Exhibit 10(nn)
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN
CONTROL AGREEMENT (“Agreement”) is effective as of
January 1, 2009, by and between CENTERPOINT ENERGY, INC.,
a Texas corporation (the
“Company”), and [NAME]
(“Executive”).
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
(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.
(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.
“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:
(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
(i) during
the three-month period ending immediately prior to the date a
Change in Control occurs, provided that a binding agreement to
effect a Change in Control has been executed as of
Executive’s termination date (a “Pre-Change in Control
Covered Termination”); 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
events:
(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;
(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” means 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, substantially in the
form attached hereto as Attachment A , in which Executive,
in exchange for severance benefits described in Section 2, among
other things, releases the Company, the Affiliates, their
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, subject to the Waiver and Release requirement in
Section 2(h) below, Executive shall be entitled to receive, as
additional compensation for services rendered to the Company
(including its Affiliates), the following severance benefits:
(a)
Severance Amount : A lump sum cash payment
in an amount equal to Executive’s Compensation multiplied by
two, subject to applicable withholding for income and employment
taxes. Such severance payment shall be paid on the
second business day immediately following the end of the six-month
period commencing on 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 commencing on Executive’s
Covered Termination date and ending on the payment 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 second business day immediately following the end of
the six-month period commencing on 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 commencing on
Executive’s Covered Termination date and ending on the
payment 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 (i) the date of
Executive’s Covered Termination or (ii) in the case of a
Pre-Change in Control Covered Termination, the date of the Change
in Control.
(e)
Outplacement : Outplacement services for a
9-month period after (i) the date of Executive’s Covered
Termination or (ii) in the case of a Pre-Change in Control Covered
Termination, the date of the Change in Control, 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)
Enhanced Retirement Plan Benefit
: Executive shall be entitled to an amount not less than
the amount that Executive would have been entitled to receive under
the cash balance formula of the Retirement Plan as if Executive
(i) was fully vested in his Retirement Plan benefit and (ii)
remained an employee of the Company or its Affiliates throughout
the two-year period following (A) the date of Executive’s
Covered Termination or (B) in the case of a Pre-Change in Control
Covered Termination, the date of the Change in Control based on his
Compensation, with such enhanced benefit paid under the
Company’s Benefit Restoration Plan in accordance with its
terms and conditions.
(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.
(h)
Waiver and Release Requirement : The
foregoing notwithstanding, payment of the benefits under this
Section 2 is subject to Executive’s timely execution and
return of the Waiver and Release to the Company, without subsequent
revocation during the seven-day period following such execution
date (the “Waiver and Release Revocation Period”), as
provided in this Section 2(h). Executive shall have 50
days following (i) his Covered Termination date, or (ii) in the
case of a Pre-Change in Control Covered Termination, the date of
the Change in Control, to consider, execute and return the Waiver
and Release to the Company and shall then have the right to revoke
the Waiver and Release during the Waiver and Release Revocation
Period. If Executive fails to timely execute and return
the Waiver and Release to the Company or revokes such Waiver and
Release during the Waiver and Release Revocation Period, then
Executive shall forfeit, and shall not be entitled to, any of the
benefits described in this Section 2.
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, provided the total of the amounts due to
Executive under this Agreement equal or exceed the Reduced Amount,
the amount of the Payment shall be reduced, to the extent provided
herein, by the minimum Reduced Amount necessary to avoid any Excise
Tax (and no Gross-Up Payment shall be required under this Section 3
or the Agreement). Any such reduction shall be made
first from the amount payable under Section 2(a) and second,
to the extent necessary, from the amount payable under Section
2(c).
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.
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;
(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 (“Supplemental
Payment”) (subject to possible repayment as provided in the
next paragraph) and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax, employment tax or income
tax (including interest or penalties with respect thereto) imposed
with respect to such payment or with respect to any imputed income
with respect thereto; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up
Payme
