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Exhibit
10.64.1
CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT, dated as of
April 4, 2006, is made by and between Duke Energy Corporation,
formerly known as Duke Energy Holding Corp., a Delaware corporation
(the “Company”), and James L. Turner (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.
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.
(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
(but, for the avoidance of doubt, excluding any transactions
contemplated by the Merger Agreement):
(a) an acquisition subsequent
to the date hereof 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
date hereof), 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 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
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(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) “Cinergy Employment
Agreement” shall mean the Employment Agreement between
Cinergy Corp., its subsidiaries and/or its affiliates and the
Executive dated September 24, 2002, as amended from time to
time, including pursuant to Section 21 hereof and Exhibit B
hereto.
(J) “Code” shall
mean the Internal Revenue Code of 1986, as amended from time to
time.
(K) “Company”
shall mean Duke Energy Corporation, formerly known as Duke Energy
Holding Corp., 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.
(L) “Confidential
Information” shall have the meaning set forth in
Section 8 hereof.
(M) “DB Pension
Plan” shall mean any tax-qualified, supplemental or excess
defined benefit pension plan maintained by the Company and any
other defined benefit plan or agreement entered into between the
Executive and the Company which is designed to provide the
Executive with supplemental retirement benefits.
(N) “DC Pension
Plan” shall mean any tax-qualified, supplemental or excess
defined contribution plan maintained by the Company and any other
defined contribution plan or agreement entered into between the
Executive and the Company which is designed to provide the
executive with supplemental retirement benefits.
(O) “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).
(P) “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.
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(Q) “Effective
Time” shall have the meaning given to such term in the Merger
Agreement.
(R) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(S) “Excise Tax”
shall mean any excise tax imposed under section 4999 of the
Code.
(T) “Executive”
shall mean the individual named in the first paragraph of this
Agreement.
(U) “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 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.
(V) “Merger
Agreement” shall mean the Agreement and Plan of Merger dated
as of May 8, 2005 by and among the Duke Energy Corporation,
Cinergy Corp., Deer Holding Corp., Deer Acquisition Corp. and
Cougar Acquisition Corp., as it may be amended.
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(W) “Notice of
Termination” shall have the meaning set forth in
Section 5 hereof.
(X) “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.
(Y) “Repayment
Amount” shall have the meaning set forth in Section 7.3
hereof.
(Z) “Restricted
Period” shall have the meaning set forth in Section 7.2
hereof.
(AA) “Severance
Payments” shall have the meaning set forth in
Section 4.1 hereof.
(BB) “Severance
Period” shall have the meaning set forth in
Section 4.1(C) hereof.
(CC) “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.
(DD) “Term” shall
mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described
therein).
(EE) “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 date hereof and
shall continue in effect through the second anniversary of the date
hereof; provided, however, that commencing on the date that is
twenty-four (24) months following the date hereof 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 date hereof 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. Notwithstanding the
preceding sentence, if the Executive’s employment is
terminated under circumstances that constitute a “Qualifying
Termination” (as defined in the Cinergy Employment Agreement)
during the twenty-four (24) month period beginning on the
Effective Time, then (i) the Term of this Agreement shall
expire immediately prior to such “Qualifying
Termination,” without further action by the parties hereto,
and except as otherwise provided in Section 21, this Agreement
shall be of no further force or effect; and (ii) the Company
shall provide to the Executive the amounts payable under, which
amounts shall be determined and payable in accordance with the
terms and procedures of, the Cinergy Employment
Agreement.
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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 the salary
amounts payable in the normal course for service through the Date
of Termination 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 and not revoking a release of claims substantially in the
form set forth as Exhibit A to this Agreement, 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;
(B) In lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay
to the Executive, no later than fifteen (15) business days
following the Date of Termination, 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.
(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
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his or her dependents medical, dental,
and basic life 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; provided, however,
that, in lieu of providing such benefits, the Company may choose to
(i) provide such benefits through a third-party insurer,
(ii) make a lump-sum cash payment to the Executive in an
amount equal to the aggregate cost of such coverage for the
Severance Period, based on the premium costs being utilized for
such coverage to former employees under “COBRA” at the
Date of Termination, or (iii) make a lump-sum cash payment to
the Executive in an amount equal to the anticipated cost of such
coverage for the Severance Period, based on the Company’s
assumed costs for such coverage for internal accounting purposes at
the Date of Termination. 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).
(D) 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 sum of (i) 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, and
(ii) the unvested portion, if any, of the Executive’s
account balance under the DC Pension Plan as of the Date of
Termination that would have vested had Executive remained employed
by the Company for the remainder of the Term.
(E) 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 sum of (i) the amount that would have been
allocated thereunder by the Company in respect of the Executive
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, and (ii) the Executive’s unvested
accrued benefit, if any, under the DB Pension Plan as of the Date
of Termination that would have vested had Executive remained
employed by the Company for the remainder of the Term.
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(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 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 cash
Severance Payments shall first be reduced, and the noncash
Severance Payments shall thereafter 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); provided, however, that the Executive may elect to
have the noncash Severance Payments reduced (or eliminated) prior
to any reduction of the cash Severance Payments.
(B) For purposes of
determining whether and the extent to which the Total Payments will
be subject to the Excise Tax, (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute a
“payment” within the meaning of section 280G(b) of the
Code shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which, in the opinion of tax
counsel (“Tax Counsel”) who is reasonably acceptable to
the Executive and selected by the accounting firm (the
“Auditor”) which was, immediately prior to the Change
in Control, the Company’s independent auditor, does not
constitute a “parachute payment” within the meaning of
section 280G(b)(2) of the Code (including by reason of section
280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments shall be taken into account which,
in the opinion of Tax Counsel, constitutes reasonable compensation
for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable
to such reasonable compensation, and (iii) the value of any
non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the
Code.
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(C) At the time that payments
are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or
other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the
statement).
5. Notice of
Termination . After a Change in Control and during the Term,
any purported termination of the Executive’s employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 12 hereof. For purposes of
this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in
this Agreement relied upon.
6. No Mitigation . The
Company agrees that, if the Executive’s employment with the
Company terminates during the Term, the Executive is not required
to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to
Section 4 hereof. Further, except as specifically provided in
Section 4.1(C) hereof, no payment
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