Exhibit 10.b

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT is made and entered into as of the 4th day of February, 2004 (the “Effective Date”), by and between Cinergy and James E. Rogers (the “Executive”).  This Agreement replaces and supersedes any and all prior employment agreements between Cinergy and the Executive.  The capitalized words and terms used throughout this Agreement are defined in Section 11.

 

Recitals

 

A.            The Executive is currently serving as Chairman of the Board, President and Chief Executive Officer of the Company, and Cinergy desires to secure the continued employment of the Executive in accordance with this Agreement.

 

B.            The Executive is willing to continue to remain in the employ of Cinergy on the terms and conditions set forth in this Agreement.

 

C.            The parties intend that this Agreement will replace and supersede any and all prior employment agreements between Cinergy (or any component company or business unit of Cinergy) and the Executive.

 

Agreement

 

In consideration of the mutual promises, covenants and agreements set forth below, the parties agree as follows:

 

1.                                      Employment and Term.

 

a.                                       Cinergy agrees to employ the Executive, and the Executive agrees to remain in the employ of Cinergy, in accordance with the terms and provisions of this Agreement, for the Employment Period set forth in Section 1b.  The parties agree that the Company will be responsible for carrying out all of the promises, covenants, and agreements of Cinergy set forth in this Agreement.

 

b.                                      The Employment Period of this Agreement will commence as of the Effective Date and continue until December 31, 2006; provided that, commencing on December 31, 2004, and on each subsequent December 31, the Employment Period will be extended for one (1) additional year unless either party gives the other party written notice not to extend this Agreement at least ninety (90) days before the extension would otherwise become effective.

 

2.                                      Duties and Powers of Executive.

 

a.                                       Position.  The Executive will serve Cinergy as the Chairman of the Board, President and Chief Executive Officer of the Company and he will have such responsibilities, duties, and authority as are customary for someone of that position and such additional duties, consistent with his position, as may be

 

 

assigned to him from time to time during the Employment Period by the Board of Directors (excluding the Executive).  Executive shall devote substantially all of Executive’s business time, efforts and attention to the performance of Executive’s duties under this Agreement; provided, however, that this requirement shall not preclude Executive from reasonable participation in civic, charitable or professional activities, the management of Executive’s passive investments or service on the board of directors of one or more unrelated companies, so long as such activities do not materially interfere with the performance of Executive’s duties under this Agreement.

 

b.                                      Place of Performance.  In connection with the Executive’s employment, the Executive will be based at the principal executive offices of Cinergy, 221 East Fourth Street, Cincinnati, Ohio.  Except for required business travel to an extent substantially consistent with the present business travel obligations of Cinergy executives who have positions of authority comparable to that of the Executive, the Executive will not be required to relocate to a new principal place of business that is more than fifty (50) miles from such location.

 

3.                                      Compensation.  The Executive will receive the following compensation for his services under this Agreement.

 

a.                                       Salary.  The Executive’s Annual Base Salary, payable in pro rata installments not less often than semi-monthly, will be at the annual rate of not less than $1,250,004.  The Board of Directors may, from time to time, increase the Annual Base Salary as the Board of Directors deems to be necessary or desirable, including without limitation adjustments to reflect increases in the cost of living.  Any increase in the Annual Base Salary will not serve to limit or reduce any other obligation of Cinergy under this Agreement.  The Annual Base Salary will not be reduced without the consent of the Executive, except for across-the-board salary reductions similarly affecting all Cinergy management personnel.  If Annual Base Salary is increased or reduced during the Employment Period (but only as permitted by the preceding sentence), then such adjusted salary will thereafter be the Annual Base Salary for all purposes under this Agreement.

 

b.                                      Retirement, Incentive, Welfare Benefit Plans and Other Benefits.

 

(i)                                     During the Employment Period, the Executive will be eligible, and Cinergy will take all necessary action to cause the Executive to become eligible, to participate in short-term and long-term incentive, stock option, restricted stock, performance unit, savings, retirement and welfare plans, practices, policies and programs commensurate with his position and at least comparable to those applicable generally to senior executives of Cinergy who are considered Tier II executives for compensation purposes, except with respect to any plan, practice, policy or program to which the Executive has waived his rights in writing.

 

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In addition, Cinergy will assume and continue the Insurance Agreement and the Deferred Compensation Agreement.  Notwithstanding anything in this Agreement to the contrary, in the event that Cinergy or any successor fails to assume, breaches, or, at any time during their respective terms, terminates, modifies, amends, or in any way affects, to the Executive’s detriment and without his consent, the Insurance Agreement or the Deferred Compensation Agreement, then the Executive will be entitled to:  (i) in the case of the Deferred Compensation Agreement, those amounts that are described in Section 16 of the Deferred Compensation Agreement, and (ii) in the case of the Insurance Agreement, those amounts that are described in Section 12 of the Insurance Agreement.

 

(ii)                                  Supplemental Retirement Benefit.

 

(1)                                  Amount, Form, Timing and Method of Payment.  If the Executive retires from Cinergy, the Executive will be entitled and fully vested in a supplemental retirement benefit in an amount which, when expressed as an annual amount payable during the life of the Executive, shall equal the excess of (1) 60% of the Executive’s Highest Average Earnings over (2) his total aggregate annual benefit, payable in the form of a single life annuity to the Executive, under all Executive Retirement Plans.  Except as described below, the form (e.g., the 100% joint and survivor annuity form of benefit), timing, and method of payment of the supplemental retirement benefit payable under this Paragraph will be the same as those elected by the Executive under the Pension Plan, and the amount of such benefit shall be calculated after taking into account the actuarial factors contained in the Pension Plan, provided, however, that such benefit shall not be actuarially reduced for early commencement.  Notwithstanding the foregoing, if the Executive retires from Cinergy after attaining age 56 but prior to attaining age 57, then this Section shall be applied by substituting 61-2/3% for 60%.  If the Executive retires from Cinergy after attaining age 57 but prior to attaining age 58, then this Section shall be applied by substituting 63-1/3% for 60%.  If the Executive retires from Cinergy after attaining age 58, then this Section shall be applied by substituting 65% for 60%.

 

(2)                                  Death Benefit.  If the Executive dies prior to his retirement from Cinergy, and if his Spouse, on the date of his death, is living on the date the first installment of the supplemental retirement benefit would be payable under this Paragraph, the Spouse will be entitled to receive the supplemental retirement benefit as a Spouse’s benefit.  The form, timing, and method of payment of any Spouse’s benefit under this Paragraph will be the same as those applicable to the Spouse under the Pension Plan, and the amount of such benefit shall be calculated after taking into account the actuarial factors

 

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contained in the Pension Plan, provided, however, that such benefit shall not be actuarially reduced for early commencement.

 

(3)                                  Special Payment Election Effective Upon a Change in Control.  Notwithstanding the foregoing, the Executive may make a special payment election with respect to his supplemental retirement benefit (if any) in accordance with the following provisions:

 

(A)                              The Executive may elect, on a form provided by Cinergy, to receive a single lump sum cash payment in an amount equal to the Actuarial Equivalent (as defined below) of his supplemental retirement benefit (or the Actuarial Equivalent of the remaining payments to be made in connection with his supplemental retirement benefit in the event that payment of his supplemental retirement benefit has already commenced) payable no later than 30 days after the later of the occurrence of a Change in Control or the date of his termination of employment.

 

(B)                                Such special payment election shall become operative only upon the occurrence of a Change in Control and only if the Executive’s termination of employment occurs either (1) prior to the occurrence of a Change in Control or (2) during the 24-month period commencing upon the occurrence of a Change in Control.  Once operative, such special payment election shall override any other payment election made by the Executive with respect to his supplemental retirement benefit.

 

(C)                                In order to be effective, a special payment election (or withdrawal of that election) must be made either prior to the occurrence of a Potential Change in Control or, with the consent of Cinergy, during the 30-day period commencing upon the occurrence of a Potential Change in Control.  In the event that a Potential Change in Control occurs and subsequently ceases to exist, other than as a result of a Change in Control, such Potential Change in Control shall be disregarded for purposes of this Section.

 

(D)                               In the event that the Executive makes a special payment election and pursuant to that election he becomes entitled to receive a single lump sum cash payment pursuant to this Section payable prior to the commencement of his supplemental retirement benefit in another form of payment, the Actuarial Equivalent of his supplemental retirement benefit shall be calculated based on the following assumptions:

 

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(I)                                    The form of payment for each of the Executive’s retirement benefits under the Executive Retirement Plans and the Executive’s supplemental retirement benefit shall be a single life annuity;

 

(II)                                The commencement date for each of the Executive’s retirement benefits under the Executive Retirement Plans and the Executive’s supplemental retirement benefit shall be the first day of the calendar month coincident with or next following his termination of employment;

 

(III)                            The term “Actuarial Equivalent” has the meaning given to that term in the Pension Plan with respect to lump sum payments; and

 

(IV)                            The amount of the Executive’s supplemental retirement benefit shall not be actuarially reduced for early commencement.

 

(E)                                 In the event that the Executive makes a special payment election and pursuant to that election he is entitled to receive a single lump sum cash payment payable after the commencement of his supplemental retirement benefit in another form of payment, his lump sum cash payment shall be equal to the Actuarial Equivalent (as that term is used in the Pension Plan with respect to lump sum payments) of the remaining payments to be made in connection with his supplemental retirement benefit.

 

(4)                              Special One-Time Payment Election Without a Change in Control.  Notwithstanding the foregoing, the Executive may make an election, on a form provided by Cinergy, to receive a single lump sum cash payment in an amount equal to one-half of the Actuarial Equivalent (as defined above in Section 3b(ii)(3)(D)) of his supplemental retirement benefit payable no later than 30 days after the date of his termination of employment.  In order to be effective, the special payment election under this Section 3b(ii)(4) must be made at least one year prior to the termination of Executive’s employment with Cinergy.  The lump sum amount payable pursuant to this Section 3b(ii)(4) shall be calculated in accordance with the provisions of Section 3b(ii)(3)(D).  In the event an amount is paid to or on behalf of the Executive pursuant to this Section 3b(ii)(4), such payment shall discharge any liability under this Agreement to or on behalf of the Executive with respect to one-half of the Actuarial Equivalent (as defined above in Section 3b(ii)(3)(D)) of his supplemental retirement benefit.

 

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(iii)                               Upon his retirement, the Executive will be eligible for comprehensive medical and dental benefits which are not materially different from the benefits provided to retirees under the Cinergy Corp. Welfare Benefits Program or any similar program or successor to that program.  For purposes of determining the amount of the monthly premiums due from the Executive, the Executive will receive from Cinergy the maximum subsidy available as of the date of his retirement to an active Cinergy employee with the same medical benefits classification/eligibility as the Executive’s medical benefits classification/eligibility on the date of his retirement.

 

(iv)                              The Executive will be a participant in the Annual Incentive Plan and will be paid pursuant to the terms and conditions of that plan, subject to the following: (1) The maximum annual bonus shall be not less than one hundred thirty percent (130%) of the Executive’s Annual Base Salary (the “Maximum Annual Bonus”); and (2) The target annual bonus shall be not less than seventy five percent (75%) of the Executive’s Annual Base Salary (the “Target Annual Bonus”).

 

(v)                                 The Executive will be a participant in the Long-Term Incentive Plan (the “LTIP”), and the Executive’s annualized target award opportunity under the LTIP will be equal to no less than one hundred sixty percent (160%) of his Annual Base Salary (the “Target LTIP Bonus”).

 

c.                                       Fringe Benefits and Perquisites.  During the Employment Period, the Executive will be entitled to the following additional fringe benefits in accordance with the terms and conditions of Cinergy’s policies and practices for such fringe benefits:

 

(i)                                     Cinergy will furnish to the Executive an automobile appropriate for the Executive’s level of position, or, at Cinergy’s discretion, a cash allowance of equivalent value.  Cinergy will also pay all of the related expenses for gasoline, insurance, maintenance, and repairs, or provide for such expenses within the cash allowance.

 

(ii)                                  Cinergy will pay the initiation fee and the annual dues, assessments, and other membership charges of the Executive for membership in up to two (2) country clubs and one (1) luncheon club of the Executive’s choice that are used for business purposes.

 

(iii)                               Cinergy will provide paid vacation for four (4) weeks per year (or such longer period for which Executive is otherwise eligible under Cinergy’s policy).

 

(iv)                              Cinergy will furnish to the Executive annual financial planning and tax preparation services, provided, however, that the cost to Cinergy of such services shall not exceed $15,000 during any thirty-six (36) consecutive month period.

 

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(v)                                 Cinergy will provide other fringe benefits in accordance with Cinergy plans, practices, programs, and policies in effect from time to time, commensurate with his position and at least comparable to those applicable generally to senior executives of Cinergy who are considered Tier I or Tier II executives for compensation purposes.

 

d.                                      Expenses.  Cinergy agrees to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by him in the performance of his duties under this Agreement in accordance with the policies established from time to time by the Board of Directors.

 

e.                                       Relocation Benefits.  Following termination of the Executive’s employment for any reason (other than death), the Executive will be entitled to reimbursement from Cinergy for the reasonable costs of relocating from the Cincinnati, Ohio, area to a new primary residence within the continental United States in a manner that is consistent with the terms of the Relocation Program.  Notwithstanding the foregoing, if the Executive becomes employed by another employer and is eligible to receive relocation benefits under another employer-provided plan, any benefits provided to the Executive under this Section 3e will be secondary to those provided under the other employer-provided relocation plan.  The Executive must report to Cinergy any such relocation benefits that he actually receives under another employer-provided plan.

 

f.                                         Stock Options and Stock Appreciation Rights.  Notwithstanding Section 5d, upon the occurrence of a Change in Control, any stock options or stock appreciation rights then held by the Executive pursuant to the LTIP or Cinergy Corp. Stock Option Plan shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately exercisable.  If the Executive terminates employment for any reason during the twenty-four (24) month period commencing upon the occurrence of a Change in Control, notwithstanding Section 5d, any stock options or stock appreciation rights then held by the Executive pursuant to the LTIP or Cinergy Corp. Stock Option Plan shall, to the extent not otherwise provided in the applicable Stock Related Documents, remain exercisable in accordance with their terms but in no event for a period less than the lesser of (i) three months following such termination of employment or (ii) the remaining term of such stock option or stock appreciation right (which remaining term shall be determined without regard to such termination of employment).

 

g.                                      Performance Award.  The Executive is hereby granted a contingent right (the “Performance Award”) to have a Nonelective Employer Contribution credited to his account under the 401(k) Excess Plan in an amount equal to the Fair Market Value as of the vesting date of 129,049 shares of Common Stock (the “Shares”) (which is the number of shares obtained by dividing $5 million by the Fair Market Value of a share of Common Stock as of January 1, 2004), subject to the following terms and conditions:

 

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(i)                                     The Performance Award shall vest on December 31, 2006, provided that the Executive has been continuously employed with Cinergy as of such date and the Committee determines as of such date that all of the applicable performance measures (as established by the Committee and communicated to the Executive no later than April 1, 2004) have been satisfied in full.  Notwithstanding the foregoing, the Performance Award shall immediately vest in full (without regard to whether the performance measures have been satisfied) if, on or prior to December 31, 2006, the Executive dies or becomes disabled (as that term is defined in the Cinergy Corp. Long-Term Disability Plan), Cinergy terminates the Executive’s employment other than for Cause, the Executive terminates employment for Good Reason, or a Change in Control occurs.  The Performance Award shall be credited to the Executive’s account under the 401(k) Excess Plan as soon as administratively practicable following the vesting date.

 

(ii)                                  Unless otherwise vested in accordance with Section 3g(i), the Executive shall forfeit the Performance Award if he ceases to remain continuously employed by Cinergy until the date on which the Performance Award vests.

 

(iii)                               The Executive shall have the right to receive, during the period commencing on January 1, 2004 and ending on the earlier of the date that the Performance Award vests in accordance with Section 3g(i) or the date that the Performance Award is forfeited in accordance with Section 3g(ii), cash payments equal to the amount of dividends that the Executive would have received if he had directly owned the Shares, which amounts shall be paid to the Executive as soon as administratively practicable following each relevant dividend payment date.  The amounts paid under this Section 3g(iii) shall be fully vested when paid and shall not be subject to forfeiture if the Performance Award does not vest thereafter.

 

(iv)                              The parties expressly agree and acknowledge that $600,000 of the Performance Award, whether or not vested in accordance with Section 3g(i), shall be deemed to be included in the Executive’s Annual Base Salary for each of the calendar years 2005 and 2006 for purposes of Section 3b(v) and shall be deemed included in the Executive’s “Highest Average Earnings” for each of the calendar years 2004, 2005 and 2006 for purposes of calculating the Executive’s supplemental retirement benefit under Section 3b(ii).  Moreover, for each of the calendar years 2004, 2005 and 2006, the Executive shall be entitled to receive a special cash bonus, payable no later than March 15 of the subsequent calendar year, equal to the excess of (A) the bonus that the Executive would have received for the applicable calendar year under the Annual Incentive Plan had the Executive’s Annual Base Salary been increased by $600,000, over (B) the actual bonus earned by the Executive for the applicable calendar year under the Annual Incentive Plan.  The amounts credited under this Section 3g(iv)

 

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shall not be affected by any forfeiture of the Performance Award occuring after the relevant crediting date.

 

(v)                                 The Committee shall make or provide for such adjustments in the number of Shares subject to the Performance Award as the Committee, in its sole discretion exercised in good faith, may determine is equitably required in order to prevent dilution or enlargement of the Executive’s rights that otherwise would result from (A) any stock dividend, stock split, combination of shares, recapitalization, or other change in the capital structure of the Company, (B) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation, or other distribution of assets or issuance of rights or warrants to purchase securities, or (C) any other corporate transaction or event having an effect similar to any of the foregoing. Any amounts paid under the Performance Award shall be paid from Cinergy’s general assets, and the Executive shall have the status of a general unsecured creditor with respect to Cinergy’s obligations under this Section 3g.

 

4.                                      Termination of Employment.

 

a.                                       Death.  The Executive’s employment will terminate automatically upon the Executive’s death during the Employment Period.

 

b.                                      By Cinergy for Cause.  Cinergy may terminate the Executive’s employment during the Employment Period for Cause.  For purposes of this Employment Agreement, “Cause” means the following:

 

(i)                                     The willful and continued failure by the Executive to substantially perform the Executive’s duties with Cinergy (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness) that, if curable, has not been cured within 30 days after the Board of Directors or the Chief Executive Officer has delivered to the Executive a written demand for substantial performance, which demand specifically identifies the manner in which the Executive has not substantially performed his duties.  This event will constitute Cause even if the Executive issues a Notice of Termination for Good Reason pursuant to Section 4d after the Board of Directors or Chief Executive Officer delivers a written demand for substantial performance.

 

(ii)                                  The breach by the Executive of the confidentiality provisions set forth in Section 9.

 

(iii)                               The conviction of the Executive for the commission of a felony, including the entry of a guilty or nolo contendere plea, or any willful or grossly negligent action or inaction by the Executive that has a materially adverse effect on Cinergy.  For purposes of this definition of Cause, no act, or failure to act, on the Executive’s part will be deemed “willful” unless it is

 

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done, or omitted to be done, by the Executive in bad faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of Cinergy.

 

(iv)                              Notwithstanding the foregoing, Cinergy shall be deemed to have not terminated the employment of the Executive for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the members of the Board (excluding the Executive) then in office at a meeting of the members of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard by the members of the Board), finding that, in the good faith opinion of the members of the Board (excluding the Executive), the Executive had committed an act set forth above in this Section 4b and specifying the particulars thereof in detail.

 

c.                                       By Cinergy Without Cause.  Cinergy may, upon at least 30 days advance written notice to the Executive, terminate the Executive’s employment during the Employment Period for a reason other than Cause, but the obligations placed upon Cinergy in Section 5 will apply.

 

d.                                      By the Executive for Good Reason.  The Executive may terminate his employment during the Employment Period for Good Reason.  For purposes of this Agreement, “Good Reason” means the following:

 

(i)                                     (1) A reduction in the Executive’s Annual Base Salary, except for across-the-board salary reductions similarly affecting all Cinergy management personnel, (2) a reduction in the amount of the Executive’s Maximum Annual Bonus under the Annual Incentive Plan, except for across-the-board Maximum Annual Bonus reductions similarly affecting all Cinergy management personnel, or (3) a reduction in any other benefit or payment described in Section 3 of this Agreement, except for changes to the employee benefits programs generally affecting Cinergy management personnel, provided that those changes, in the aggregate, will not result in a material adverse change with respect to the benefits to which the Executive was entitled as of the Effective Date.

 

(ii)                                  (1) The material reduction without his consent of the Executive’s title, authority, duties, or responsibilities from those in effect immediately prior to the reduction, (2) the failure by Cinergy without the consent of the Executive to nominate the Executive for re-election to the Board, or (3) a material adverse change in the Executive’s reporting responsibilities.

 

(iii)                               Any breach by Cinergy of any other material provision of this Agreement (including but not limited to the place of performance as specified in Section 2b).

 

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(iv)                              The Executive’s disability due to physical or mental illness or injury that precludes the Executive from performing any job for which he is qualified and able to perform based upon his education, training or experience.

 

(v)                                 A failure by the Company to require any successor entity to the Company specifically to assume in writing all of the Company’s obligations to the Executive under this Agreement.

 

e.                                       By the Executive Without Good Reason.  The Executive may terminate his employment without Good Reason upon prior written notice to the Company.

 

f.                                         Notice of Termination.  Any termination of the Executive’s employment by Cinergy or by the Executive during the Employment Period (other than a termination due to the Executive’s death) will be communicated by a written Notice of Termination to the other party to this Agreement in accordance with Section 12b.  For purposes of this Agreement, a “Notice of Termination” means a written notice that meets the following requirements:

 

(i)                                     The notice indicates the specific termination provision in this Agreement relied upon as the basis for termination.

 

(ii)                                  To the extent applicable, the notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision specified pursuant to Paragraph (i).

 

(iii)                               If the Date of Termination is other than the date of receipt of the notice, the notice specifies the Date of Termination, which will be no more than 30 days after the date the notice was given.  The failure by the Executive or Cinergy to set forth in the Notice of Termination any fact or circumstances that contributes to a showing of Good Reason or Cause will not waive any right of the Executive or Cinergy under this Agreement or preclude the Executive or Cinergy from asserting that fact or circumstance in enforcing rights under this Agreement.

 

(iv)                              A Notice of Termination for Cause after a Change in Control has occurred must include a copy of a resolution duly adopted by the affirmative vote of not less three quarters (3/4) of the entire membership of the Board of Directors (excluding the Executive) at a meeting of the Board of Directors called and held for the purpose of considering the termination.  The resolution must include a finding that, in the good faith opinion of the Board of Directors (excluding the Executive), the Executive was guilty of conduct set forth in the definition of Cause, and it must specify the particulars of the conduct in detail.

 

g.                                      Sale of Stock.  The Executive acknowledges and agrees that he shall not sell or otherwise dispose of any shares of Company stock acquired pursuant to the exercise of a stock option, other than shares sold in order to pay an option

 

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exercise price or the related tax withholding obligation, until 90 days after the Date of Termination.  Notwithstanding the foregoing, Cinergy, in its sole discretion, may waive the restrictions contained in the previous sentence.

 

5.                                      Obligations of Cinergy Upon Termination.

 

a.                                       Certain Terminations.

 

(i)                                     If a Qualifying Termination occurs during the Employment Period, Cinergy will pay to the Executive a lump sum amount, in cash, equal to the sum of the following Accrued Obligations:

 

(1)                                  the pro-rated portion of the Executive’s Annual Base Salary payable through the Date of Termination, to the extent not previously paid.

 

(2)                                  any amount payable to the Executive under the Annual Incentive Plan in respect of the most recently completed fiscal year, to the extent not theretofore paid.

 

(3)                                  an amount equal to the AIP Benefit for the fiscal year that includes the Date of Termination multiplied by a fraction, the numerator of which is the number of days from the beginning of that fiscal year to and including the Date of Termination and the denominator of which is three hundred and sixty-five (365).  The AIP Benefit component of the calculation will be equal to the annual bonus that would have been earned by the Executive pursuant to any annual bonus or incentive plan maintained by Cinergy in respect of the fiscal year in which occurs the Date of Termination, determined by projecting Cinergy’s performance and other applicable goals and objectives for the entire fiscal year based on Cinergy’s performance during the period of such fiscal year occurring prior to the Date of Termination, and based on such other assumptions and rates as Cinergy deems reasonable.

 

(4)                                  the Accrued Obligations described in this Section 5a(i) will be paid within thirty (30) days after the Date of Termination.  These Accrued Obligations are payable to the Executive regardless of whether a Change in Control has occurred.

 

(ii)                                  In the event of a Qualifying Termination either prior to the occurrence of a Change in Control, or more than twenty-four (24) months following the occurrence of a Change in Control, Cinergy will pay the Accrued Obligations, and Cinergy will have the following additional obligations described in this Section 5a(ii); provided, however, that each of the benefits described below in this Section 5a(ii) shall only be provided to the Executive if, upon presentation to the Executive following a Qualifying

 

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Termination, the Executive timely executes and does not timely revoke the Waiver and Release.

 

(1)                                  Cinergy will pay to the Executive a lump sum amount, in cash, equal to three (3) times the sum of the Annual Base Salary and the Annual Bonus.  For this purpose, the Annual Base Salary will be at the rate in effect at the time Notice of Termination is given (without giving effect to any reduction in Annual Base Salary, if any, prior to the termination, other than across-the-board reductions), and the Annual Bonus will be the higher of (A) the annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by Cinergy in respect of the year ending immediately prior to the fiscal year in which occurs the Date of Termination, and (B) the annual bonus that would have been earned by the Executive pursuant to any annual bonus or incentive plan maintained by Cinergy in respect of the fiscal year in which occurs the Date of Termination, calculated by projecting Cinergy’s performance and other applicable goals and objectives for the entire fiscal year based on Cinergy’s performance during the period of such fiscal year occurring prior to the Date of Termination, and based on such other assumptions and rates as Cinergy deems reasonable; provided, however that for purposes of this Section 5a(ii)(1)(B), the Annual Bonus shall not be less than the Target Annual Bonus, nor greater than the Maximum Annual Bonus for the year in which the Date of Termination occurs.  This lump sum will be paid within thirty (30) days after the expiration of the revocation period contained in the Waiver and Release.

 

(2)                                  With respect to each performance share award held by the Executive pursuant to the Value Creation Plan of the LTIP on the Date of Termination (collectively, the “Performance Share Awards”), Cinergy will pay to the Executive an amount, in cash, equal to the excess (if any) of (i) the amount to which the Executive would have been entitled under each Performance Share Award if he had remained employed by Cinergy until the end of the Employment Period, over (ii) the amount to which he is actually entitled under such Performance Share Award.  With respect to each Performance Share Award, such amount shall be paid to the Executive at the same time as other amounts are paid with respect to that Performance Share Award.

 

(3)                                  Subject to Clauses (A), (B) and (C) below, Cinergy will provide, until the end of the Employment Period, medical and dental benefits to the Executive and/or the Executive’s eligible dependents at least equal to those that would have been provided if the Executive’s employment had not been terminated (excluding benefits to which the Executive has waived his rights in writing).

 

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The benefits described in the preceding sentence will be in accordance with the medical and welfare benefit plans, practices, programs, or policies of Cinergy (the “M&W Plans”) as then currently in effect and applicable generally to other Cinergy senior executives and their families.

 

(A)                              If, as of the Executive’s Date of Termination, the Executive meets the eligibility requirements for Cinergy’s retiree medical and welfare benefit plans, the provision of those retiree medical and welfare benefit plans to the Executive will satisfy Cinergy’s obligation under this Section 5a(ii)(3).

 

(B)                                If, as of the Executive’s Date of Termination, the provision to the Executive of the M&W Plan benefits described in this Section 5a(ii)(3) would either (1) violate the terms of the M&W Plans (or any related insurance policies) or (2) violate any of the Code’s nondiscrimination requirements applicable to the M&W Plans, then Cinergy, in its sole discretion, may elect to pay the Executive, in lieu of the M&W Plan benefits described under this Section 5a(ii)(3), a lump sum cash payment equal to the total monthly premiums (or in the case of a self funded plan, the cost of COBRA continuation coverage) that would have been paid by Cinergy for the Executive under the M&W Plans from the Date of Termination through the end of the Employment Period.  Nothing in this Clause will affect the Executive’s right to elect COBRA continuation coverage under a M&W Plan in accordance with applicable law, and Cinergy will make the payment described in this Clause whether or not the Executive elects COBRA continuation coverage, and whether or not the Executive receives health coverage from another employer.

 

(C)                                If the Executive becomes employed by another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, any benefits provided to the Executive under the M&W Plans will be secondary to those provided under the other employer-provided plan during the Executive’s applicable period of eligibility.

 

(4)                                  Cinergy will pay the Executive a lump sum amount, in cash, equal to $15,000 in order to cover tax counseling services through an agency selected by the Executive.  Such payment will be transferred to the Executive within thirty (30) days of the

 

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