severance benefits:
(a) Severance Amount :
A lump sum cash payment in an amount equal to Executive’s
Compensation multiplied by three, subject to applicable withholding
for income and employment taxes. Such severance payment shall be
paid on the date following six months after the date of
Executive’s Covered Termination, along with simple interest
on the severance amount at the short-term applicable Federal rate
provided for in Code Section 7872(f)(2)(A), based on the
period the payment was delayed from the Covered Termination
date.
(b) Vacation Payment :
A lump sum cash payment in an amount equal to his earned, but not
taken, vacation days through the date of Executive’s Covered
Termination, subject to applicable withholding for income and
employment taxes. Such vacation payment shall be paid as soon as
practicable following his Covered Termination date in accordance
with the Company’s normal payroll policies and
practices.
(c) Pro-Rated Bonus : A
lump sum cash payment in an amount equal to the Target Bonus in
effect at the time of Executive’s Covered Termination based
on Executive’s eligible earnings under the STI Plan as of the
date of his Covered Termination, but reduced by any amount payable
under the terms of the STI Plan for the performance year in which
the Change in Control is consummated, subject to applicable
withholding for income and employment taxes. Such pro-rated bonus
shall be paid on the date following six months after the date of
Executive’s Covered Termination, along with simple interest
on the bonus amount at the short-term applicable Federal rate
provided for in Code Section 7872(f)(2)(A), based on the
period the payment was delayed from the Covered Termination
date.
(d) Welfare Benefit
Coverage : Subject to Executive’s payment of
applicable premiums on the same basis as similarly situated active
executives of the Company, continued Welfare Benefit Coverage for
Executive and his eligible dependents for a period of two years
following the date of Executive’s Covered Termination.
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(e) Outplacement :
Outplacement services for a 9-month period after the date of
Executive’s Covered Termination in connection with
Executive’s efforts to obtain new employment under the
outplacement program adopted by the Company. Executive shall not be
entitled to a cash payment in lieu of such services.
(f) Benefit Restoration
Plan : Benefits pursuant to the Company’s Benefit
Restoration Plan in which Executive is a participant in an amount
not less than the amount that Executive would have been entitled to
receive pursuant to the Retirement Plan and the Benefit Restoration
Plan (i) if Executive were fully vested in his Retirement Plan
benefits and (ii) had Executive remained an employee of the
Company or its Affiliates throughout the three-year period
following the date of the Change in Control ( provided,
however , that in no event shall this clause (ii) cause
Executive to have more than 35 years of service for purposes
of the Benefit Restoration Plan). If Executive’s Retirement
Plan benefit is pursuant to the cash balance formula, his annual
compensation for each of the three years following the Change in
Control shall be based on his Compensation. The Company agrees to
amend the Benefit Restoration Plan to the extent necessary to
provide for the payment of this benefit, which shall be offset by,
and not in addition to, any benefit actually payable pursuant to
the qualified Retirement Plan. Such benefit shall be paid in
accordance with the terms and conditions of the Benefit Restoration
Plan.
(g) All Other Benefit Plans or
Programs : Executive’s participation in all other
employee benefit plans and/or programs at the Company and the
Affiliates shall cease as of Executive’s Covered Termination
date, subject to the terms and conditions of the governing
documents of those employee benefit plans and/or programs.
3. Certain Additional
Payments : Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution in
the nature of compensation (within the meaning of
Section 280G(b)(2) of the Code) to or for the benefit of
Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section 3 (the “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to
such excise tax (“Excise Tax”), then Executive shall be
entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that, after payment (whether
through withholding at the source or otherwise) by Executive of all
taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto),
employment taxes and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment. Notwithstanding the foregoing
provision of this Section 3, if the Company determines that by
reducing the Payment by an amount not to exceed 10% of the Payment
(“Reduced Amount”) the receipt of the Payment will not
give rise to any Excise Tax, and thus no Gross-Up Payment would be
required to be made to Executive, then the amount of the Payment
shall be reduced by the minimum Reduced Amount
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necessary, with such reduction to be made from the amounts payable
under Section 2(a) and (c), to avoid any Excise Tax and no Gross-Up
Payment shall be required under this Section 3 or the
Agreement.
Subject
to the provisions of this Section 3, all determinations
required to be made under this Section 3, 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 a nationally recognized
certified public accounting firm that is selected by the Company
(the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and Executive within 15
business days after the receipt of notice from Executive that there
has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change in Control or the Accounting Firm declines or is unable
to serve, Executive shall appoint another nationally recognized
certified public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). 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 3, shall be
paid by the Company to Executive within 15 days after the
receipt of the Accounting Firm’s determination. If the
Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion that
failure to report the Excise Tax on Executive’s applicable
federal income tax return would not result in the imposition of
negligence or similar penalty. Any determination by the Accounting
Firm shall be binding upon the Company and Executive. 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 the Company should have been made
(“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to the following provisions of this
Section 3 and 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 the Company to or for the
benefit of Executive no later than December 31st of the year
following the year during which Executive remits the related taxes,
provided however , that in no event shall such Underpayment
be made to Executive until after the 6-month period commencing on
the date of Executive’s Covered Termination.
Executive
shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days
after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(a) give the Company any information
reasonably requested by the Company relating to such claim;
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(b) take such action in connection
with contesting such claim as the Company shall reasonably request
in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;
(c) cooperate with the Company in
good faith in order to effectively contest such claim; and
(d) permit the Company to participate
in any proceedings relating to such claim;
provided, however , that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after-tax basis, for
any Excise Tax, employment tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 3, the
Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole
option, either direct Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however , that if the Company
directs Executive to pay such claim and sue for a refund, the
Company shall provide the amount of such payment to Executive as an
additional payment (“
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