UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MarkOne)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas
& Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of April 30, 1999, shares of Common Stock outstanding for each registrant
were as listed:
Company Shares
- ---------------------------------------------------------------- ------------
Cinergy Corp., par value $.01 per share 158,870,194
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . . 6
Consolidated Statements of Income . . . . . . . . . . 8
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . . 9
Consolidated Statements of Cash Flows . . . . . . . . 10
Results of Operations . . . . . . . . . . . . . . . . 11
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . . 15
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statements of Cash Flows . . . . . . . . 18
Results of Operations . . . . . . . . . . . . . . . . 19
PSI Energy, Inc.
Consolidated Balance Sheets. . . . . . . . . . . . 23
Consolidated Statements of Income and
Comprehensive Income . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows. . . . . . . . 26
Results of Operations . . . . . . . . . . . . . . . . 27
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . . 31
Statements of Income. . . . . . . . . . . . . . . . . 33
Statements of Cash Flows. . . . . . . . . . . . . . . 34
Results of Operations . . . . . . . . . . . . . . . . 35
Notes to Financial Statements . . . . . . . . . . . . . 37
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 45
3 Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . 51
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 52
4 Submission of Matters to a Vote of Security Holders . . 52
5 Other Information . . . . . . . . . . . . . . . . . . . 53
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 53
Signatures. . . . . . . . . . . . . . . . . . . . . . . 56
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION
1998 Form Combined 1998 Annual Report on Form 10-K filed separately by
10-K Cinergy, CG&E, PSI, and ULH&P
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
CAAA Clean Air Act Amendments of 1990
CC&T Cinergy Capital and Trading, Inc. (a subsidiary of
Investments)
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
CIBU Cinergy Investments Business Unit
Cinergy or Cinergy Corp.
Company
Committed Lines A line of credit providing short-term loans on a
committed basis
Destec Destec Energy, Inc.
DOE United States Department of Energy
Dynegy Dynegy Inc.
ECBU Energy Commodities Business Unit
EDBU Energy Delivery Business Unit
EPA United States Environmental Protection Agency
EPS Earnings per share
FASB Financial Accounting Standards Board
Gibson PSI's Gibson Generating Station (steam electric generating
plant)
IBU International Business Unit
ICR Information Collection Request
IDEM Indiana Department of Environmental Management
IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water
Company, Inc.
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IT Information Technology
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
IURC Indiana Utility Regulatory Commission
kwh Kilowatt-hour
mcf Thousand cubic feet
MGP Manufactured gas plant
Midlands Midlands Electricity plc, a United Kingdom regional electric
company (a wholly-owned subsidiary of Avon Energy)
MW Megawatts
N/A Not applicable
NERC North American Electric Reliability Council
NIPSCO Northern Indiana Public Service Company
NOx Nitrogen oxide
ProEnergy Producers Energy Marketing, LLC (a subsidiary of CC&T),
which is engaged in the marketing of natural gas
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
RUS Rural Utilities Service
SEC United States Securities and Exchange Commission
September 1996 An IURC order issued in September 1996 on PSI's retail
Order rate proceeding
SIP State Implementation Plan
SO2 Sulfur dioxide
Statement 131 Statement of Financial Accounting Standards No. 131,
Disclosures About Segments of an Enterprise and Related
Information
Statement 133 Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
Uncommitted A line of credit providing short-term loans on an
Lines uncommitted basis
US United States
WVPA Wabash Valley Power Association, Inc.
<PAGE>
CINERGY CORP.
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 92,652 $ 100,154
Restricted deposits 3,641 3,587
Notes receivable 59 64
Accounts receivable less accumulated provision
for doubtful accounts of $31,355 at March
31, 1999, and $25,622 at December 31, 1998 397,686 580,305
Materials, supplies, and fuel - at average cost 180,969 202,747
Prepayments and other 73,692 74,849
Energy risk management assets 703,278 969,000
----------- ------------
1,451,977 1,930,706
Utility Plant - Original Cost
In service
Electric 9,248,374 9,222,261
Gas 794,785 786,188
Common 197,299 186,364
----------- -----------
10,240,458 10,194,813
Accumulated depreciation 4,100,406 4,040,247
----------- -----------
6,140,052 6,154,566
Construction work in progress 209,461 189,883
----------- -----------
Total utility plant 6,349,513 6,344,449
Other Assets
Regulatory assets 940,386 970,767
Investments in unconsolidated subsidiaries 645,250 574,401
Other 459,022 478,472
----------- -----------
2,044,658 2,023,640
$ 9,846,148 $10,298,795
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 433,732 $ 668,860
Accrued taxes 240,179 228,347
Accrued interest 40,878 51,679
Notes payable and other short-term obligations 1,052,811 903,700
Long-term debt due within one year 25,959 136,000
Energy risk management liabilities 828,424 1,117,146
Other 86,814 93,376
---------- -----------
2,708,797 3,199,108
Non-Current Liabilities
Long-term debt 2,605,657 2,604,467
Deferred income taxes 1,100,473 1,091,075
Unamortized investment tax credits 154,381 156,757
Accrued pension and other postretirement
benefit costs 323,949 315,147
Other 268,042 298,370
---------- -----------
4,452,502 4,465,816
Total liabilities 7,161,299 7,664,924
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 92,616 92,640
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
158,779,900 at March 31, 1999, and
158,664,532 at December 31, 1998 1,588 1,587
Paid-in capital 1,598,884 1,595,237
Retained earnings 1,001,034 945,214
Accumulated other comprehensive loss (9,273) (807)
---------- -----------
Total common stock equity 2,592,233 2,541,231
$9,846,148 $10,298,795
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands, except per share amounts)
Operating Revenues
Electric $ 968,532 $1,158,724
Gas 421,308 184,846
Other 12,439 4,891
---------- ----------
1,402,279 1,348,461
Operating Expenses
Fuel and purchased and exchanged power 433,169 652,404
Gas purchased 334,402 107,586
Other operation and maintenance 244,548 212,693
Depreciation and amortization 86,477 79,935
Taxes other than income taxes 69,534 70,135
---------- ----------
1,168,130 1,122,753
Operating Income 234,149 225,708
Equity in Earnings of Unconsolidated
Subsidiaries 44,682 11,854
Other Income and (Expenses) - Net (11,886) (11,815)
Interest 60,772 59,805
---------- ----------
Income Before Taxes 206,173 165,942
Income Taxes 77,564 57,449
Preferred Dividend Requirements
of Subsidiaries 1,364 2,422
---------- ----------
Net Income $ 127,245 $ 106,071
Average Common Shares Outstanding 158,746 157,764
Earnings Per Common Share
Net income $0.80 $0.67
Earnings Per Common Share - Assuming Dilution
Net income $0.80 $0.67
Dividends Declared Per Common Share $0.45 $ 0.45
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income (Loss) Equity
Quarter Ended March 31, 1999
Balance at January 1, 1999 $1,587 $1,595,237 $ 945,214 $ (807) $2,541,231
Comprehensive income
Net income 127,245 $127,245 127,245
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (8,451) (8,451)
Unrealized gains/losses -
grantor trusts (15) (15)
--------
Other comprehensive loss
total (8,466) (8,466)
--------
Comprehensive income total $118,779
Issuance of 115,368 shares of
common stock - net 1 1,978 1,979
Treasury shares purchased (233) (233)
Treasury shares reissued 1,902 1,902
Dividends on common stock (see
page 8 for per share amounts) (71,422) (71,422)
Other (3) (3)
------ ---------- ---------- ------- ----------
Balance at March 31, 1999 $1,588 $1,598,884 $1,001,034 $(9,273) $2,592,233
Quarter Ended March 31, 1998
Balance at January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200
Comprehensive income
Net income 106,071 $106,071 106,071
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (367) (367)
Minimum pension liability
adjustment (51) (51)
--------
Other comprehensive loss
total (418) (418)
--------
Comprehensive income total $105,653
========
Issuance of 19,362 shares of
common stock - net 1 289 290
Treasury shares purchased (1) (1,430) (1,431)
Treasury shares reissued 1 2,149 2,150
Dividends on common stock (see
page 8 for per share amounts) (70,994) (70,994)
Other 8 (2) 6
------ ---------- ---------- ------- ----------
Balance at March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 127,245 $ 106,071
Items providing (using) cash currently:
Depreciation and amortization 86,477 79,935
Deferred income taxes and investment tax
credits - net 12,877 (12,955)
Equity in earnings of unconsolidated subsidiaries (44,682) (11,854)
Allowance for equity funds used during
construction (775) (21)
Regulatory assets - net 5,140 10,670
Changes in current assets and current liabilities
Restricted deposits (54) (29)
Accounts and notes receivable, net of reserves
on receivables sold 182,265 (106,525)
Materials, supplies, and fuel 21,778 4,660
Accounts payable (235,128) 69,305
Accrued taxes and interest 1,031 24,938
Energy risk management - net (23,000) -
Other items - net 9,478 25,788
--------- ---------
Net cash provided by operating
activities 142,652 189,983
Financing Activities
Issuance of common stock 1,979 290
Issuance of long-term debt 6,623 98,901
Retirement of preferred stock of subsidiaries (20) (85,229)
Redemption of long-term debt (116,000) (160,291)
Change in short-term debt 149,111 108,767
Dividends on common stock (71,422) (70,994)
--------- ---------
Net cash used in financing activities (29,729) (108,556)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (79,143) (66,348)
Investments in unconsolidated subsidiaries (41,282) (9,658)
--------- ---------
Net cash used in investing activities (120,425) (76,006)
Net increase (decrease) in cash and temporary
cash investments (7,502) 5,421
Cash and temporary cash investments at beginning
of period 100,154 53,310
--------- ---------
Cash and temporary cash investments at end of period $ 92,652 $ 58,731
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter ended March 31, 1999. For information concerning the
results of operations for each of the other registrants for the quarter ended
March 31, 1999, see the discussion under the heading "Results of Operations"
following the financial statements of each registrant.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $676 $ 633 12,276 11,678
Sales for resale 266 515 10,694 21,733
Other 27 11 172 -
---- ------ ------ -------
Total $969 $1,159 23,142 33,411
Electric operating revenues decreased $190 million (16%) for the quarter ended
March 31, 1999, when compared to the same period for 1998. This decrease was
primarily due to decreased volumes on non-firm power sales for resale
transactions related to energy marketing and trading operations. Partially
offsetting the decline was an increase in the average price per kwh for retail
customers, higher retail and firm power kwh sales resulting from growth in the
average number of residential and commercial customers and a return to more
normal weather in the first quarter of 1999, as compared to 1998, and increased
international operations.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- -----
($ and mcf in millions)
Sales for resale $243 $ - 143 N/A
Retail 158 174 26 26
Transportation 20 11 13 16
---- ---- --- ---
Total $421 $185 182 42
Gas operating revenues increased $236 million in the first quarter of 1999, when
compared to the same period last year, primarily due to the gas operating
revenues of ProEnergy, which was acquired in June 1998. A lower average cost per
mcf of gas purchased, which was passed on to end users, contributed to the
decrease in retail sales. Transportation revenues increased as more residential
and commercial customers began to purchase gas directly from suppliers, using
transportation services provided by CG&E. This increase in transportation
revenues was partially offset by a decrease in mcf transportation volumes
resulting from the loss of a large industrial transportation customer during
late 1998.
Other Revenues
Other revenues increased $8 million for the quarter ended March 31, 1999, over
the same period of 1998. This increase was primarily the result of increased
revenues of new non-regulated initiatives operated by the various business
units.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $198 $181
Purchased and exchanged power 235 471
---- ----
Total $433 $652
Electric fuel costs increased $17 million (9%) for the quarter ended March 31,
1999, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $181
Increase (Decrease) due to change in:
Price of fuel (2)
Deferred fuel cost 5
Kwh generation 9
Other 5
----
Fuel expense - March 31, 1999 $198
Purchased and exchanged power expense decreased $236 million (50%) for the
quarter ended March 31, 1999, as compared to the same period last year,
primarily reflecting decreased purchases of non-firm power for resale to others
as a result of a decline in sales for resale volumes in the energy marketing and
trading operations.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, increased $227 million, when
compared to the same period last year, primarily due to the gas purchased
expenses of ProEnergy, which was acquired in June 1998. Partially offsetting
this increase was a lower average cost per mcf of gas purchased.
<PAGE>
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $195 $174
Maintenance 50 39
---- ----
Total $245 $213
Other operation expenses increased $21 million (12%) for the quarter ended March
31, 1999, as compared to the same period last year, primarily due to an increase
in operating expenses related to various non-regulated subsidiaries and the
estimated loss on a specific customer account.
Maintenance expenses increased $11 million (28%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Depreciation $79 $73
Amortization of phase-in deferrals 6 6
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $86 $80
Depreciation expense increased $6 million (8%) for the quarter ended March 31,
1999, as compared to the same period last year, primarily due to additions to
depreciable plant.
Equity in Earnings of Unconsolidated Subsidiaries
The $33 million increase in equity in earnings of unconsolidated subsidiaries
for the quarter ended March 31, 1999, as compared to the same period of 1998, is
primarily attributable to an increase in the earnings of Avon Energy resulting
from increased profits related to Midlands' supply business and lower costs of
purchased electricity.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $1 million
(44%) for the quarter ended March 31, 1999, as compared to the same period of
1998, is primarily attributable to PSI's redemption of all outstanding shares of
its 7.44% Series Cumulative Preferred Stock on March 1, 1998.
<PAGE>
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 17,856 $ 26,989
Restricted deposits 1,173 1,173
Notes receivable from affiliated companies 109,725 84,358
Accounts receivable less accumulated provision
for doubtful accounts of $19,295 at March
31, 1999, and $17,607 at December 31, 1998 119,288 205,060
Accounts receivable from affiliated companies 431 22,635
Materials, supplies, and fuel - at average cost 94,163 115,294
Prepayments and other 41,369 40,158
Energy risk management assets 351,639 484,500
---------- ---------
735,644 980,167
Utility Plant - Original Cost
In service
Electric 4,817,108 4,806,958
Gas 794,786 786,188
Common 197,299 186,364
---------- ----------
5,809,193 5,779,510
Accumulated depreciation 2,184,770 2,147,298
---------- ----------
3,624,423 3,632,212
Construction work in progress 121,476 119,993
---------- ----------
Total utility plant 3,745,899 3,752,205
Other Assets
Regulatory assets 616,784 627,035
Other 101,817 100,061
---------- ----------
718,601 727,096
$5,200,144 $5,459,468
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 171,792 $ 282,743
Accounts payable to affiliated companies 34,376 13,166
Accrued taxes 138,096 151,455
Accrued interest 13,920 20,571
Long-term debt due within one year 20,000 130,000
Notes payable and other short-term obligations 288,991 189,283
Notes payable to affiliated companies 4,289 17,020
Energy risk management liabilities 414,212 558,573
Other 25,961 26,422
---------- ----------
1,111,637 1,389,233
Non-Current Liabilities
Long-term debt 1,219,901 1,219,778
Deferred income taxes 779,201 771,145
Unamortized investment tax credits 109,260 110,801
Accrued pension and other postretirement
benefit costs 149,830 146,361
Other 134,550 134,990
---------- ----------
2,392,742 2,383,075
Total liabilities 3,504,379 3,772,308
Cumulative Preferred Stock
Not subject to mandatory redemption 20,697 20,717
Common Stock Equity
Common stock - $8.50 par value; authorized
shares - 120,000,000; outstanding shares -
89,663,086 at March 31, 1999, and
December 31, 1998 762,136 762,136
Paid-in capital 553,929 553,926
Retained earnings 360,127 351,505
Accumulated other comprehensive loss (1,124) (1,124)
---------- ----------
Total common stock equity 1,675,068 1,666,443
$5,200,144 $5,459,468
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $481,586 $593,305
Gas 163,797 173,462
-------- --------
645,383 766,767
Operating Expenses
Fuel and purchased and exchanged power 198,871 325,171
Gas purchased 78,878 96,588
Other operation and maintenance 108,156 101,405
Depreciation and amortization 50,570 47,660
Taxes other than income taxes 54,114 54,683
-------- --------
490,589 625,507
Operating Income 154,794 141,260
Other Income and (Expenses) - Net (1,261) (2,494)
Interest 24,407 26,789
-------- --------
Income Before Taxes 129,126 111,977
Income Taxes 48,889 40,785
-------- --------
Net Income $ 80,237 $ 71,192
Preferred Dividend Requirement 214 215
-------- --------
Net Income Applicable to Common Stock $ 80,023 $ 70,977
Other Comprehensive Income (Loss), Net of Tax - (155)
-------- --------
Comprehensive Income $ 80,023 $ 70,822
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 80,237 $ 71,192
Items providing (using) cash currently:
Depreciation and amortization 50,570 47,660
Deferred income taxes and investment tax
credits - net 8,795 (27)
Allowance for equity funds used during
construction (775) (10)
Regulatory assets - net 4,496 2,912
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 80,619 391
Materials, supplies, and fuel 21,131 14,073
Accounts payable (89,741) 51,971
Accrued taxes and interest (20,010) (4,439)
Energy risk management - net (11,500) -
Other items - net (1,938) 9,753
--------- --------
Net cash provided by operating
activities 121,884 193,476
Financing Activities
Retirement of preferred stock (17) (9)
Redemption of long-term debt (110,000) (160,291)
Change in short-term debt 86,977 49,157
Dividends on preferred stock (214) (215)
Dividends on common stock (71,400) (42,600)
--------- ---------
Net cash used in financing
activities (94,654) (153,958)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (36,363) (36,483)
Net cash used in investing
activities (36,363) (36,483)
Net increase (decrease) in cash and temporary
cash investments (9,133) 3,035
Cash and temporary cash investments at
beginning of period 26,989 2,349
--------- ---------
Cash and temporary cash investments at
end of period $ 17,856 $ 5,384
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $358 $336 5,882 5,438
Sales for resale 121 254 4,918 10,793
Other 3 3 N/A N/A
---- ---- ------ ------
Total $482 $593 10,800 16,231
Electric operating revenues decreased $111 million (19%) for the quarter ended
March 31, 1999, when compared to the same period for 1998. This decrease was
primarily due to decreased volumes on non-firm power sales for resale
transactions related to Cinergy's energy marketing and trading operations.
Partially offsetting the decline was higher retail kwh sales resulting from
growth in the average number of residential and commercial customers and a
return to more normal weather in the first quarter of 1999, as compared to 1998.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
1999 1998 1999 1998
($ and mcf in millions)
Retail $144 $162 26 26
Transportation 20 11 13 16
---- ---- -- --
Total $164 $173 39 42
Gas operating revenues decreased $9 million (5%) in the first quarter of 1999,
when compared to the same period last year. A lower average cost per mcf of gas
purchased, which was passed on to end users, contributed to the decrease in
retail sales. Transportation revenues increased as more residential and
commercial customers began to purchase gas directly from suppliers, using
transportation services provided by CG&E. This increase in transportation
revenues was partially offset by a decrease in mcf transportation volumes
resulting from the loss of a large industrial transportation customer during
late 1998.
<PAGE>
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $ 86 $ 88
Purchased and exchanged power 113 237
---- ----
Total $199 $325
Electric fuel costs decreased $2 million (2%) for the quarter ended March 31,
1999, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $88
Increase (Decrease) due to change in:
Price of fuel 1
Deferred fuel cost (7)
Kwh generation 4
---
Fuel expense - March 31, 1999 $86
Purchased and exchanged power expense decreased $124 million (52%) for the
quarter ended March 31, 1999, as compared to the same period last year. This
decline primarily reflects decreased purchases of non-firm power for resale to
others as a result of a decline in sales for resale volumes in Cinergy's energy
marketing and trading operations.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, decreased $18 million (18%),
when compared to the same period last year, primarily due to an decrease in the
average cost per mcf of gas purchased.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $ 84 $ 82
Maintenance 24 19
--- ---
Total $108 $101
<PAGE>
Maintenance expenses increased $5 million (26%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Depreciation $43 $41
Amortization of phase-in deferrals 7 6
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $51 $48
Depreciation expense increased $2 million (5%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to additions to
depreciable plant.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily due
to an increase in interest income and an increase in allowance for equity funds
used during construction resulting from an increase in the equity rate applied
and an increase in construction expenditures subject to allowance.
Interest
The decrease in interest expense of $2 million (9%) for the quarter ended March
31, 1999, as compared to the same period last year, was due to decreases in both
interest on long-term debt and other interest expense. The decrease in interest
expense on long-term debt is primarily due to a net redemption of approximately
$90 million of long-term debt during the period of March 1998 through February
1999. The decrease in other interest expense was due to a reduction in average
short-term borrowings and lower short-term interest rates.
<PAGE>
PSI ENERGY, INC.
AND SUBSIDIARY COMPANY
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 31,187 $ 18,788
Restricted deposits 2,468 2,414
Notes receivable 8,298 17,024
Notes receivable from affiliated companies 70 73
Accounts receivable less accumulated provision
for doubtful accounts of $11,968 at March
31, 1999, and $7,893 at December 31, 1998 139,685 225,449
Accounts receivable from affiliated companies 10,674 384
Materials, supplies, and fuel - at average cost 83,789 80,445
Prepayments and other 27,485 31,461
Energy risk management assets 351,639 484,500
---------- ----------
Total current assets 655,295 860,538
Electric Utility Plant - Original Cost
In service 4,431,266 4,415,303
Accumulated depreciation 1,915,636 1,892,949
---------- ----------
2,515,630 2,522,354
Construction work in progress 87,984 69,891
---------- ----------
Total electric utility plant 2,603,614 2,592,245
Other Assets
Regulatory assets 323,603 343,731
Other 92,496 93,012
---------- ----------
Total other assets 416,099 436,743
$3,675,008 $3,889,526
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 141,076 $ 217,959
Accounts payable to affiliated companies 12,954 30,145
Accrued taxes 90,558 58,901
Accrued interest 17,628 28,335
Notes payable and other short-term obligations 157,597 173,162
Notes payable to affiliated companies 103,092 102,946
Long-term debt due within one year 5,959 6,000
Energy risk management liabilities 414,212 558,573
Other 2,161 2,227
---------- ----------
945,237 1,178,248
Non-Current Liabilities
Long-term debt 1,020,093 1,025,659
Deferred income taxes 360,007 364,049
Unamortized investment tax credits 45,121 45,956
Accrued pension and other postretirement
benefit costs 116,664 112,387
Other 101,641 115,656
---------- ----------
1,643,526 1,663,707
Total liabilities 2,588,763 2,841,955
Cumulative Preferred Stock
Not subject to mandatory redemption 71,919 71,923
Common Stock Equity
Common stock - without par value; $0.01
stated value; authorized shares - 60,000,000;
outstanding shares - 53,913,701 at March
31, 1999, and December 31, 1998 539 539
Paid-in capital 410,740 410,739
Retained earnings 603,557 564,865
Accumulated other comprehensive loss (510) (495)
---------- ----------
Total common stock equity 1,014,326 975,648
$3,675,008 $3,889,526
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $482,465 $592,125
Operating Expenses
Fuel and purchased and exchanged power 234,927 352,746
Other operation and maintenance 113,240 101,685
Depreciation and amortization 33,743 32,275
Taxes other than income taxes 14,488 14,967
-------- --------
396,398 501,673
Operating Income 86,067 90,452
Other Income and (Expenses) - Net 323 1,718
Interest 21,364 22,898
-------- --------
Income Before Taxes 65,026 69,272
Income Taxes 25,185 25,944
-------- --------
Net Income $ 39,841 $ 43,328
Preferred Dividend Requirement 1,150 2,208
-------- --------
Net Income Applicable to Common Stock $ 38,691 $ 41,120
Other Comprehensive Income (Loss), Net of Tax (15) 944
-------- ---------
Comprehensive Income $ 38,676 $ 42,064
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 39,841 $ 43,328
Items providing (using) cash currently:
Depreciation and amortization 33,743 32,275
Deferred income taxes and investment tax
credits - net (3,476) (473)
Allowance for equity funds used during
construction - (11)
Regulatory assets - net 644 7,758
Changes in current assets and current
liabilities
Restricted deposits (54) (29)
Accounts and notes receivable, net of
reserves on receivables sold 85,834 (75,348)
Materials, supplies, and fuel (3,344) (9,413)
Accounts payable (94,074) 33,541
Accrued taxes and interest 20,950 26,088
Energy risk management - net (11,500) -
Other items - net 7,593 (14,292)
--------- ---------
Net cash provided by operating
activities 76,157 43,424
Financing Activities
Issuance of long-term debt - 98,901
Retirement of preferred stock (3) (85,220)
Redemption of long-term debt (6,000) -
Change in short-term debt (15,419) 8,481
Dividends on preferred stock (1,150) (2,736)
Dividends on common stock - (28,400)
--------- ---------
Net cash used in financing activities (22,572) (8,974)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (41,186) (26,803)
Net cash used in investing activities (41,186) (26,803)
Net increase in cash and temporary cash
investments 12,399 7,647
Cash and temporary cash investments at
beginning of period 18,788 18,169
--------- ---------
Cash and temporary cash investments at
end of period $ 31,187 $ 25,816
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
The components of operating revenues and the related kwh sales are shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $318 $297 6,393 6,239
Sales for resale 157 287 6,282 12,185
Other 7 8 N/A N/A
---- ---- ------ ------
Total $482 $592 12,675 18,424
Operating revenues decreased $110 million (19%) for the quarter ended March 31,
1999, when compared to the same period for 1998. This decrease was primarily due
to decreased volumes on non-firm power sales for resale transactions related to
Cinergy's energy marketing and trading operations. Partially offsetting the
decline was an increase in the average price per kwh for retail customers and
higher retail and firm power kwh sales resulting from growth in the average
number of residential and commercial customers and a return to more normal
weather in the first quarter of 1999, as compared to 1998.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $107 $ 92
Purchased and exchanged power 128 261
---- ----
Total $235 $353
Fuel costs increased $15 million (16%) for the first quarter of 1999, as
compared to the same period last year.
<PAGE>
An analysis of fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $ 92
Increase (Decrease) due to change in:
Price of fuel (3)
Deferred fuel cost 12
Kwh generation 6
----
Fuel expense - March 31, 1999 $107
Purchased and exchanged power expense decreased $133 million (51%) for the
quarter ended March 31, 1999, as compared to the same period last year. This
decline primarily reflects decreased purchases of non-firm power for resale to
others as a result of a decline in sales for resale volumes in Cinergy's energy
marketing and trading operations.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $ 88 $ 82
Maintenance 25 20
---- ----
Total $113 $102
Other operation expense increased $6 million (7%) for the quarter ended March
31, 1999, as compared to the same period of 1998, primarily due to the estimated
loss on a specific customer account.
Maintenance expense increased $5 million (25%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily
attributable to a decrease in interest income.
Interest
The $2 million (7%) decrease in interest expense for the quarter ended March 31,
1999, as compared to the same period of 1998, is primarily due to a decrease in
other interest expense resulting from a reduction in average short-term
borrowings and lower short-term interest rates. Partially offsetting the
decrease was an increase in interest expense on long-term debt resulting from
the net issuance of approximately $144 million of long-term debt during the
period from March 1998 through December 1998.
<PAGE>
Preferred Dividend Requirement
The decrease in preferred dividend requirement of $1 million (48%) for the
quarter ended March 31, 1999, as compared to the same period of 1998, is
primarily attributable to PSI's redemption of all outstanding shares of its
7.44% Series Cumulative Preferred Stock on March 1, 1998.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 4,993 $ 3,244
Accounts receivable less accumulated provision
for doubtful accounts of $1,826 at
March 31, 1999, and $1,248 at December
31, 1998 9,076 14,125
Accounts receivable from affiliated companies - 666
Materials, supplies, and fuel - at average cost 3,668 8,269
Prepayments and other 154 308
-------- --------
Total current assets 17,891 26,612
Utility Plant - Original Cost
In service
Electric 234,791 232,222
Gas 165,629 164,040
Common 20,358 18,908
-------- --------
420,778 415,170
Accumulated depreciation 146,128 143,386
-------- --------
274,650 271,784
Construction work in progress 9,971 11,444
-------- --------
Total utility plant 284,621 283,228
Other Assets
Regulatory assets 10,893 10,978
Other 5,470 3,767
-------- --------
16,363 14,745
$318,875 $324,585
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 6,729 $ 5,903
Accounts payable to affiliated companies 15,582 14,986
Accrued taxes 6,616 3,216
Accrued interest 1,432 1,959
Long-term debt due within one year 20,000 20,000
Notes payable to affiliated companies 11,386 31,817
Other 4,179 4,247
-------- --------
65,924 82,128
Non-Current Liabilities
Long-term debt 54,571 54,553
Deferred income taxes 25,711 26,134
Unamortized investment tax credits 4,168 4,238
Accrued pension and other postretirement
benefit costs 11,920 11,678
Amounts due to customers - income taxes 9,253 8,959
Other 11,968 8,077
-------- --------
117,591 113,639
Total liabilities 183,515 195,767
Common Stock Equity
Common stock - $15.00 par value; authorize
shares - 1,000,000; outstanding shares -
585,333 at March 31, 1999, and
December 31, 1998 8,780 8,780
Paid-in capital 19,525 19,525
Retained earnings 107,055 100,513
-------- --------
Total common stock equity 135,360 128,818
$318,875 $324,585
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $49,159 $46,999
Gas 33,000 28,480
------- -------
82,159 75,479
Operating Expenses
Electricity purchased from parent company
for resale 36,748 34,090
Gas purchased 17,322 16,353
Operation and maintenance 10,190 9,430
Depreciation 3,571 3,232
Taxes other than income taxes 1,083 1,005
------- -------
68,914 64,110
Operating Income 13,245 11,369
Other Income and (Expenses) - Net (390) (496)
Interest 1,563 1,115
------- -------
Income Before Taxes 11,292 9,758
Income Taxes 4,749 3,989
------- -------
Net Income $ 6,543 $ 5,769
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 6,543 $ 5,769
Items providing (using) cash currently:
Depreciation 3,571 3,232
Deferred income taxes and investment tax
credits - net (200) 462
Allowance for equity funds used during
construction 16 14
Regulatory assets 35 (41)
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 4,006 240
Materials, supplies, and fuel 4,601 3,111
Accounts payable 1,422 (5,751)
Accrued taxes and interest 2,873 (1,000)
Other current assets and liabilities 86 -
Other items - net 4,200 1,627
-------- --------
Net cash provided by operating
activities 27,153 7,663
Financing Activities
Change in short-term debt (20,431) (2,030)
-------- --------
Net cash used in financing
activities (20,431) (2,030)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (4,973) (6,175)
Net cash used in investing
activities (4,973) (6,175)
Net increase (decrease) in cash and temporary
cash investments 1,749 (542)
Cash and temporary cash investments at
beginning of period 3,244 546
-------- --------
Cash and temporary cash investments at
end of period $ 4,993 $ 4
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $2 million (5%) for the quarter ended
March 31, 1999, as compared to the same period last year. This increase
primarily reflects a return to more normal weather conditions, as compared to
the same period in 1998, and higher retail kwh sales resulting from growth in
the average number of residential and commercial customers.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
1999 1998 1999 1998
($ and mcf in thousands)
Retail $31,555 $27,266 5,219 4,491
Transportation 1,445 1,214 1,078 1,106
------- ------- ----- -----
Total $33,000 $28,480 6,297 5,597
Gas operating revenues increased $5 million (16%) in the first quarter of 1999,
when compared to the same period last year, primarily due to a increase in mcf
volumes sold, a return to more normal weather conditions, and an increase in the
number of customers.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased increased $3 million (8%) for the quarter ended March 31,
1999, as compared to the same period last year. This increase reflects higher
volumes purchased from CG&E.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, increased $1 million (6%),
when compared to the same period last year, primarily due to an increase in the
volumes of gas purchased, due to higher demand and an increase in the number of
customers.
<PAGE>
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in thousands)
Other operation $ 8,948 $8,135
Maintenance 1,242 1,295
------- -------
Total $10,190 $9,430
Other operation expenses increased $.8 million (10%) for the quarter ended March
31, 1999, as compared to the same period last year, primarily due to an increase
in administrative and general activities.
Depreciation
Depreciation increased $.3 million (10%) for the quarter ended March 31, 1999,
as compared to the same period last year, due to additions to depreciable plant.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $.1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily
attributable to an increase in miscellaneous non-utility revenues.
Interest
The increase in interest expense of $.4 million (40%) for the quarter ended
March 31, 1999, as compared to the same period last year, was primarily due to
the net issuance of approximately $30 million of long-term debt during the
period of April 1998 through December 1998.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include normal,
recurring adjustments) necessary in the opinion of the registrants for a
fair presentation of the interim results. These statements should be read
in conjunction with the Financial Statements and the notes thereto included
in the combined 1998 Form 10-K of the registrants.
Certain amounts in the 1998 Financial Statements have been reclassified to
conform to the 1999 presentation.
Cinergy
2. On April 16, 1999, Cinergy issued and sold $200 million principal amount of
its 6.125% Debentures due 2004. Proceeds from the sale were used to repay a
portion of short-term indebtedness and for general corporate purposes.
Cinergy and PSI
3. On April 30, 1999, PSI issued: $124.7 million principal amount of its First
Mortgage Bonds, Series BBB, 8%, due July 15, 2009, in exchange for $125.7
million principal amount of certain outstanding Secured Medium-term Notes,
Series A; $60.1 million principal amount of its First Mortgage Bonds,
Series CCC, 8.85%, due January 15, 2022, in exchange for $60.5 million
principal amount of certain outstanding Secured Medium-term Notes, Series
A; and $38 million principal amount of its First Mortgage Bonds, Series
DDD, 8.31%, due September 1, 2032, in exchange for $38 million principal
amount of certain outstanding Secured Medium-term Notes, Series B.
Also on April 30, 1999, PSI issued $97 million principal amount of its
6.52% Senior Notes due 2009 in exchange for a like principal amount of
outstanding 7.25% Junior Maturing Principal Securities due 2028
("JUMPS(sm)").
The Secured Medium-term Notes and JUMPS(sm) received by PSI in the exchange
transactions described above have been cancelled.
Cinergy, CG&E, and PSI
4. Cinergy'senergy marketing and trading operations, conducted primarily
through its ECBU, markets and trades electricity, natural gas, and other
energy-related products. The power marketing and trading operation has both
physical and trading activities. Generation not required to meet native
load requirements is available to be sold to third parties, either under
long-term contracts, such as full requirements transactions or firm forward
sales contracts, or in short-term and spot market transactions. When
transactions are entered into, each transaction is designated as either a
physical or trading transaction. In order for a transaction to be
designated as physical, there must be intent and ability to physically
deliver the power from company-owned generation. Physical transactions are
accounted for on a settlement basis. All other transactions are considered
trading transactions and are accounted for using the mark-to-market method
of accounting. Under the mark-to-market method of accounting, these trading
transactions are reflected at fair value as "Energy risk management assets"
and "Energy risk management liabilities." Changes in fair value, resulting
in unrealized gains and losses, are reflected in "Fuel and purchased and
exchanged power." Revenues and costs for all transactions are recorded
gross in
<PAGE>
the Consolidated Statements of Income as contracts are settled. Revenues
are recognized in "Operating Revenues - Electric" and costs are recorded in
"Fuel and purchased and exchanged power."
Although physical transactions are entered with the intent and ability to
settle the contract with company-owned generation, it is likely, that from
time to time, due to numerous factors such as generating station outages,
native load requirements, and weather, power used to settle the physical
transactions will be required to be purchased on the open market. Depending
on the factors giving rise to these open market purchases, the cost of such
purchases could be in excess of the associated revenues. Losses such as
this will be recognized as the power is delivered. In addition, physical
contracts are subject to permanent impairment tests. At March 31, 1999,
management has concluded that no physical contracts are impaired.
Prior to December 31, 1998, the transactions now included in the trading
portfolio were accounted for and valued at the aggregate lower of cost or
market. Under this method, only the net value of the entire portfolio was
recorded as a liability in the Consolidated Balance Sheets.
Contracts in the trading portfolio are valued at end-of-period market
prices, utilizing factors such as closing exchange prices, broker and
over-the-counter quotations, and model pricing. Model pricing considers
time value and volatility factors underlying any options and contractual
commitments. Management expects that some of these obligations, even though
considered as trading contracts, will ultimately be settled from time to
time by using company-owned generation. The cost of this generation is
typically below the market prices at which the trading portfolio has been
valued.
Because of the volatility currently experienced in the power markets, and
the factors discussed above pertaining to both the physical and trading
activities, volatility in future earnings (losses) from period to period in
the ECBU is likely.
Cinergy's ECBU also physically markets natural gas and trades natural gas
and other energy-related products. All of these operations are accounted
for on the mark-to-market method of accounting. Revenues and costs from
physical marketing are recorded gross in the Consolidated Statements of
Income as contracts are settled due to the exchanging of title to the
natural gas throughout the earnings process. All non-physical transactions
are recorded net in the Consolidated Statements of Income. Energy risk
management assets and liabilities and gross margins from these trading
activities currently are not significant.
Cinergy, CG&E, and PSI
5. Cinergy and its subsidiaries use derivative financial instruments to hedge
exposures to foreign currency exchange rates, lower funding costs, and
manage exposures to fluctuations in interest rates. Instruments used as
hedges must be designated as a hedge at the inception of the contract and
must be effective at reducing the risk associated with the exposure being
hedged. Accordingly, changes in market values of designated hedge
instruments must be highly correlated with changes in market values of the
underlying hedged items at inception of the hedge and over the life of the
hedge contract.
Cinergy and its subsidiaries utilize foreign exchange forward contracts and
currency swaps to hedge certain of its net investments in foreign
operations. Accordingly, any translation gains or losses related to the
foreign exchange forward contracts or the principal exchange on the
currency swap are recorded in "Accumulated other comprehensive loss," which
is a separate component of common stock equity. Aggregate translation
losses related to these instruments are reflected in "Current Liabilities"
in the Consolidated Balance Sheets.
Interest rate swaps are accounted for under the accrual method.
Accordingly, gains and losses based on any interest differential between
fixed-rate and floating-rate interest amounts, calculated on agreed upon
notional principal amounts, are recognized in the Consolidated Statements
of Income as a component of interest expense as realized over the life of
the agreement.
Cinergy, CG&E, PSI, and ULH&P
6. As discussed in the 1998 Form 10-K, prior to the 1950s, gas was produced at
MGP sites through a process that involved the heating of coal and/or oil.
The gas produced from this process was sold for residential, commercial,
and industrial uses.
Cinergy and PSI
Coal tar residues, related hydrocarbons, and various metals associated with
MGP sites have been found at former MGP sites in Indiana, including at
least 21 MGP sites which PSI or its predecessors previously owned. PSI
acquired four of the sites from NIPSCO in 1931 and at the same time it sold
NIPSCO the sites located in Goshen and Warsaw, Indiana. In 1945, PSI sold
19 of these sites (including the four it acquired from NIPSCO) to Indiana
Gas and Water Company, Inc. (now IGC). One of the 19 sites, located in
Rochester, Indiana, was later sold by IGC to NIPSCO.
IGC and NIPSCO both made claims against PSI, contending that PSI is a
Potentially Responsible Party under the CERCLA with respect to the 21 MGP
sites, and therefore legally responsible for the costs of investigating and
remediating these sites. Moreover, in August 1997, NIPSCO filed suit
against PSI in federal court, claiming, pursuant to CERCLA, recovery from
PSI of NIPSCO's past and future costs of investigating and remediating MGP
related contamination at the Goshen MGP site.
In November 1998, NIPSCO, IGC, and PSI entered into a Site Participation
and Cost Sharing Agreement by which they settled allocation of CERCLA
liability for past and future costs, among the three companies, at seven
MGP sites in Indiana. Pursuant to this agreement, NIPSCO's lawsuit against
PSI was dismissed. The parties have assigned one of the parties lead
responsibility for managing further investigation and remediation
activities at each of the sites. Similar agreements were reached between
IGC and PSI which allocate CERCLA liability at 14 MGP sites with which
NIPSCO had no involvement. These agreements conclude all CERCLA and similar
claims between the three companies relative to MGP sites. Pursuant to the
agreements and applicable laws, the parties are continuing to investigate
and remediate the sites as appropriate. Investigation and cleanup of some
of the sites is subject to oversight by the IDEM.
PSI has placed its insurance carriers on notice of IGC's, NIPSCO's, and the
IDEM's claims related to MGP sites. In April 1998, PSI filed suit in
Hendricks County Circuit Court against its general liability insurance
carriers seeking, among other matters, a declaratory judgment that its
insurance carriers are obligated to defend MGP claims against PSI or pay
PSI's costs of defense and to indemnify PSI for its costs of investigating,
preventing, mitigating, and remediating damage to
<PAGE>
property and paying claims associated with MGP sites. PSI cannot predict
the outcome of this litigation.
Based upon the work performed to date, PSI has accrued costs for the sites
related to investigation, remediation, and groundwater monitoring.
Estimated costs of certain remedial activities are accrued when such costs
are reasonably estimable. PSI does not believe it can provide an estimate
of the reasonably possible total remediation costs for any site prior to
completion of a remedial investigation/feasibility study and the
development of some sense of the timing for the implementation of the
potential remedial alternatives, to the extent such remediation may be
required. Accordingly, the total costs that may be incurred in connection
with the remediation of all sites, to the extent remediation is necessary,
cannot be determined at this time. These future costs at the 21 Indiana MGP
sites, based on information currently available, are not material to
Cinergy's financial condition or results of operations. However, as further
investigation and remediation activities are undertaken at these sites, the
potential liability for the 21 MGP sites could be material to Cinergy's and
PSI's financial condition or results of operations.
Cinergy, CG&E, and ULH&P
CG&E and its utility subsidiaries are aware of potential sites where MGP
activities have occurred at some time in the past. None of these sites is
known to present a risk to the environment. CG&E and its utility
subsidiaries have undertaken preliminary site assessments to obtain more
information about some of these MGP sites.
Cinergy, CG&E, PSI, and ULH&P
7. During the second quarter of 1998, the FASB issued Statement 133. The new
standard requires companies to record derivative instruments, as defined in
Statement 133, as assets or liabilities, measured at fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting
treatment. The standard is effective for fiscal years beginning after June
15, 1999, and Cinergy expects to adopt the provisions of Statement 133 in
the first quarter of 2000.
The Company has not yet quantified the impacts of adopting Statement 133 on its
consolidated financial statements. However, Statement 133 could increase
volatility in earnings and other comprehensive income.
<PAGE>
<TABLE>
<CAPTION>
Cinergy
Presented below is a reconciliation of earnings per common share (basic EPS) and
earnings per common share assuming dilution (diluted EPS).
<S> <C> <C> <C>
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Quarter ended March 31, 1999
Earnings per common share:
Net income $127,245 158,746 $ .80
Effect of dilutive securities:
Common stock options 412
Contingently issuable common stock 13
EPS--assuming dilution:
Net income plus assumed conversions $127,245 159,171 $ .80
Quarter ended March 31, 1998
Earnings per common share:
Net income $106,071 157,764 $ .67
Effect of dilutive securities:
Common stock options 787
Contingently issuable common stock 123
EPS--assuming dilution:
Net income plus assumed conversions $106,071 158,674 $ .67
</TABLE>
Options to purchase shares of common stock that were excluded from the
calculation of EPS--assuming dilution because the exercise prices of these
options were greater than the average market price of the common shares during
the period are summarized below:
Quarter Average
Ended Exercise
March 31 Shares Price
1999 1,744,800 $35.70
1998 914,800 37.61
Cinergy
9. Midlands (of which the Company owns 50%) has a 40% ownership interest in a
586 MW power project in Pakistan ("Uch project" or "Uch") which as
originally scheduled to begin commercial operation in late 1998. In July
1998, the Pakistani government-owned utility issued a notice of intent to
terminate certain key project agreements relative to the Uch project. The
notice asserted that various forms of corruption were involved in the
original granting of the agreements to the Uch investors by a predecessor
government. The Company believes that this notice is similar to notices
received by a number of other independent power projects in Pakistan.
The Uch investors, including a subsidiary of Midlands, strongly deny the
allegations and have pursued all available legal options to enforce their
contractual rights under the project agreements. Physical construction of
the project is complete; however, commercial operations have been delayed
pending resolution of the dispute. In December 1998, the Pakistani
government offered to withdraw its notice.
Through its 50% ownership of Midlands, the Company's current investment in the
Uch project is approximately $36 million. In addition, project lenders could
require investors to make additional capital contributions to the project under
certain conditions. The Company's share of these additional contributions is
approximately $8 million. At the present time, the Company cannot predict the
ultimate outcome of this matter.
Cinergy and PSI
10. As discussed in the 1998 Form 10-K, PSI and Dynegy (formerly Destec)
entered into a 25-year contractual agreement for the provision of coal
gasification services in November 1995. The agreement requires PSI to pay
Dynegy a base monthly fee including certain monthly operating expenses. PSI
received authorization in the September 1996 Order for the inclusion of
these costs in retail rates. In addition, PSI received authorization to
defer, for subsequent recovery in retail rates, the base monthly fees and
expenses incurred prior to the effective date of the September 1996 Order.
Over the next five years, the base monthly fees and expenses for the coal
gasification service agreement are expected to total $201 million.
During the third quarter of 1998, PSI reached an agreement with Dynegy to
purchase the remainder of its 25-year contract for coal gasification
services for $265.7 million. The proposed purchase, which is contingent
upon regulatory approval satisfactory to PSI, could be completed in 1999.
PSI is investigating financing alternatives. The transaction, if approved
as proposed, is not expected to have a material impact on PSI's earnings.
Currently, natural gas prices have fallen to a level which causes the
synthetic gas supply taken under the current gasification services
agreement to be substantially above market. If the buyout of the
gasification services agreement is approved, the combustion turbine will be
fired with natural gas, or with synthetic gas if it can be produced at a
cost competitive with natural gas.
11. As discussed in the 1998 Form 10-K, the collective-bargaining agreement
with the International Brotherhood of Electrical Workers Local No. 1393,
covering approximately 1,470 employees, expired on May 1, 1999. A new labor
agreement was ratified April 22, 1999, and is effective from May 1, 1999,
through April 30, 2002.
Cinergy, CG&E, PSI, and ULH&P
12. As discussed in the 1998 Form 10-K, during 1998, Cinergy and its
subsidiaries adopted the provisions of Statement 131. During the first
quarter of 1999, Cinergy reorganized its reportable segments. The business
unit structure effective with that reorganization is described below.
The ECBU operates and maintains, exclusive of certain jointly-owned plant,
all of the Company's domestic electric generation facilities. In addition
to the production of electric power, all energy risk management, marketing,
and proprietary arbitrage trading, with the exception of electric and gas
retail sales, is conducted through the ECBU. Revenues from external
customers are derived from the ECBU's marketing, trading, and risk
management activities. Intersegment revenues are derived from the sale of
electric power to the EDBU.
The EDBU plans, constructs, operates, and maintains the Company's
transmission and distribution systems and provides gas and electric energy
to end users. Revenues from customers other than end users are primarily
derived from the transmission of electric power through the Company's
transmission system.
The CIBU manages the development, sales, and marketing of domestic,
non-regulated wholesale energy and energy-related products and services.
Most of the CIBU's revenues are derived from the sales of such products and
services to external, end-use customers. In addition, some of the CIBU's
activities are conducted through joint-venture affiliates, including the
construction and sale or lease of cogeneration and trigeneration facilities
to large commercial/industrial customers and energy management services to
third parties.
The IBU directs and manages all of the Company's international business
holdings, which include wholly-owned subsidiaries and equity investments.
Revenues and equity earnings from unconsolidated companies are primarily
derived from energy-related businesses.
Transfer pricing for sales of electric energy and sales of electric and gas
transmission and distribution services between the ECBU and EDBU are
derived from the operating utilities' retail and wholesale rate structures.
<PAGE>
<TABLE>
<CAPTION>
Financial results by business unit for the quarters ended March 31, 1999, and
1998, and Total Segments Assets at March 31, 1999, and December 31, 1998, are as
follows:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
All Reconciling
Cinergy Business Units Other Eliminations
ECBU EDBU CIBU IBU Total (1) (2) Consolidated
-------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues -
External Customers $ 503,638 $ 868,367 $17,400 $ 12,874 $1,402,279 $ - $ - $1,402,279
Intersegment Revenues 456,536 - - - 456,536 - (456,536) -
Segment Profit (Loss)
Before Taxes 83,317 102,754 (2,729) 24,136 207,478 (1,305) - 206,173
Total Segment Assets
at March 31, 1999 $5,081,083 $3,897,368 $46,876 $789,840 $9,815,167 $30,981 $ - $9,846,148
1998
All Reconciling
Cinergy Business Units Other Eliminations
ECBU EDBU CIBU IBU Total (1) (2) Consolidated
-------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues -
External Customers $ 502,098 $ 832,452 $13,765 $ 146 $ 1,348,461 $ - $ - $ 1,348,461
Intersegment Revenues 434,931 - - - 434,931 - (434,931) -
Segment Profit (Loss)
Before Taxes 91,153 90,572 (3,268) (961) 177,496 (11,554) - 165,942
Total Segment Assets
at December 31,
1998 $5,474,428 $3,987,055 $42,107 $751,861 $10,255,451 $ 43,344 $ - $10,298,795
<FN>
1. The all other category represents miscellaneous corporate items, which are
not allocated to business units for the purposes of segment profit
measurement.
2. The reconciling eliminations category eliminates the intersegment revenues
of the ECBU and the EDBU.
</FN>
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Matters discussed in
this "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in "Part I. Financial Information" reflect and elucidate
Cinergy's corporate vision of the future and, as a part of that, outline goals
and aspirations, as well as specific projections. These goals and projections
are considered forward-looking statements and are based on management's beliefs,
as well as certain assumptions made by management. Forward-looking statements
involve risks and uncertainties which may cause actual results to differ
materially from the forward-looking statements. In addition to any assumptions
and other factors that are referred to specifically in connection with these
statements, other factors that could cause actual results to differ materially
from those indicated in any forward-looking statements include, among others:
factors generally affecting operations, such as unusual weather conditions,
unscheduled generation outages; unusual maintenance or repairs, unanticipated
changes in fuel costs, environmental incidents, or system constraints;
legislative and regulatory initiatives regarding deregulation and restructuring
of the industry; increased competition in the electric and gas utility
environment; challenges related to Year 2000 readiness; regulatory factors;
changes in accounting principles or policies; adverse political, legal, or
economic conditions; changing market conditions; success of efforts to invest in
and develop new opportunities in non-traditional business; availability or cost
of capital; employee workforce factors; legal and regulatory delays and other
obstacles associated with mergers, acquisitions, and investments in joint
ventures; costs and effects of legal and administrative proceedings; changes in
legislative requirements; and other risks. The SEC's rules do not require
forward-looking statements to be revised or updated, and Cinergy does not intend
to do so.
FINANCIAL CONDITION
Recent Developments
Cinergy
Acquisitions During the first quarter of 1999, Cinergy, through its
international subsidiaries, invested an additional $41 million in international
unconsolidated subsidiaries.
Competitive Pressures
Cinergy, CG&E, PSI, and ULH&P
Ohio As discussed in the 1998 Form 10-K, electric restructuring legislation was
reintroduced in 1999 in both houses of the Ohio General Assembly. These
companion bills propose to give choice to all retail electric customers by
January 1, 2001. As written, the legislation has not gained consensus among the
stakeholders.
The Ohio Senate Ways and Means Committee has scheduled a vote on a deregulation
bill during the second quarter of 1999 with a full senate vote scheduled if a
bill is reported from committee. It is uncertain whether these efforts will
produce legislation in Ohio in 1999.
<PAGE>
Indiana As discussed in the 1998 Form 10-K, legislation by a large group of
industrial customers was introduced into the Indiana legislature in January
1999. This legislation did not pass in the 1999 session of the Indiana General
Assembly, which came to a close on April 29, 1999.
Regulatory Matters
Cinergy and PSI
Coal Contract Buyout Costs See Note 10 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Environmental Issues
Cinergy, CG&E, and PSI
Ozone Transport Rulemaking As discussed in the 1998 Form 10-K, in October 1998,
the EPA finalized its Ozone Transport Rule (or NOx SIP Call). It applies to 22
states in the eastern half of the US, including the three states in which the
Cinergy electric utilities operate, and also proposes a model NOx trading
program. This rule recommends that states reduce NOx emissions from primarily
industrial and utility sources to a certain limit by May 2003. The EPA gave the
affected states until September 30, 1999, to incorporate utility NOx reductions
with a trading program into their SIPs. Ohio, Indiana, a number of other states,
and various industry groups, including some of which Cinergy is a member, filed
legal challenges to the NOx SIP Call in late 1998. Ohio and Indiana have also
provided preliminary indications that they will seek fewer NOx reductions from
the utility sector in their implementing regulations than the EPA has budgeted
in its rulemaking.
On April 30, 1999, the EPA made an affirmative technical determination on the
February 1998 northeast state CAAA Section 126 petitions seeking to reduce ozone
in the eastern US. By affirming these Section 126 petitions the EPA makes a
finding that the named Midwest stationary sources (including all of Cinergy's
facilities) are significantly contributing to ozone problems in the northeast
for both the one- and eight-hour ozone standard. The EPA has stated that the
Section 126 petitions and the NOx SIP call requirements should be coordinated.
Therefore, the EPA will defer fully granting the relief sought by petitioners
until the affected states file their proposed SIPs in September 1999.
Ambient Air Standards and Regional Haze As discussed in the 1998 Form 10-K, in
1997, the EPA revised the National Ambient Air Quality Standards for ozone and
fine particulate matter and was scheduled to finalize new regional haze rules by
the summer of 1999. It is currently anticipated that the new ozone standard will
not require additional utility NOx reductions beyond those resulting from the
NOx SIP Call discussed above.
The EPA finalized the new regional haze rules on April 22, 1999. These rules
established planning and emission reduction timelines for states to use to
improve visibility in national parks throughout the US. The ultimate effect of
the new regional haze rules could be requirements for newer and cleaner
technologies and additional controls on conventional particulates and/or
reductions in SO2 and NOx emissions from utility sources. If more utility
emissions reductions are required, the compliance cost could be significant. The
outcome or effects of the states' determination cannot currently be predicted.
Air Toxics As discussed in the 1998 Form 10-K, in November 1998, the EPA
finalized its Mercury ICR. Pursuant to the ICR, all generating units must
provide detailed information about coal use and mercury content. The EPA has
since selected about 100 generating units for one-time stack sampling, including
Cinergy's Gibson Unit No. 3 and the Wabash River Repowering Project. The EPA is
planning to make its regulatory determination on the need for additional
regulation by the fourth quarter of 2000. If more air toxics regulations are
issued, the compliance cost could be significant. The outcome or effects of the
EPA's determination cannot currently be predicted.
MGP Sites See Note 6 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standards See Note 7 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Market Risk Sensitive Instruments and Positions
Cinergy, CG&E, and PSI
Energy Commodities Sensitivity The Company markets and trades electricity,
natural gas, and other energy-related products. The Company utilizes
over-the-counter forward and option contracts for the purchase and sale of
electricity and also trades exchange-traded futures contracts. See Notes 4 and 5
of the "Notes to Financial Statements" in "Part I. Financial Information" for
the Company's accounting policies for certain derivative instruments. The
Company's market risks have not changed materially from the market risks
reported in the 1998 Form 10-K.
Cinergy
Exchange Rate Sensitivity The Company utilizes foreign exchange forward
contracts and currency swaps to hedge certain of its net investments in foreign
operations. See Notes 4 and 5 of the "Notes to Financial Statements" in "Part I.
Financial Information" for the Company's accounting policies for certain
derivative instruments. The Company's market risks have not changed materially
from the market risks reported in the 1998 Form 10-K.
Cinergy, CG&E, PSI, and ULH&P
Interest Rate Sensitivity The Company's net exposure to changes in interest
rates primarily consists of debt instruments with floating interest rates that
are benchmarked to various market indices. To manage the Company's exposure to
fluctuations in interest rates and to lower funding costs, the Company
constantly evaluates the use of, and has entered into, interest rate swaps. See
Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial
Information" for the Company's accounting policies for certain derivative
instruments. The Company's market risks have not changed materially from the
market risks reported in the 1998 Form 10-K.
CAPITAL RESOURCES AND REQUIREMENTS
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt For information regarding recent issuances and redemptions of
long-term debt securities, see Notes 2 and 3 of the "Notes to Financial
Statements" in "Part I. Financial Information."
As of April 30, 1999, CG&E and PSI have remaining state regulatory authority for
long-term debt issuance of $200 million and $30 million, respectively.
<PAGE>
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt Obligations representing notes payable and other short-term
obligations (excluding notes payable to affiliated companies) at March 31, 1999,
were as follows:
Cinergy
Established
Lines Outstanding
(in millions)
Cinergy
Committed lines
Acquisition line $ 160 $ 160
Revolving line 600 -
Commercial paper - 336
Uncommitted line 45 83*
Utility subsidiaries
Committed lines 215 -
Uncommitted lines 410 180
Pollution control notes 267 267
Non-utility subsidiary 130 27
------ ------
Total $1,827 $1,053
* Excess over Established Line represents amount sold by dealers to other
investors.
CG&E
Established
Lines Outstanding
(in millions)
Committed lines $ 85 $ -
Uncommitted lines 215 105
Pollution control notes 184 184
---- ----
Total $484 $289
PSI
Established
Lines Outstanding
(in millions)
Committed lines $130 $ -
Uncommitted lines 195 75
Pollution control notes 83 83
---- ----
Total $408 $158
Cinergy, CG&E, and PSI
Cinergy's committed lines are comprised of an acquisition line and a revolving
line. The established revolving line also provides credit support for Cinergy's
commercial paper program, which is limited to a maximum principal amount of $400
million. The proceeds from the commercial paper sales were used for general
corporate purposes.
The established committed lines for CG&E and PSI each include $75 million
designated as backup for certain of the uncommitted lines at March 31, 1999.
CG&E and PSI also have the capacity to issue commercial paper that must be
supported by committed lines of the respective company. Neither CG&E nor PSI
issued commercial paper during the first quarter of 1999.
Both CG&E and PSI have issued variable rate pollution control notes. Holders of
these pollution control notes have the right to put their notes on any business
day. Accordingly, these issuances are reflected in the Consolidated Balance
Sheets as "Notes payable and other short-term obligations."
Cinergy
Global Resources established a $100 million revolving credit agreement in 1998,
which was due to expire in March 1999 and has been extended to June 29, 1999.
Cinergy, CG&E, PSI, and ULH&P
Year 2000 The Year 2000 issue generally exists because many computer systems and
applications, including those embedded in equipment and facilities, use
two-digit rather than four-digit date fields to designate an applicable year. As
a result, the systems and applications may not properly recognize dates
including and beyond the year 2000 or accurately process data in which such
dates are included, potentially causing data miscalculations and inaccuracies or
operational malfunctions and failures, which could materially affect a
business's financial condition, results of operations, and cash flows.
Cinergy has established a centrally-managed, company-wide initiative, known as
the Cinergy Year 2000 Readiness Program, to identify, evaluate, and address Year
2000 issues. The Cinergy Year 2000 Readiness Program, which began in the fourth
quarter of 1996, is generally focused on three elements that are integral to
this initiative: (1) business continuity, (2) risk management, and (3)
regulatory compliance. Business continuity includes providing reliable electric
and gas supply and service in a safe and cost-effective manner. This element
encompasses mission-critical generation, transmission, and distribution systems
and related infrastructure, as well as operational and financial IT systems and
applications, end-user computing resources, and building systems (such as
security, elevator, and heating and cooling systems). Risk management includes a
review of the Year 2000 readiness efforts of Cinergy's critical suppliers, key
customers and other principal business partners, and, as appropriate, the
development of joint business support, contingency plans, and the inclusion of
Year 2000 concerns as a regular part of the due diligence process in any new
business venture. Regulatory compliance includes communications with regulatory
agencies, other utilities, and various industry groups. While this initiative is
broad in scope, it has been structured to identify and prioritize efforts for
mission-critical electric and gas systems and services and key business
partners.
Under the Cinergy Year 2000 Readiness Program, Cinergy has established a target
date of June 30, 1999, for the remediation and testing of its mission-critical
generation, transmission, and distribution systems (gas and electric). An
innovative remediation and testing effort which Cinergy has initiated involves
operating several electric-generating units with post Year 2000 dates. Cinergy's
experience has been that those units have continued to operate without any
material adverse result relating to a Year 2000 issue. Cinergy's progress to
date ranges from approximately 95% regarding IT systems to approximately 87%
regarding assessment of critical suppliers.
Cinergy has also reviewed its existing contingency and business continuity plans
and modified them in light of the Year 2000 issue. Contingency planning to
maintain and restore service in the event of natural and other disasters
(including software- and hardware-related problems) has been part of Cinergy's
standard operation for many years, and Cinergy is working to leverage this
experience in the review of existing plans to address Year 2000-related
challenges. These reviews have assessed the potential for business disruption in
various scenarios, including the most reasonably likely worst-case scenario, and
to provide for key operational back up, recovery, and restoration alternatives.
Cinergy cannot guarantee that third parties on whom it depends for essential
goods and services (those where the interruption of the supply of such goods and
services could lead to issues involving the safety of employees, customers, or
the public; the continued reliable delivery of gas and/or electricity; and the
ability to comply with applicable laws or regulations) will convert their
mission-critical systems and processes in a timely manner. Failure or delay by
any of these third parties could significantly disrupt business. However, to
address this issue, Cinergy has established a supplier compliance program, and
is working with its critical suppliers in an effort to minimize such risks.
In addition, Cinergy is coordinating its findings and other issues with other
utilities and various industry groups via the Electric Power Research Institute
Year 2000 Embedded Systems Project and the Year 2000 Readiness Assessment
Program of the NERC, acting at the request of the DOE. The DOE has asked NERC to
report on the integrity of the transmission system for North America and to
coordinate and assess the preparation of the electric systems in North America
for the Year 2000. NERC submitted its initial quarterly status report and
coordination plan to the DOE in September 1998, and a second quarterly status
report for the fourth quarter of 1998 was submitted on January 11, 1999. A third
quarterly status report for the first quarter of 1999 was submitted on April 30,
1999.
Cinergy currently estimates that the total cost for the inventory, assessment,
remediation, testing, and upgrading of its systems as a result of the Year 2000
effort is approximately $13 million. Approximately $12 million in expenses have
been incurred through March 31, 1999, for such things as external labor, for
hardware and software upgrades, and for Cinergy employees who are dedicated
full-time to the Cinergy Year 2000 Readiness Program. The timing of these
expenses may vary and is not necessarily indicative of readiness efforts or
progress to date. Cinergy anticipates that a portion of its Year 2000 expenses
will not be incremental costs, but rather, will represent the redeployment of
existing IT resources. Since its formation, Cinergy has incurred, and will
continue to incur, significant capital improvement costs related to planned
system upgrades or replacements required in the normal course of business. These
costs have not been accelerated as a result of the Year 2000 issue.
The above information is based on Cinergy's current best estimates, which were
derived using numerous assumptions of future events, including the availability
and future costs of certain technological and other resources, third-party
modification actions, and other factors. Given the complexity of these issues
and possible unidentified risks, actual results may vary materially from those
anticipated and discussed above. Specific factors that might cause such
differences include, among others, the ability to locate and correct all
affected computer code, the timing and success of remedial efforts of
third-party suppliers, and similar uncertainties.
The above information is a Year 2000 Readiness Disclosure pursuant to the
Federal Year 2000 Information and Readiness Disclosure Act.
Cinergy
Other Commitments At March 31, 1999, Cinergy had issued $297 million in
guarantees primarily related to the energy marketing and trading activities of
its subsidiaries and affiliates. In addition, Cinergy had guaranteed $258
million of the debt securities of its subsidiaries and affiliates.
<PAGE>
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "Item 1. Financial Statements" in "Part I. Financial
Information."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Cinergy, CG&E, PSI, and ULH&P
Reference is made to the "Market Risk Sensitive Instruments and Positions"
section in "Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations" in "Part I. Financial Information" and Notes 4 and 5
of the "Notes to Financial Statements" in "Part I. Financial Information."
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Manufactured Gas Plant Sites
See Note 6 of the "Notes to Financial Statements" in Part I. Financial
Information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cinergy
The annual meeting of shareholders of Cinergy was held April 21, 1999, in
Cincinnati, Ohio.
At the meeting, six Class II directors were elected to the board of Cinergy to
serve three-year terms, expiring in 2002, as set forth below:
Votes Votes
Class II For Withheld
Melvin Perelman, Ph.D. 128,436,454 2,555,756
Thomas E. Petry 128,566,730 2,425,480
Jackson H. Randolph 128,212,529 2,779,681
Mary L. Schapiro 128,329,336 2,662,874
Philip R. Sharp, Ph.D. 128,557,852 2,434,358
Dudley S. Taft 128,586,398 2,405,812
Also at the meeting, the following matters were submitted to a vote of security
holders:
Votes Votes Votes
Item For Against Abstain
Approval of Amended and Restated Cinergy
Corp. Retirement Plan for Directors 107,613,574 21,666,413 1,712,217
Approval of Cinergy Corp. Directors'
Equity Compensation Plan 112,705,936 16,438,145 1,848,122
Adoption of Amendment to Article III,
Section 3.1, of the Company's By-laws 127,811,378 4,740,599 1,979,187
CG&E
(a) In lieu of the annual meeting of shareholders of CG&E, a resolution was
duly adopted via unanimous written consent of CG&E's sole shareholder,
effective April 20, 1999.
(b) The following members of the Board of Directors were elected via unanimous
written consent of the sole shareholder of CG&E, in lieu of its annual
meeting, for one-year terms expiring in 2000:
Jackson H. Randolph
James E. Rogers
James L. Turner
PSI
(a) The annual meeting of shareholders of PSI was held April 21, 1999, in
Cincinnati, Ohio.
(b) Proxies were not solicited for the annual meeting, at which the Board of
Directors was re-elected in its entirety (see (c) below).
(c) The following members of the Board of Directors were unanimously re-elected
at the annual meeting for one-year terms expiring in 2000:
James K. Baker
Michael G. Browning
John A. Hillenbrand II
John M. Mutz
Jackson H. Randolph
James E. Rogers
ULH&P
Omitted pursuant to Instruction H(2)(b).
ITEM 5. OTHER INFORMATION
Cinergy and PSI
On April 20, 1999, the Company announced that John M. Mutz will retire May 31,
1999, as president of PSI. Mr. Mutz has served as president of PSI since October
1993.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits identified with a pound sign (#) are being filed herewith by the
registrant identified in the exhibit discussion below and are incorporated
herein by reference with respect to any other designated registrant.
Exhibits not so identified are filed herewith:
Exhibit
Designation Nature of Exhibit
Cinergy
3-a By-laws of Cinergy, as amended on April 21, 1999.
4-a Indenture between Cinergy and Fifth Third Bank, as Trustee, dated as
of April 15, 1999.
Cinergy and PSI
4-b #Fifty-second Supplemental Indenture between PSI and LaSalle National
Bank, as Trustee, dated as of April 30, 1999. (Exhibit to PSI's March
31, 1999, Form 10-Q in File No. 1-3543.)
4-c #Sixth Supplemental Indenture between PSI and Fifth Third Bank, as
Trustee, dated as of April 30, 1999. (Exhibit to PSI's March 31, 1999,
Form 10-Q in File No. 1-3543.)
Cinergy, CG&E, and PSI
10-a #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Cheryl M.
Foley. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
<PAGE>
Exhibit
Designation Nature of Exhibit
10-b #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and William J.
Grealis. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-c #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and M. Stephen Harkness. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-d #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Donald B.
Ingle, Jr. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-e #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Madeleine W.
Ludlow. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-f #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and William L. Sheafer. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-g #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and John P. Steffen. (Exhibit to Cinergy's
March 31, 1999, Form 10-Q in File No. 1-11377.)
10-h #Employment Agreement dated February 16, 1999, between Cinergy,
Cinergy Services, Inc., CG&E, PSI, and James L. Turner. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-i #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Charles J.
Winger. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-j #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Larry E.
Thomas. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in electronic submission only)
<PAGE>
The following reports on Form 8-K were filed during the quarter ended March 31,
1999.
Date of Report Item Filed
Cinergy
December 31, 1998 Item 5. Other Events
Item 7. Financial Statements and Exhibits
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make
the information presented not misleading. In the opinion of Cinergy, CG&E, PSI,
and ULH&P, these statements reflect all adjustments (which include normal,
recurring adjustments) necessary to reflect the results of operations for the
respective periods. The unaudited statements are subject to such adjustments as
the annual audit by independent public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: May 13, 1999 /s/Bernard F. Roberts
---------------------------------------
Bernard F. Roberts
Duly Authorized Officer
and
Chief Accounting Officer
BY-LAWS
OF
CINERGY CORP.
Adopted: October 24, 1994
Amended: January 25, 1996
Amended: December 18, 1997
Amended: April 22, 1998
Amended: October 15, 1998
Amended: April 21, 1999
#43938
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Offices and Headquarters
Section 1.1 Offices...................................................... 1
1.2 Headquarters................................................. 1
ARTICLE II
Stockholders
Section 2.1 Annual Meeting............................................... 2
2.2 Special Meetings............................................. 4
2.3 Notice of Meetings........................................... 4
2.4 Quorum....................................................... 5
2.5 Voting....................................................... 5
2.6 Presiding Officer and Secretary.............................. 6
2.7 Proxies...................................................... 6
2.8 List of Stockholders......................................... 7
ARTICLE III
Directors
Section 3.1 Number of Directors.......................................... 8
3.2 Election and Term of Directors............................... 8
3.3 Vacancies and Newly Created Directorships..................... 10
3.4 Resignation................................................... 11
3.5 Meetings...................................................... 11
3.6 Quorum and Voting............................................. 12
3.7 Written Consent of Directors in Lieu of a Meeting............. 12
3.8 Compensation.................................................. 12
3.9 Contracts and Transactions Involving Directors................ 12
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers........................................ 13
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office................................ 15
5.2 The Chairman of the Board..................................... 16
5.3 Vice-Chairman................................................. 16
5.4 Chief Executive Officer....................................... 16
5.5 The President................................................. 17
5.6 The Vice-Presidents........................................... 17
5.7 The Secretary................................................. 17
5.8 The Treasurer................................................. 18
5.9 The Comptroller............................................... 19
5.10 Compensation and Bond......................................... 20
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees and Agents.. 20
6.2 Advances for Litigation Expenses.............................. 22
6.3 Indemnification Nonexclusive.................................. 23
6.4 Indemnity Insurance........................................... 23
6.5 Definitions................................................... 24
ARTICLE VII
Common Stock
Section 7.1 Certificates.................................................. 25
7.2 Transfers of Stock............................................ 25
7.3 Lost, Stolen or Destroyed Certificates........................ 25
7.4 Stockholder Record Date....................................... 26
7.5 Beneficial Owners............................................. 27
ARTICLE VIII
Seal
Section 8.1 Seal........................................................... 27
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice............................................... 28
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year................................................... 28
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc........................................ 29
ARTICLE XII
Amendments
Section 12.1 Amendments................................................... 29
ARTICLE XIII
Dividends
Section 13.1 Dividends.................................................... 30
<PAGE>
BY-LAWS
OF
CINERGY CORP. (THE "CORPORATION")
ARTICLE I
Offices and Headquarters
Section 1.1 Offices. The location of the Corporation's principal office
shall be in the City of Cincinnati, County of Hamilton, State of Ohio. The
Corporation may, in addition to the aforesaid principal office, establish and
maintain an office or offices elsewhere in Delaware, Ohio or Indiana or in such
other states and places as the Board of Directors may from time to time find
necessary or desirable, at which office or offices the books, documents, and
papers of the Corporation may be kept. Section 1.2 Headquarters. Subject to the
sentence next following, the Corporation's headquarters and executive offices,
shall be located in the City of Cincinnati, County of Hamilton, State of Ohio.
The location of the Corporation's headquarters and executive offices may be
changed from the City of Cincinnati, County of Hamilton, State of Ohio only by
the affirmative vote of 80% of the full Board of Directors of the Corporation
and not by the vote of any committee of the Board of Directors. As used in these
By-Laws, the term "the full Board of Directors" shall mean all directors then in
office together with any vacancies, however created. For the avoidance of doubt
and as an example only, if the Board of Directors consists of 17 members and two
vacancies exist, the affirmative vote of 14 of the 15 members of the
Corporation's Board of Directors then in office would be required to authorize a
change in location of the Corporation's headquarters and executive offices. The
headquarters and executive offices of the Corporation's subsidiary, PSI Energy,
Inc., shall be located in the City of Plainfield, Indiana and the headquarters
and executive offices of the Corporation's subsidiary, The Cincinnati Gas &
Electric Company, shall be located in the City of Cincinnati, Ohio.
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation for the election of directors and for the transaction of any other
proper business shall be held at such time and date in each year as the Board of
Directors may from time to time determine. The annual meeting in each year shall
be held at such hour on said day and at such place within or without the State
of Delaware as may be fixed by the Board of Directors, or if not so fixed, at
the principal business office of the Corporation in the City of Cincinnati,
County of Hamilton, State of Ohio.
No business may be transacted at an annual meeting of stockholders, other
than business that is either: (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof); (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof); or (c) otherwise properly brought before the
annual meeting by any stockholder of the Corporation: (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section
2.1 and on the record date for the determination of stockholders entitled to
vote at such annual meeting; and (ii) who complies with the notice procedures
set forth in this Section 2.1.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) calendar days nor more than one hundred
twenty (120) calendar days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30)
calendar days before or after such anniversary date, notice by the stockholder
in order to be timely must be so received not later than the close of business
on the tenth (10th) calendar day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure of the date of
the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and record address of such stockholder;
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder; (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business; and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
Notwithstanding anything to the contrary in the By-Laws, no business shall
be conducted at the annual meeting of stockholders except business brought
before the annual meeting in accordance with the procedures set forth in this
Section 2.1; provided, however, that once business has been properly brought
before the annual meeting in accordance with such procedures, nothing in this
Section 2.1 shall be deemed to preclude discussion by any stockholder of any
such business. If the presiding officer of an annual meeting determines that
business was not properly brought before the annual meeting in accordance with
the foregoing procedures, the presiding officer shall declare to the meeting
that the business was not properly brought before the meeting and such business
shall not be transacted.
Section 2.2 Special Meetings. A special meeting of the stockholders of the
Corporation entitled to vote on any business to be considered at any such
meeting may be called by the Chairman of the Board or the President or by a
majority of the members of the Board of Directors then in office, acting with or
without a meeting, or by the persons who hold 50% of all shares outstanding and
entitled to vote thereat upon notice in writing, stating the time, place and
purpose of the special meeting. The business transacted at the special meeting
shall be confined to the purposes and objects stated in the call.
Section 2.3 Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, unless notice is waived in writing by
all stockholders entitled to vote at the meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
<PAGE>
Unless otherwise provided by law, and except as to any stockholder duly
waiving notice, the written notice of any meeting shall be given personally or
by mail, not less than 10 days nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, notice
shall be deemed given when deposited in the mail, postage prepaid, directed to
the stockholder at his or her address as it appears on the records of the
Corporation.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation or by these By-Laws in respect of the vote
required for a specified action, at any meeting of stockholders the holders of a
majority of the outstanding stock entitled to vote thereat, either present, in
person or represented by proxy, shall constitute a quorum for the transaction of
any business, but the stockholders present, although less than a quorum, may
adjourn the meeting to another time or place and, except as provided in the last
paragraph of Section 2.3 of these By-Laws, notice need not be given of the
adjourned meeting.
Section 2.5 Voting. Whenever directors are to be elected at a meeting, they
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote thereon. Whenever any
corporate action, other than the election of directors, is to be taken by vote
of stockholders at a meeting, it shall, except as otherwise required by law or
by the Certificate of Incorporation or by these By-Laws, be authorized by the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote thereon.
Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one (1)
vote for each share of such stock standing in the name of such holder on the
stock ledger of the Corporation on the record date for the determination of the
stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for directors
or the vote on any other matter at a meeting shall be by written ballot, but
otherwise the method of voting and the manner in which votes are counted shall
be discretionary with the presiding officer at the meeting.
Section 2.6 Presiding Officer and Secretary. At every meeting of
stockholders, and where the offices of the Chairman of the Board and the Chief
Executive Officer are held by different individuals, the Chief Executive
Officer, or, in his or her absence, the Chairman of the Board, or, in his or her
absence, the appointee of the meeting, shall preside. The Secretary, or, in his
or her absence an Assistant Secretary, or if none be present, the appointee of
the presiding officer of the meeting, shall act as secretary of the meeting.
Section 2.7 Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
or her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. Every proxy
shall be signed by the stockholder or by his duly authorized attorney. A
stockholder may authorize another person or persons to act for him as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission if such transmission is submitted with information
from which it may be determined that the transmission was authorized by the
stockholder.
Section 2.8 List of Stockholders. The officer who has charge
of the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE III
Directors
Section 3.1 Number of Directors. The Board of Directors shall consist of a
number of directors not less than seven (7) and not more than twenty-three (23)
as determined by a vote of not less than 75% of the full Board of Directors
("Supermajority Vote"). Any such determination made by the Board of Directors
shall continue in effect unless and until changed by the Board of Directors by
Supermajority Vote, but no such change shall affect the term of any director
then in office.
Section 3.2 Election and Term of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors. Except as may be required by applicable law, no person who is, at the
time of nomination, 70 years of age or older shall be eligible for election as a
director. Nominations of persons as candidates for election as directors of the
Corporation may be made at a meeting of stockholders (i) by or at the direction
of the Board of Directors acting by Supermajority Vote (or by a unanimous vote
of the remaining directors if a Supermajority Vote is not obtainable because the
number of vacancies on the Board of Directors); or (ii) by any stockholder of
the Corporation entitled to vote for the election of directors at such meeting
who complies with the notice procedures set forth herein. Any nomination other
than those governed by clause (i) of the preceding sentence shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal office of the Corporation in the State of Ohio not less than 50
days prior to the meeting; provided, however, that if less than 60 days' notice
or prior public disclosure of the date of the meeting is given to stockholders
or made public, to be timely notice by a stockholder must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice to the Secretary shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election as director: (i)
the name, age, business address, and residence address of such person; (ii) the
principal occupation or employment of such person; (iii) the class and number of
any shares of capital stock of the Corporation that are beneficially owned by
such person; and (iv) any other information relating to such person that is
required to be disclosed in solicitations for proxies for the election of
directors pursuant to any then existing rules or regulations promulgated under
the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving notice: (i) the name and record address of such stockholder; (ii) the
class and number of shares of capital stock of the Corporation that are
beneficially owned by such stockholder, and (iii) the period of time such
stockholder has held such shares. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director. No person otherwise eligible for election as a director shall be
eligible for election as a director unless nominated as set forth herein.
Commencing on October 24, 1994 (the "Classification Date") of the Board of
Directors of the Corporation, the terms of office of the Board of Directors
shall be divided into three (3) classes, Class I, Class II and Class III, as
determined by the Board of Directors. All classes shall be as nearly equal in
number as possible.
The terms of office of directors classified shall be as
follows: (1) that of Class I shall expire at the annual meeting of stockholders
that occurs within the first year after the Classification Date, (2) that of
Class II shall expire at the annual meeting of stockholders that occurs within
the second year after the Classification Date, and (3) that of Class III shall
expire at the annual meeting of stockholders that occurs within the third year
after the Classification Date. At each annual meeting of stockholders after the
Classification Date, the successors to directors whose terms shall expire shall
be elected to serve from the time of election and qualification until the third
annual meeting following election and until a successor shall have been elected
and qualified or until his earlier resignation, removal from office or death. As
being under 70 years of age constitutes a continuing qualification for service
on the Board of Directors, any director who reaches the age of 70 years while in
office shall, except as limited by applicable law, promptly resign from the
Corporation's Board of Directors.
Section 3.3 Vacancies and Newly Created Directorships.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by election at a meeting of
stockholders. Except as otherwise provided by law, and notwithstanding the
provision of Section 3.6, the remaining directors, whether or not constituting a
majority of the whole authorized number of directors, may, by not less than a
Supermajority Vote (or by a unanimous vote of the remaining directors if a
Supermajority Vote is not obtainable because of the number of vacancies on the
Board of Directors) fill any vacancy in the Board, however arising, for the
unexpired term thereof. Any person elected to fill a vacancy in the Board shall
hold office until the expiration of the term of office for the class to which he
or she is elected and until a successor is elected and qualified or until his or
her earlier resignation, removal from office or death.
<PAGE>
Section 3.4 Resignation. Any director may resign at any time upon written
notice to the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof, and
the acceptance of such resignation, unless required by the terms thereof, shall
not be necessary to make such resignation effective.
Section 3.5 Meetings. Meetings of the Board of Directors,
regular or special, may be held at any place within or without the State of
Delaware. Members of the Board of Directors, or of any committee designated by
the Board, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting. An
annual meeting of the Board of Directors shall be held after each annual
election of directors. If such election occurs at an annual meeting of
stockholders, the annual meeting of the Board of Directors shall be held at the
same place and immediately following such meeting of stockholders, and no notice
thereof need be given. The Board of Directors may fix times and places for
regular meetings of the Board and no notice of such meetings need be given. A
special meeting of the Board of Directors shall be held whenever called by the
Chairman of the Board, the President or by the written request of at least two
(2) members of the Board of Directors, at such time and place as shall be
specified in the notice or waiver thereof. Notice of each special meeting shall
be given by the Secretary or by a person calling the meeting to each director in
writing, through the mail, not later than the second day before the meeting, or
personally served or by telephone, telecopy, telegram, cablegram or radiogram,
in each such cases, not later than the day before the meeting, and such notice
shall be deemed to be given at the time when the same shall be transmitted.
Section 3.6 Quorum and Voting. A majority of the full Board of Directors
shall constitute a quorum for the transaction of business, but, if there be less
than a quorum at any meeting of the Board of Directors, a majority of the
directors present may adjourn the meeting from time to time, and no further
notice thereof need be given other than announcement at the meeting which shall
be so adjourned. Except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws (including, without limitation, where any
Supermajority Vote or any other vote in excess of a majority is required), the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 3.7 Written Consent of Directors in Lieu of a Meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or of such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 3.8 Compensation. Each director of the Corporation (other than
directors who are salaried officers of the Corporation or any of its
subsidiaries) shall be entitled to receive as compensation for services such
reasonable compensation, which may include pension, disability and death
benefits, as may be determined from time to time by the Board of Directors.
Reasonable compensation may also be paid to any person other than a director
officially called to attend any such meeting.
Section 3.9 Contracts and Transactions Involving Directors. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his, her
or their votes are counted for such purpose, if: (1) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers. The Board of Directors may, by
resolution adopted by a majority of the Board, designate from time to time
(subject to Article V hereof) no less than three (3) and no more than six (6) of
their number to constitute an Executive Committee, and may delegate to such
committee power to authorize the seal of the Corporation to be affixed to all
papers which may require it and to exercise in the intervals between the
meetings of the Board of Directors the powers of the Board in the management of
the business and affairs of the Corporation to the fullest extent permitted by
Section 141(c)(1) of the Delaware General Corporation Law; provided, however,
that the Executive Committee shall not have the power or authority to take any
action for which a Supermajority Vote or other vote in excess of a majority of
the Board of Directors is required. Each member of the Executive Committee shall
continue to be a member thereof only during the pleasure of a majority of the
full Board of Directors.
The Executive Committee may act by a majority of its members at a meeting
or by a writing signed by all of its members.
All action by the Executive Committee shall be reported to the Board of
Directors at its meeting next succeeding such action.
Non-employee members of such Executive Committee shall be entitled to
receive such fees and compensation as the Board of Directors may determine.
The Board of Directors may also appoint a Finance Committee, a
Committee on Directors, an Audit Committee, a Public Policy Committee and a
Compensation Committee and may also appoint such other standing or temporary
committees from time to time as they may see fit, delegating to such committees
all or any part of their own powers (subject to the provisions of these
By-Laws); provided, however, that any compensation or benefits to be paid to an
executive officer who is also a director must be approved by the Board of
Directors. The members of such committees shall be entitled to receive such fees
as the Board may determine.
The Board of Directors shall not amend, modify, vary or waive
any of the terms of the Amended and Restated Agreement and Plan of
Reorganization by and among The Cincinnati Gas & Electric Company, PSI
Resources, Inc., PSI Energy, Inc., the Corporation, Cinergy Corp., an Ohio
corporation, and Cinergy Sub, Inc. dated as of December 11, 1992, as amended and
restated as of July 2, 1993 and as of September 10, 1993 and as further amended
as of June 20, 1994, as of July 26, 1994 and as of September 30, 1994 (the
"Merger Agreement") other than by a Supermajority Vote of the Board of
Directors.
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office. The executive
officers of the Corporation, shall consist of a Chairman of the Board, a
Vice-Chairman, a Chief Executive Officer, a President, one or more
Vice-Presidents, a Secretary, a Treasurer and a Comptroller, all of whom shall
be elected by the Board of Directors by a Supermajority Vote, and shall hold
office for one (1) year and until their successors are chosen and qualified. Any
number of such offices may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. Any
vacancy occurring in the office of the Chairman, Chief Executive Officer or
President shall be filed by Supermajority Vote of the Board of Directors. The
Chairman, Chief Executive Officer or President shall be subject to removal
without cause only by Supermajority Vote of the Board of Directors at a special
meeting of the Board of Directors called for that purpose.
The Board of Directors may appoint, and may delegate power to
appoint, such other non-executive officers, agents and employees as it may deem
necessary or proper, who shall hold their offices or positions for such terms,
have such authority and perform such duties as may from time to time be
determined by or pursuant to authorization of the Board of Directors.
Section 5.2 The Chairman of the Board. The Chairman of the
Board shall be a director and shall preside at all meetings of the Board of
Directors and, in the absence or inability to act of the Chief Executive
Officer, meetings of stockholders and shall, subject to the Board's direction
and control, be the Board's representative and medium of communication, and
shall perform such other duties as may from time-to-time be assigned to the
Chairman of the Board by Supermajority Vote of the Board of Directors. The
Chairman of the Board shall direct the long-term strategic planning process of
the Corporation and shall also lend his or her expertise to the President, as
may be requested from time-to-time by the President. The Chairman shall be a
member of the Executive Committee.
Section 5.3 Vice-Chairman. The Vice-Chairman of the Board
shall be a director and shall preside at meetings of the Board of Directors in
the absence or inability to act of the Chairman of the Board or meetings of
stockholders in the absence or inability to act of the Chief Executive Officer
and the Chairman of the Board. The Vice-Chairman shall perform such other duties
as may from time-to-time be assigned to him or her by Supermajority Vote of the
Board of Directors. The Vice- Chairman shall be a member of the Executive
Committee and the Corporate Governance Committee.
Section 5.4 Chief Executive Officer. The Chief Executive
Officer shall be a director and shall preside at all meetings of the
stockholders, and, in the absence or inability to act of the Chairman of the
Board and the Vice-Chairman, meetings of the Board of Directors, and shall
submit a report of the operations of the Corporation for the fiscal year to the
stockholders at their annual meeting and from time-to-time shall report to the
Board of Directors all matters within his or her knowledge which the interests
of the Corporation may require be brought to their notice. The Chief Executive
Officer shall be the chairman of the Executive Committee and ex officio a member
of all standing committees. Where the offices of President and Chief Executive
Officer are held by different individuals, the President will report directly to
the Chief Executive Officer.
Section 5.5 The President. The President shall be the chief
operating officer of the Corporation. The President shall have general and
active management and direction of the affairs of the Corporation, shall have
supervision of all departments and of all officers of the Corporation, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect, and shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. All corporate officers and functions except those reporting to the
Chairman of the Board or the Chief Executive Officer shall report directly to
the President.
Section 5.6 The Vice-Presidents. The Vice-Presidents shall perform such
duties as the Board of Directors shall, from time to time, require. In the
absence or incapacity of the President, the Vice President designated by the
President or Board of Directors or Executive Committee shall exercise the powers
and duties of the President.
Section 5.7 The Secretary. The Secretary shall attend all meetings of the
Board of Directors, of the Executive Committee and any other committee of the
Board of Directors and of the stockholders and act as clerk thereof and record
all votes and the minutes of all proceedings in a book to be kept for that
purpose, and shall perform like duties for the standing committees when
required.
The Secretary shall keep in safe custody the seal of the
Corporation and, whenever authorized by the Board of Directors or the Executive
Committee, affix the seal to any instrument requiring the same.
The Secretary shall see that proper notice is given of all the
meetings of the stockholders of the Corporation and of the Board of Directors
and shall perform such other duties as may be prescribed from time to time by
the Board of Directors, the Chairman, the Chief Executive Officer, or the
President.
Assistant Secretaries. At the request of the Secretary, or in his or her
absence or inability to act, the Assistant Secretary or, if there be more than
one, the Assistant Secretary designated by the Secretary, shall perform the
duties of the Secretary and when so acting shall have all the powers of and be
subject to all the restrictions of the Secretary. The Assistant Secretaries
shall perform such other duties as may from time to time be assigned to them by
the President, the Secretary, or the Board of Directors.
Section 5.8 The Treasurer. The Treasurer shall be the
financial officer of the Corporation, shall keep full and accurate accounts of
all collections, receipts and disbursements in books belonging to the
Corporation, shall deposit all moneys and other valuables in the name and to the
credit of the Corporation, in such depositories as may be directed by the Board
of Directors, shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, the Chairman, the Chief Executive Officer, or the
President, taking proper vouchers therefor, and shall render to the President,
the Chief Executive Officer, the Chairman, and/or directors at all regular
meetings of the Board, or whenever they may require it, and to the annual
meeting of the stockholders, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation.
The Treasurer shall also perform such other duties as the
Board of Directors, the Chairman, the Chief Executive Officer, or the President
may from time to time require.
If required by the Board of Directors the Treasurer shall give
the Corporation a bond in a form and in a sum with surety satisfactory to the
Board of Directors for the faithful performance of the duties of his or her
office and the restoration to the Corporation in the case of his or her death,
resignation or removal from office of all books, papers, vouchers, money and
other property of whatever kind in his or her possession belonging to the
Corporation.
Assistant Treasurers. At the request of the Treasurer, or in his or her
absence or inability to act, the Assistant Treasurer or, if there be more than
one, the Assistant Treasurer designated by the Treasurer, shall perform the
duties of the Treasurer and when so acting shall have all the powers of and be
subject to all the restrictions of the Treasurer. The Assistant Treasurers shall
perform such other duties as may from time to time be assigned to them by the
President, the Treasurer, or the Board of Directors.
Section 5.9 The Comptroller. The Comptroller shall have control over all
accounts and records of the Corporation pertaining to moneys, properties,
materials and supplies. He or she shall have executive direction over the
bookkeeping and accounting departments and shall have general supervision over
the records in all other departments pertaining to moneys, properties, materials
and supplies. He or she shall have such other powers and duties as are incident
to the office of Comptroller of a corporation and shall be subject at all times
to the direction and control of the Board of Directors, the Chairman, the Chief
Executive Officer, the President, or a Vice President.
Assistant Comptrollers. At the request of the Comptroller, or in his or her
absence or inability to act, the Assistant Comptroller or, if there be more than
one, the Assistant Comptroller designated by the Comptroller, shall perform the
duties of the Comptroller and when so acting shall have all the powers of and be
subject to all the restrictions of the Comptroller. The Assistant Comptrollers
shall perform such other duties as may from time to time be assigned to them by
the President, the Comptroller, or the Board of Directors.
Section 5.10 Compensation and Bond. The compensation of the officers of the
Corporation shall be fixed by the Compensation Committee of the Board of
Directors, but this power may be delegated to any officer in respect of other
officers under his or her control. The Corporation may secure the fidelity of
any or all of its officers, agents or employees by bond or otherwise.
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees and Agents.
(A) Any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than any action or suit by or
in the right of the Corporation) by reason of the fact that he or she is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(specifically including employee benefit plans), shall be indemnified by the
Corporation, if, as and to the extent authorized by applicable law, against
expenses (specifically including attorney's fees), judgments, fines
(specifically including any excise taxes assessed on a person with respect to an
employee benefit plan) and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, suit or proceeding, if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner he or she
reasonably believed to be in and not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, he or she
had no reasonable cause to believe his or her conduct was unlawful.
(B) The Corporation shall, to the extent not prohibited by applicable law,
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director, officer, employee, or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, trustee, officer, employee, or agent of another corporation,
domestic or foreign, non-profit or for-profit, partnership, joint venture, trust
or other enterprise (specifically including employee benefit plans), against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation; provided that, no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(C) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in the paragraphs (A) or (B) of this
Section, or in defense of any claim, issue, or matter therein, he or she shall
be indemnified against expenses, specifically including attorneys' fees,
actually and reasonably incurred by him or her in connection therewith.
(D) Any indemnification under Paragraphs (A) and (B) of this Section,
unless ordered by a court, shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in such Paragraphs
(A) and (B). Such determination shall be made as follows: (1) the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit, or proceeding; (2) if the quorum described in
(D)(1) of this Section is not obtainable or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (3) by the stockholders.
Section 6.2 Advances for Litigation Expenses. Expenses
(including attorneys' fees) incurred by a director, officer, employee, or agent
of the Corporation in defending any civil, criminal, administrative or
investigative action, suit or proceeding, shall be paid by the Corporation as
they are incurred in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee, or agent: (1) to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VI; and (2) to cooperate reasonably with the
Corporation concerning the action, suit or proceeding.
Section 6.3 Indemnification Nonexclusive. The indemnification
provided by this Article shall not be exclusive of and shall be in addition to
any other rights granted to those seeking indemnification under the Certificate
of Incorporation, these By-Laws, any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office and
shall continue as to a person who has ceased to be a director, trustee, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
Section 6.4 Indemnity Insurance. The Corporation may purchase
and maintain insurance or furnish similar protection, including but not limited
to trust funds, letters of credit, or self-insurance, on behalf of or for any
person who is or was a director, officer, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, trustee,
officer, employee or agent of another corporation, domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her against such
liability under this Article. Insurance may be purchased from or maintained with
a person in which the Corporation has a financial interest.
Section 6.5 Definitions. For purposes of this Article: (1) a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall conclusively be deemed to have acted in a manner "not opposed to the
best interests of the Corporation"; (2) a person shall be deemed to have acted
in "good faith" and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their duties,
or on the advice of legal counsel for the Corporation or another enterprise or
on information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise; (3) the term "another enterprise" as used in this Article VI shall
mean any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent; and (4)
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, and agents.
<PAGE>
ARTICLE VII
Common Stock
Section 7.1 Certificates. Certificates for stock of the Corporation shall
be in such form as shall be approved by the Board of Directors and shall be
signed in the name of the Corporation by the Chairman or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary. Such certificates may be sealed with the seal of the
Corporation or a facsimile thereof. Any of or all the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
Section 7.2 Transfers of Stock. Transfers of stock shall be
made only upon the books of the Corporation by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates for
such stock properly endorsed. The Board of Directors shall have the power to
make all such rules and regulations, not inconsistent with the Certificate of
Incorporation and these By-Laws and the law, as the Board of Directors may deem
appropriate concerning the issue, transfer and registration of certificates for
stock of the Corporation. The Board of Directors or the Finance Committee may
appoint one (1) or more transfer agents or registrars of transfers, or both, and
may require all stock certificates to bear the signature of either or both.
Section 7.3 Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new stock certificate in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate or his or her legal representative to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. The Board of Directors may require such
owner to satisfy other reasonable requirements.
Section 7.4 Stockholder Record Date. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than sixty days prior to any other
action. Only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to give such consent, or to receive payment of such
dividend or other distribution, or to exercise such rights in respect of any
such change, conversion or exchange of stock, or to participate in such action,
as the case may be, notwithstanding any transfer of any stock on the books of
the Corporation after any record date so fixed.
If no record date is fixed by the Board of Directors, (l) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the date on which notice is given, or, if notice is waived by all
stockholders entitled to vote at the meeting, at the close of business on the
day next preceding the day on which the meeting is held and (2) the record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 7.5 Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VIII
Seal
Section 8.1 Seal. The seal of the Corporation shall be circular in form and
shall bear, in addition to any other emblem or device approved by the Board of
Directors, the name of the Corporation, the year of its incorporation and the
words "Corporate Seal" and "Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
<PAGE>
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice. Whenever notice is required to be given by
statute, or under any provision of the Certificate of Incorporation or these
By-Laws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. In the case of a stockholder, such waiver of notice may be signed by
such stockholder's attorney or proxy duly appointed in writing. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice.
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year. The Fiscal Year of the Corporation shall begin on
the first day of January and terminate on the thirty-first day of December each
year.
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc. The Board of Directors or the Finance
Committee may by resolution adopted at any meeting designate officers of the
Corporation who may in the name of the Corporation execute contracts, checks,
drafts, and orders for the payment of money in its behalf and, in the discretion
of the Board of Directors or the Finance Committee, such officers may be so
authorized to sign such contracts or checks singly without the necessity of
counter-signature.
ARTICLE XII
Amendments
Section 12.1 Amendments. Except as set forth below, these By-Laws may be
amended or repealed by the Board of Directors or by the affirmative vote of the
holders of a majority of the issued and outstanding common stock of the
Corporation, or by the unanimous written consent of the holders of the issued
and outstanding common stock of the Corporation.
Notwithstanding the foregoing paragraph, the affirmative vote
of the holders of at least 80% of the issued and outstanding shares of common
stock of the Corporation shall be required to amend, alter or repeal, or adopt
any provision inconsistent with, the requirements of Section 2.2, Section 3.1,
Section 3.2, Section 3.3 or this paragraph of Section 12.1 of these By-Laws, in
addition to any requirements of law and any provisions of the Certificate of
Incorporation, any By-law, or any resolution of the Board of Directors adopted
pursuant to the Certificate of Incorporation (and notwithstanding that a lesser
percentage may be specified by law, the Certificate of Incorporation, these
By-Laws, such resolution, or otherwise).
Notwithstanding any of the foregoing, the affirmative vote of
a majority of the holders of the issued and outstanding common stock of the
Corporation shall be required to amend, alter or repeal, or adopt any provision
inconsistent with (i) any provision of these By-Laws requiring a Supermajority
Vote of the Board of Directors (including this provision of Section 12.1) or
(ii) the responsibilities of the Chief Executive Officer or President as set
forth in Section 5.4 or Section 5.5, and the Board of Directors shall not
recommend any such amendment to such provisions to the stockholders unless the
proposed amendment is approved by the Board of Directors acting by Supermajority
Vote.
ARTICLE XIII
Dividends
Section 13.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
#43938
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and Cheryl M. Foley
(the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will sometimes be
referred to in this Employment Agreement collectively as the "Company".
WHEREAS, the Executive is currently serving as Vice President and
Corporate Secretary of the Company, and President, International Business Unit
of the Company, and the Company desires to secure the continued employment of
the Executive in accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective October 24, 1994 (the "1994 Employment Agreement"), as
amended by a First Amendment dated effective October 24, 1994, and a Second
Amendment dated effective January 29, 1997;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1994 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1994 Employment Agreement commenced as of
October 24, 1994 (the "Effective Date") and continued until December
31, 1997; provided, however, that on January 1, 1996, and each January
1 thereafter (the "Renewal Date"), the 1994 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1994 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1994 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1994 Employment Agreement
shall terminate and be of no force and effect. The parties to this
Agreement agree that Cinergy shall be responsible for all of the
premises, covenants, and agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to her from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President and Corporate Secretary for
the Company, and as President, International Business Unit of the
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy during the Employment
Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation
for her services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base
Salary"), payable not less often than semi-monthly, shall be at
the annual rate of not less than $390,000.00 and the amount in
effect as of the day before the Commencement Date. The Board may,
from time to time, direct such upward adjustments in the Annual
Base Salary as the Board deems to be necessary or desirable,
including without limitation adjustments in order to reflect
increases in the cost of living. Any increase in the Annual Base
Salary shall not serve to limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall
not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all
management personnel of the Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is
employed by the Company, the Executive shall be eligible, and the
Company shall take such actions as may be necessary or required
to cause the Executive to become eligible, to participate in all
short-term and long-term incentive, stock option, restricted
stock, performance unit, savings, retirement and welfare plans,
practices, policies and programs applicable generally to
employees and/or other senior executives of the Company who are
considered Tier II executives for compensation purposes,
including, but not limited to Cinergy's Annual Incentive Plan,
Cinergy's 1996 Long-Term Incentive Compensation Plan, Cinergy's
Executive Supplemental Life Insurance Program, Cinergy's Stock
Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's
Non-Union Employees' 401(k) Plan, Cinergy's Non-Union Employees'
Pension Plan, Cinergy's Supplemental Executive Retirement Plan
(both the Mid-Career Benefit portion and the Senior Executive
Supplement), and Cinergy's Excess Pension Plan, or any successors
thereto, except with respect to any plan, practice, policy or
program to which the Executive has waived her rights in writing.
During the Employment Period, the Executive shall participate in
the Mid-Career Benefit portion of Cinergy's Supplemental
Executive Retirement Plan in accordance with its terms, except
that effective as of the Executive's fiftieth (50th) birthday,
the Executive shall be credited with and vested in twenty-five
(25) full years of "Participation" (as that term is defined in
Cinergy's Supplemental Executive Retirement Plan), and shall be
credited with and vested in an additional two (2) years of
Participation on each birthday thereafter for the following five
(5) years provided that she is employed by the Company as of each
such birthday.
If the Executive retires on or after having attained age
fifty-five (55), the Executive shall be entitled to receive from
the Company total annual retirement income for her lifetime equal
to the greater of (i) sixty percent (60%) of the Executive's
"Highest Average Earnings" (as such term is defined in Cinergy's
Supplemental Executive Retirement Plan) or (ii) sixty percent
(60%) of the Executive's "Earnings" (as such term is defined in
the Supplemental Executive Retirement Plan) for the final twelve
(12) calendar months immediately prior to the Executive's
effective date of retirement. Thus, in addition to the
Executive's retirement benefits under Cinergy's Pension Plan, its
Supplemental Executive Retirement Plan, and its Excess Pension
Plan, or any successors thereto, the Executive shall receive an
annual amount known as the "Supplemental Executive Retirement
Benefit" (a non-qualified benefit paid from the Company's general
assets) that is equal to the difference between the greater of
(i) sixty percent (60%) of the Executive's "Highest Average
Earnings" (as such term is defined in Cinergy's Supplemental
Executive Retirement Plan) or (ii) sixty percent (60%) of the
Executive's "Earnings" (as such term is defined in Cinergy's
Supplemental Executive Retirement Plan) for the final twelve (12)
calendar months immediately prior to the Executive's effective
date of retirement, and the sum of the amounts payable to the
Executive under Cinergy's Pension Plan, its Supplemental
Executive Retirement Plan, and its Excess Pension Plan, or any
successors thereto.
Upon her retirement on or after having attained age fifty (50),
the Executive shall be eligible for comprehensive medical and
dental insurance pursuant to the terms of Cinergy's Retirees'
Medical Plan and its Retirees' Dental Plan, or any successors
thereto. However, the Executive shall receive the full subsidy
provided by the Company to retirees for purposes of determining
the amount of monthly premiums due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in
the event that the Executive's employment is terminated following
a Change in Control, the Executive shall immediately be credited
with and vested in thirty-five (35) full years of "Participation"
(as that term is defined in Cinergy's Supplemental Executive
Retirement Plan), and the word "fifty (50)" shall be substituted
for the word "fifty-five (55)" in the first sentence of the third
paragraph of this Section 3(b).
The Executive shall be a participant in Cinergy's Annual
Incentive Plan. The Executive shall be paid by the Company an
annual benefit of up to sixty percent (60%) of the Executive's
Annual Base Salary, which benefit shall be determined and paid
pursuant to the terms of Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term
Incentive Plan (the "LTIP") implemented under Cinergy's 1996
Long-Term Incentive Compensation Plan. The LTIP consists of two
(2) parts: the Value Creation Plan involving shares of restricted
common stock of Cinergy and options to purchase shares of common
stock of Cinergy. The Executive's annualized target award
opportunity under the LTIP shall be equal to no less seventy
percent (70%) of her Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with her
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company agrees to reimburse the Executive for all
expenses, including those for travel and entertainment, properly
incurred by her in the performance of her duties under this Agreement
in accordance with the policies established from time to time by the
Board.
e. Relocation Benefits. Following termination of the Executive's
employment for any reason (other than death), the Executive shall be
entitled to reimbursement from the Company for the reasonable costs of
relocating from the Cincinnati, Ohio, area to a new primary residence
in a manner that is consistent with the terms of the Company's
Relocation Program in effect as of the Commencement Date. The expenses
described in this Section shall be "grossed-up" to provide for adverse
tax consequences to the Executive.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate her
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without her consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which she is qualified and able to perform based upon her
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be; (ii) if the Executive's employment is
terminated by the Company other than for Cause, the date on which
the Company notifies the Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation , other than (1) a merger or consolidation which
would result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate her employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan target
percentage benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be three hundred and sixty-five
(365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan benefit described in Section
3(b) of this Agreement payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days of
the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had she remained in
employment with the Company until the end of the Employment
Period under Cinergy's Executive Supplemental Life Insurance
Program ;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which would
have been provided if the Executive's employment had not
been terminated (excluding benefits to which the Executive
has waived her rights in writing), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other senior executives of the Company (but on a
prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive
becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans
shall be secondary to those provided under such other plan
during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates her
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greatest.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of Exhibit
10-a
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for
which the Executive may qualify (except with respect to any benefit to
which the Executive has waived her rights in writing), nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Commencement
Date with the Company. Amounts which are vested benefits or that the
Executive is otherwise entitled to receive under any benefit, plan,
program, policy or practice of, or any contract or agreement entered into
after the date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as explicitly
modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Cheryl M. Foley
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: /s/ James E. Rogers
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
/s/ Cheryl M. Foley
Cheryl M. Foley
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and William J.
Grealis (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will
sometimes be referred to in this Employment Agreement collectively as the
"Company".
WHEREAS, the Executive is currently serving as Vice President,
Corporate Services of the Company, and the Company desires to secure the
continued employment of the Executive in accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective January 1, 1995 (the "1995 Employment Agreement"), as
amended by a First Amendment dated effective January 1, 1997, and a Second
Amendment dated effective January 29, 1997;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1995 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1995 Employment Agreement commenced as of
January 16, 1995 (the "Effective Date") and continued until June 30,
2000; provided, however, that on January 1, 1998, and each January 1
thereafter (the "Renewal Date"), the 1995 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1995 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1995 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1995 Employment Agreement
shall terminate and be of no force and effect, and the Employment
Period shall convert to a three (3) year term ending December 31,
2001, subject to automatic one-year extensions as set forth in this
Section 1.b. The parties to this Agreement agree that Cinergy shall be
responsible for all of the premises, covenants, and agreements set
forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President, Corporate Services for the
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy during the Employment
Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than Four Hundred Forty Thousand Dollars ($440,000.00) and
the amount in effect as of the day before the Commencement Date. The
Board may, from time to time, direct such upward adjustments in the
Annual Base Salary as the Board deems to be necessary or desirable,
including without limitation adjustments in order to reflect increases
in the cost of living. Any increase in the Annual Base Salary shall
not serve to limit or reduce any other obligation of the Company under
this Agreement. The Annual Base Salary shall not be reduced after any
increase thereof except for across-the-board salary reductions
similarly affecting all management personnel of the Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (both the Mid-Career
Benefit portion and the Senior Executive Supplement), and Cinergy's
Excess Pension Plan, or any successors thereto, except with respect to
any plan, practice, policy or program to which the Executive has
waived his rights in writing.
During the Employment Period, the Executive shall participate in the
Mid-Career Benefit portion of Cinergy's Supplemental Executive
Retirement Plan in accordance with its terms, except that effective as
of the Executive's fiftieth (50th) birthday, the Executive shall be
credited with and vested in twenty-five (25) full years of
"Participation" (as that term is defined in Cinergy's Supplemental
Executive Retirement Plan), and shall be credited with and vested in
an additional two (2) years of Participation on each birthday
thereafter for the following five (5) years provided that he is
employed by the Company as of each such birthday.
If the Executive retires on or after having attained age fifty-five
(55), the Executive shall be entitled to receive from the Company
total annual retirement income for his lifetime equal to the greater
of (i) sixty percent (60%) of the Executive's "Highest Average
Earnings" (as such term is defined in Cinergy's Supplemental Executive
Retirement Plan) or (ii) sixty percent (60%) of the Executive's
"Earnings" (as such term is defined in the Supplemental Executive
Retirement Plan) for the final twelve (12) calendar months immediately
prior to the Executive's effective date of retirement. Thus, in
addition to the Executive's retirement benefits under Cinergy's
Pension Plan, its Supplemental Executive Retirement Plan, and its
Excess Pension Plan, or any successors thereto, the Executive shall
receive an annual amount known as the "Supplemental Executive
Retirement Benefit" (a non-qualified benefit paid from the Company's
general assets) that is equal to the difference between the greater of
(i) sixty percent (60%) of the Executive's "Highest Average Earnings"
(as such term is defined in Cinergy's Supplemental Executive
Retirement Plan) or (ii) sixty percent (60%) of the Executive's
"Earnings" (as such term is defined in Cinergy's Supplemental
Executive Retirement Plan) for the final twelve (12) calendar months
immediately prior to the Executive's effective date of retirement, and
the sum of the amounts payable to the Executive under Cinergy's
Pension Plan, its Supplemental Executive Retirement Plan, and its
Excess Pension Plan, or any successors thereto. Upon his retirement on
or after having attained age fifty (50), the Executive shall be
eligible for comprehensive medical and dental insurance pursuant to
the terms of Cinergy's Retirees' Medical Plan and its Retirees' Dental
Plan, or any successors thereto. However, the Executive shall receive
the full subsidy provided by the Company to retirees for purposes of
determining the amount of monthly premiums due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in the
event that the Executive's employment is terminated following a Change
in Control, the Executive shall immediately be credited with and
vested in thirty-five (35) full years of "Participation" (as that term
is defined in Cinergy's Supplemental Executive Retirement Plan), and
the word "fifty (50)" shall be substituted for the word "fifty-five
(55)" in the first sentence of the third paragraph of this Section
3(b).
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less seventy percent (70%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
e. Relocation Benefits. Following termination of the Executive's
employment for any reason (other than death), the Executive shall be
entitled to reimbursement from the Company for the reasonable costs of
relocating from the Cincinnati, Ohio, area to a new primary residence
in a manner that is consistent with the terms of the Company's
Relocation Program in effect as of the Commencement Date. The expenses
described in this Section shall be "grossed-up" to provide for adverse
tax consequences to the Executive.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) if the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan target
percentage benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be three hundred and sixty-five
(365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan benefit described in Section
3(b) of this Agreement payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days of
the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under Cinergy's Executive Supplemental Life Insurance
Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other senior executives of the Company (but on a
prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive
becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans
shall be secondary to those provided under such other plan
during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greatest. Notwithstanding anything in this Agreement to
the contrary, if the Executive terminates employment prior to age
fifty-five (55), he shall receive at a minimum total retirement
benefits from all applicable sources from the Company of no less than
$283,000 per year payable as a straight life annuity. d. Survival of
Section 5(c). The provisions of Section 5(c) shall survive the
expiration or termination of this Employment Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of Exhibit
10-b
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for
which the Executive may qualify (except with respect to any benefit to
which the Executive has waived his rights in writing), nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Commencement
Date with the Company. Amounts which are vested benefits or that the
Executive is otherwise entitled to receive under any benefit, plan,
program, policy or practice of, or any contract or agreement entered into
after the date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as explicitly
modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended, modified, repealed,
waived, extended or discharged except by an agreement in writing
signed by the party against whom enforcement of such amendment,
modification, repeal, waiver, extension or discharge is sought.
No person, other than pursuant to a resolution of the Board or a
committee thereof, shall have authority on behalf of the Company
to agree to amend, modify, repeal, waive, extend or discharge any
provision of this Agreement or anything in reference thereto.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
William J. Grealis
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance with this Agreement. All
notices and communications shall be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
___/s/ William J. Grealis______
William J. Grealis
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
July, 1998, by and among Cinergy Corp., a Delaware corporation ("Cinergy"),
Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and M. Stephen Harkness (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this
Agreement collectively as the "Company".
WHEREAS, the Company desires to secure the continued employment of the
Executive with the Company in accordance with this Agreement;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
in this Agreement and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of the date
first set forth above setting forth the terms and conditions for the employment
relationship of the Executive;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company agrees to employ the Executive, and the Executive agrees
to be employed, in accordance with the terms and provisions of this
Agreement for the period set forth below (the "Employment Period").
b. The Employment Period of the Executive as provided in Section 1(a)
will commence on July 1, 1998, (the "Effective Date") and shall
continue until December 31, 2001; provided, however, commencing on
January 1, 2000, and each January 1 thereafter (the "Renewal Date"),
the Employment Period of this Agreement shall automatically be
extended for one (1) additional year if neither the Company not the
Executive shall have given between December 1 and December 15 prior to
each applicable Renewal Date written notice to the other of its intent
to terminate this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
or Cinergy Services (the Board of Directors of Cinergy or Cinergy
Services, as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy or the Chief
Operating Officer of Cinergy may from time to time determine and shall
have such responsibilities, duties and authority as may be assigned to
him from time to time during the Employment Period by the Board or the
Chief Executive Officer of Cinergy or the Chief Operating Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Effective Date of this Agreement, the Executive
shall initially serve as Executive Vice President and Chief Operating
Officer, Trigen-Cinergy Solutions LLC for the Company, but consistent
with the foregoing provisions of this Section 2(a), may be assigned to
any other position or positions by either the Board or the Chief
Executive Officer of Cinergy or the Chief Operating Officer of Cinergy
during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the offices of the Company at 1000
East Main Street, Plainfield, Indiana, and, except for required
business travel to an extent substantially consistent with the present
business travel obligations of executives of the Company who have
positions of authority comparable to that of the Executive, the
Executive shall not be required to relocate to a new principal place
of business which is more than thirty (30) miles from Plainfield,
Indiana.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $192,612.00. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, PSI or CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier III executives for
compensation purposes, including, but not limited to, Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, the Senior
Executive Supplement portion of Cinergy's Supplemental Executive
Retirement Plan (effective January 1, 1999), and Cinergy's Excess
Pension Plan, or any successors thereto, except with respect to any
plan, practice, policy or program to which the Executive has waived
his rights in writing.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership charges of the Executive for membership in a country
club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy); and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Company for Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
The breach by the Executive of the confidentiality provisions set
forth in Section 8 of this Agreement, or
(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 the Company.
For purposes of this definition of "Cause," no act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
Notwithstanding the above definition of "Cause", the Company may
terminate the Executive's employment during the Employment Period
for a reason other than Cause, but the obligations placed upon
the Company in Section 5 shall apply.
c. 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" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Agreement, or any other benefit or
payment described in Section 3 of this Agreement, except for
across-the-board salary reductions similarly affecting all
management personnel of Cinergy, Cinergy Services, CG&E, and PSI,
and changes to the employee benefits programs affecting all
management personnel of those corporations, provided that such
changes (either individually or in the aggregate) will not result
in a material adverse change with respect to the benefits which
the Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b);
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision in this Agreement
relied upon;
(ii) To the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)If the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) If the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)If the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Company Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent most previously paid;
(2) an amount equal to the Cinergy Annual Incentive Plan target
percentage benefit for the fiscal year that includes the
Date of Termination multiplied by a fraction the numerator
of which shall be the number of days from the beginning of
such fiscal year to and including the Date of Termination
and the denominator of which shall be three hundred and
sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the
event of Termination other than by reason of the Executive's
death, then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted
using an interest rate equal to the prime rate
promulgated by CitiBank, N.A. and in effect as of the
Date of Termination (the "Prime Rate") of the Annual
Base Salary, and the Cinergy Annual Incentive Plan
target percentage payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days
of the Date of Termination;
(2) the Company shall pay to the Executive the present
value (discounted at the Prime Rate) of all amounts to
which the Executive would have been entitled had he
remained in employment with the Company until the end
of the Employment Period under the Cinergy Executive
Supplemental Life Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts whether or not then
payable; and
(4) the Company shall continue, until the end of the
Employment Period, medical and welfare benefits to the
Executive and/or the Executive's family at least equal
to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the
"M&W Plans") of the Company as in effect and applicable
generally to other senior executives of the Company and
their families during the ninety (90) day period
immediately preceding the Date of Termination;
provided, however, that if the Executive becomes
employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such
other plan during such applicable period of
eligibility.
(iii)From and after the occurrence of a Change in Control and in
the event of Termination other than by reason of the
Executive's death, then in lieu of any further salary
payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any other benefits payable
pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum
severance payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which
the Executive is receiving immediately prior to the
Notice of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason),
except for any benefits that were waived by the
Executive in writing. Benefits otherwise receivable by
the Executive pursuant to this Section 5(a)(iii)(2)
shall be reduced to the extent comparable benefits are
actually received by or made available to the Executive
without cost during the thirty-six (36) month period
following the Executive's termination of employment
(and any such benefits actually received by the
Executive shall be reported to the Company by the
Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Company for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7 of this
Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for
Good Reason, the Company shall have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations and the amounts determined under
Section 5(c), plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and its Excess
Pension Plan, or any successor thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan effective January 1,
1999.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
other contract or agreement entered into after the date hereof with the
Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, program, policy or
practice of, or any contract or agreement entered into after the date
hereof with, the Company at or subsequent to the Date of Termination, shall
be payable in accordance with such benefit, plan, program, policy or
practice, or contract or agreement, except as explicitly modified by this
Agreement.
7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and
5(a)(iii)(2) of this Agreement, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains
other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of Cinergy, all of its subsidiary companies and affiliates,
as well as all successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data relating to the
Cinergy Companies, and their respective businesses, that shall have been
obtained by the Executive during the Executive's employment by the Company
and that shall not have been or now or subsequently have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior written consent of
the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Cinergy Companies may be
required from time to time to make public disclosure of the terms or
existence of the Executive's employment relationship in order to comply
with various laws and legal requirements. In addition to all other remedies
available to the Company in law and equity, this Agreement is subject to
termination by the Company for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon the
Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
M. Stephen Harkness
Cinergy Corp./PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana 46168
If to the Company:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, and all promises, representations,
understandings, arrangements and prior agreements are merged into this
Agreement and accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
___/s/ M. Stephen Harkness___
M. Stephen Harkness
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and Donald B. Ingle,
Jr. (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will sometimes
be referred to in this Employment Agreement collectively as the "Company".
WHEREAS, the Executive is currently serving as Vice President of the
Company and President, Cinergy Investments Business Unit of the Company, and the
Company desires to secure the continued employment of the Executive in
accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective October 1, 1997 (the "1997 Employment Agreement");
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1997 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1997 Employment Agreement commenced as of
October 1, 1997 (the "Effective Date") and shall continue until
December 31, 2000; provided, however, that on January 1, 1999, and
each January 1 thereafter (the "Renewal Date"), the 1997 Employment
Agreement was automatically extended for one (1) additional year
because neither the Company nor the Executive gave written notice to
the other between December 1 and December 15 prior to any Renewal Date
of its intent to terminate the 1997 Employment Agreement. The
Employment Period of the Executive shall continue uninterrupted under
this Agreement until December 31, 2001; provided however, that on
January 1, 2000, and each Renewal Date thereafter, the term of this
Agreement shall automatically be extended for one (1) additional year
if, prior to such Renewal Date, neither the Company nor the Executive
shall have given written notice to the other between December 1 and
December 15 prior to any Renewal Date of its intent to terminate this
Agreement. For that portion of the Employment Period prior to, but not
including the commencement date ("Commencement Date") of this
Agreement, the 1997 Employment Agreement, as amended, shall remain in
full force and effect. As of the Commencement Date, the 1997
Employment Agreement shall terminate and be of no force and effect.
The parties to this Agreement agree that Cinergy shall be responsible
for all of the premises, covenants, and agreements set forth in this
Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President of the Company and as
President, Cinergy Investments Business Unit for the Company, but
consistent with the foregoing provisions of this Section 2(a), may be
assigned to any other position or positions by either the Board or the
Chief Executive Officer of Cinergy during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than Three Hundred Fifty Thousand Dollars ($350,000.00)
and the amount in effect as of the day before the Commencement Date.
The Board may, from time to time, direct such upward adjustments in
the Annual Base Salary as the Board deems to be necessary or
desirable, including without limitation adjustments in order to
reflect increases in the cost of living. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any increase thereof except for across-the-board salary
reductions similarly affecting all management personnel of the
Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (both the Mid-Career
Benefit portion and the Senior Executive Supplement), and Cinergy's
Excess Pension Plan, or any successors thereto, except with respect to
any plan, practice, policy or program to which the Executive has
waived his rights in writing.
During the Employment Period, the Executive shall participate in the
Mid-Career Benefit portion of Cinergy's Supplemental Executive
Retirement Plan in accordance with its terms, except that upon
retirement on or after attainment of age fifty-five (55), the
Executive shall be credited with and vested in thirty-five (35) full
years of "Participation" (as that term is defined in Cinergy's
Supplemental Executive Retirement Plan). If the Executive terminates
employment prior to attainment of age fifty-five (55), the Executive
shall be credited with and vested in twenty-two (22) full years of
"Participation" (as that term is defined in Cinergy's Supplemental
Executive Retirement Plan) as of October 1, 1997.
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less seventy percent (70%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
e. Relocation Benefits. Following termination of the Executive's
employment for any reason (other than death), the Company shall
purchase the Executive's primary residence in the general area of the
Company's principal corporate office located in Cincinnati, Ohio, at
its fair market value. For purposes of this Section, the term "fair
market value" shall have the meaning as used in the Company's
Relocation Program in effect as of the Commencement Date. The expenses
described in this Section shall be "grossed-up" to provide for adverse
tax consequences to the Executive.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) if the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan target
percentage benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be three hundred and sixty-five
(365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the
event of Termination other than by reason of the Executive's
death, then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted
using an interest rate equal to the prime rate
promulgated by CitiBank, N.A. and in effect as of the
Date of Termination (the "Prime Rate") of the Annual
Base Salary, and the Cinergy Annual Incentive Plan
benefit described in Section 3(b) of this Agreement
payable through the end of the Employment Period, each
at the rate, and using the same goals and factors, in
effect at the time Notice of Termination is given, and
paid within thirty (30) days of the Date of
Termination;
(2) the Company shall pay to the Executive the present
value (discounted at the Prime Rate) of all amounts to
which the Executive would have been entitled had he
remained in employment with the Company until the end
of the Employment Period under Cinergy's Executive
Supplemental Life Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or
payable; and
(4) the Company shall continue, until the end of the
Employment Period, medical and welfare benefits to the
Executive and/or the Executive's family at least equal
to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the
"M&W Plans") of the Company as in effect and applicable
generally to other senior executives of the Company and
their families during the ninety (90) day period
immediately preceding the Date of Termination or, if
more favorable to the Executive, as in effect generally
at any time thereafter with respect to other senior
executives of the Company (but on a prospective basis
only unless and then only to the extent, such more
favorable M&W Plans are by their terms retroactive);
provided, however, that if the Executive becomes
employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such
other plan during such applicable period of
eligibility.
(iii)From and after the occurrence of a Change in Control and in
the event of Termination other than by reason of the
Executive's death, then in lieu of any further salary
payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any other benefits payable
pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greater.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and Exhibit 10-d
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements.
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for
which the Executive may qualify (except with respect to any benefit to
which the Executive has waived his rights in writing), nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Commencement
Date with the Company. Amounts which are vested benefits or that the
Executive is otherwise entitled to receive under any benefit, plan,
program, policy or practice of, or any contract or agreement entered into
after the date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as explicitly
modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Donald B. Ingle, Jr.
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: _/s/ James E. Rogers______
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
____/s/ Donald B. Ingle, Jr.____
Donald B. Ingle, Jr.
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and Madeleine W.
Ludlow (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will
sometimes be referred to in this Employment Agreement collectively as the
"Company".
WHEREAS, the Executive is currently serving as Vice President and Chief
Financial Officer of the Company, and the Company desires to secure the
continued employment of the Executive in accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective April 22, 1997 (the "1997 Employment Agreement");
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1997 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1997 Employment Agreement commenced as of
April 22, 1997 (the "Effective Date") and continued until December 31,
1999; provided, however, that on January 1, 1998, and each January 1
thereafter (the "Renewal Date"), the 1997 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1997 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1997 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1997 Employment Agreement
shall terminate and be of no force and effect. The parties to this
Agreement agree that Cinergy shall be responsible for all of the
premises, covenants, and agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to her from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President and Chief Financial Officer
for the Company, but consistent with the foregoing provisions of this
Section 2(a), may be assigned to any other position or positions by
either the Board or the Chief Executive Officer of Cinergy during the
Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
her services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $375,000.00 and the amount in effect as of the day
before the Commencement Date. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of the Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (both the Mid-Career
Benefit portion and the Senior Executive Supplement), and Cinergy's
Excess Pension Plan, or any successors thereto, except with respect to
any plan, practice, policy or program to which the Executive has
waived her rights in writing.
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less seventy percent (70%) of her Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with her
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company agrees to reimburse the Executive for all
expenses, including those for travel and entertainment, properly
incurred by her in the performance of her duties under this Agreement
in accordance with the policies established from time to time by the
Board.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate her
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without her consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which she is qualified and able to perform based upon her
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) if the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate her employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan target
percentage benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be three hundred and sixty-five
(365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in
the event of Termination other than by reason of the
Executive's death, then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted
using an interest rate equal to the prime rate
promulgated by CitiBank, N.A. and in effect as of the
Date of Termination (the "Prime Rate") of the Annual
Base Salary, and the Cinergy Annual Incentive Plan
benefit described in Section 3(b) of this Agreement
payable through the end of the Employment Period, each
at the rate, and using the same goals and factors, in
effect at the time Notice of Termination is given, and
paid within thirty (30) days of the Date of
Termination;
(2) the Company shall pay to the Executive the present
value (discounted at the Prime Rate) of all amounts to
which the Executive would have been entitled had she
remained in employment with the Company until the end
of the Employment Period under Cinergy's Executive
Supplemental Life Insurance Program ;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or
payable; and
(4) the Company shall continue, until the end of the
Employment Period, medical and welfare benefits to the
Executive and/or the Executive's family at least equal
to those which would have been provided if the
Executive's employment had not been terminated
(excluding benefits to which the Executive has waived
her rights in writing), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the
"M&W Plans") of the Company as in effect and applicable
generally to other senior executives of the Company and
their families during the ninety (90) day period
immediately preceding the Date of Termination or, if
more favorable to the Executive, as in effect generally
at any time thereafter with respect to other senior
executives of the Company (but on a prospective basis
only unless and then only to the extent, such more
favorable M&W Plans are by their terms retroactive);
provided, however, that if the Executive becomes
employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such
other plan during such applicable period of
eligibility.
(iii)From and after the occurrence of a Change in Control
and in the event of Termination other than by reason of
the Executive's death, then in lieu of any further
salary payments to the Executive for periods subsequent
to the Date of Termination and in lieu of any other
benefits payable pursuant to Section 5(a)(ii) of this
Agreement:
(1) The Company shall pay to the Executive a lump sum
severance payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which
the Executive is receiving immediately prior to the
Notice of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason),
except for any benefits that were waived by the
Executive in writing. Benefits otherwise receivable by
the Executive pursuant to this Section 5(a)(iii)(2)
shall be reduced to the extent comparable benefits are
actually received by or made available to the Executive
without cost during the thirty-six (36) month period
following the Executive's termination of employment
(and any such benefits actually received by the
Executive shall be reported to the Company by the
Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates her
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greatest.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, (ii) the amount
of the Severance Benefits that shall be treated as subject to the
Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require. 6. Non-exclusivity of Rights. Nothing in this Employment
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, plan, program, policy or practice
provided by the Company and for which the Executive may qualify
(except with respect to any benefit to which the Executive has waived
her rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract
or agreement entered into after the Commencement Date with the
Company. Amounts which are vested benefits or that the Executive is
otherwise entitled to receive under any benefit, plan, program, policy
or practice of, or any contract or agreement entered into after the
date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as
explicitly modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Madeleine W. Ludlow
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance with this Agreement. All
notices and communications shall be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and
the Stock-Related Documents described in Section 5(f) hereof, all
promises, representations, understandings, arrangements and prior
agreements are merged into this Agreement and accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
____/s/ Madeleine W. Ludlow__
Madeleine W. Ludlow
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
July, 1998, by and among Cinergy Corp., a Delaware corporation ("Cinergy"),
Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and William L. Sheafer (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this
Agreement collectively as the "Company".
WHEREAS, the Company desires to secure the continued employment of the
Executive with the Company in accordance with this Agreement;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
in this Agreement and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of the date
first set forth above setting forth the terms and conditions for the employment
relationship of the Executive;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company agrees to employ the Executive, and the Executive agrees
to be employed, in accordance with the terms and provisions of this
Agreement for the period set forth below (the "Employment Period").
b. The Employment Period of the Executive as provided in Section 1(a)
will commence on July 1, 1998, (the "Effective Date") and shall
continue until December 31, 2001; provided, however, commencing on
January 1, 2000, and each January 1 thereafter (the "Renewal Date"),
the Employment Period of this Agreement shall automatically be
extended for one (1) additional year if neither the Company nor the
Executive shall have given between December 1 and December 15 prior to
each applicable Renewal Date written notice to the other of its intent
to terminate this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
or Cinergy Services (the Board of Directors of Cinergy or Cinergy
Services, as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy or the Chief
Operating Officer of Cinergy may from time to time determine and shall
have such responsibilities, duties and authority as may be assigned to
him from time to time during the Employment Period by the Board or the
Chief Executive Officer of Cinergy or the Chief Operating Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Effective Date of this Agreement, the Executive
shall initially serve as Vice President and Treasurer for the Company,
but consistent with the foregoing provisions of this Section 2(a), may
be assigned to any other position or positions by either the Board or
the Chief Executive Officer of Cinergy or the Chief Operating Officer
of Cinergy during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 139 and 221 East Fourth Street, Cincinnati, Ohio, and, except
for required business travel to an extent substantially consistent
with the present business travel obligations of executives of the
Company who have positions of authority comparable to that of the
Executive, the Executive shall not be required to relocate to a new
principal place of business which is more that thirty (30) miles from
the current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $181,272.00. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, PSI or CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier III executives for
compensation purposes, including, but not limited to, Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, the Senior
Executive Supplement portion of Cinergy's Supplemental Executive
Retirement Plan (effective January 1, 1999), and Cinergy's Excess
Pension Plan, or any successors thereto, except with respect to any
plan, practice, policy or program to which the Executive has waived
his rights in writing. It is expressly agreed, however, that the
Amended and Restated Supplemental Executive Retirement Income
Agreement between CG&E and the Executive dated as of January 1, 1995,
shall remain in effect and is not superseded by this Agreement.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership charges of the Executive for membership in a country
club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy); and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Company for Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
The breach by the Executive of the confidentiality provisions set
forth in Section 8 of this Agreement, or
(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 the Company.
For purposes of this definition of "Cause," no act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
Notwithstanding the above definition of "Cause", the Company may
terminate the Executive's employment during the Employment Period
for a reason other than Cause, but the obligations placed upon
the Company in Section 5 shall apply.
c. 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" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Agreement, or any other benefit or
payment described in Section 3 of this Agreement, except for
across-the-board salary reductions similarly affecting all
management personnel of Cinergy, Cinergy Services, CG&E, and PSI,
and changes to the employee benefits programs affecting all
management personnel of those corporations, provided that such
changes (either individually or in the aggregate) will not result
in a material adverse change with respect to the benefits which
the Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b);
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision in this Agreement
relied upon;
(ii) To the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)If the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) If the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)If the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Company Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination, to the extent not previously paid;
(2) an amount equal to the Cinergy Annual Incentive Plan target
percentage benefit for the fiscal year that includes the
Date of Termination multiplied by a fraction the numerator
of which shall be the number of days from the beginning of
such fiscal year to and including the Date of Termination
and the denominator of which shall be three hundred and
sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan target percentage payable
through the end of the Employment Period, each at the rate,
and using the same goals and factors, in effect at the time
Notice of Termination is given, and paid within thirty (30)
days of the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under the Cinergy Executive Supplemental Life
Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts whether or not then payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination; provided, however, that if the
Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Company for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7 of this
Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for
Good Reason, the Company shall have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations and the amounts determined under
Section 5(c), plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and its Excess
Pension Plan, or any successor thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan(commonly referred to
as the "SERP") effective January 1, 1999. Although the Executive will
be eligible to participate in the SERP, it is expressly understood
that the Executive will not receive simultaneously benefits from the
SERP and benefits under the Amended and Restated Supplemental
Retirement Income Plan dated effective January 1, 1995 between the
Executive and the Company (the "Restated CG&E SERP"). Instead, the
Executive will receive benefits from either the SERP or the Restated
CG&E SERP, whichever is greater.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
other contract or agreement entered into after the date hereof with the
Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, program, policy or
practice of, or any contract or agreement entered into after the date
hereof with, the Company at or subsequent to the Date of Termination, shall
be payable in accordance with such benefit, plan, program, policy or
practice, or contract or agreement, except as explicitly modified by this
Agreement.
7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and
5(a)(iii)(2) of this Agreement, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains
other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of Cinergy, all of its subsidiary companies and affiliates,
as well as all successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data relating to the
Cinergy Companies, and their respective businesses, that shall have been
obtained by the Executive during the Executive's employment by the Company
and that shall not have been or now or subsequently have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Cinergy Companies may be
required from time to time to make public disclosure of the terms or
existence of the Executive's employment relationship in order to comply
with various laws and legal requirements. In addition to all other remedies
available to the Company in law and equity, this Agreement is subject to
termination by the Company for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8. 10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon the
Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
William L. Sheafer
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Company:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. With the exception of the Restated CG&E SERP, this instrument contains
the entire agreement of the Executive and the Company with respect to
the subject matter hereof; and subject to any agreements evidencing
stock option or restricted stock grants described in Section 3(b) and
the Stock-Related Documents described in Section 5(f) hereof, and all
promises, representations, understandings, arrangements and prior
agreements are merged into this Agreement and accordingly superseded.
Specifically, the Executive Severance Agreement dated as of January
17, 1990, as amended, is hereby superseded by this Agreement.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: _/s/ James E. Rogers______
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
_____/s/ William L. Sheafer____
William L. Sheafer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
July, 1998, by and among Cinergy Corp., a Delaware corporation ("Cinergy"),
Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and John P. Steffen (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this
Agreement collectively as the "Company".
WHEREAS, the Company desires to secure the continued employment of the
Executive with the Company in accordance with this Agreement;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
in this Agreement and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of the date
first set forth above setting forth the terms and conditions for the employment
relationship of the Executive;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company agrees to employ the Executive, and the Executive agrees
to be employed, in accordance with the terms and provisions of this
Agreement for the period set forth below (the "Employment Period").
b. The Employment Period of the Executive as provided in Section 1(a)
will commence on July 1, 1998, (the "Effective Date") and shall
continue until December 31, 2001; provided, however, commencing on
January 1, 2000, and each January 1 thereafter (the "Renewal Date"),
the Employment Period of this Agreement shall automatically be
extended for one (1) additional year if neither the Company not the
Executive shall have given between December 1 and December 15 prior to
each applicable Renewal Date written notice to the other of its intent
to terminate this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
or Cinergy Services (the Board of Directors of Cinergy or Cinergy
Services, as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy or the Chief
Operating Officer of Cinergy may from time to time determine and shall
have such responsibilities, duties and authority as may be assigned to
him from time to time during the Employment Period by the Board or the
Chief Executive Officer of Cinergy or the Chief Operating Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Effective Date of this Agreement, the Executive
shall initially serve as Vice President and Comptroller for the
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy or the Chief Operating
Officer of Cinergy during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 139 and 221 East Fourth Street, Cincinnati, Ohio, and, except
for required business travel to an extent substantially consistent
with the present business travel obligations of executives of the
Company who have positions of authority comparable to that of the
Executive, the Executive shall not be required to relocate to a new
principal place of business which is more that thirty (30) miles from
the current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $155,256.00. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, PSI or CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier III executives for
compensation purposes, including, but not limited to, Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, the Senior
Executive Supplement portion of Cinergy's Supplemental Executive
Retirement Plan (effective January 1, 1999), and Cinergy's Excess
Pension Plan, or any successors thereto, except with respect to any
plan, practice, policy or program to which the Executive has waived
his rights in writing.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership charges of the Executive for membership in a country
club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy); and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Company for Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
The breach by the Executive of the confidentiality provisions set
forth in Section 8 of this Agreement, or
(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 the Company.
For purposes of this definition of "Cause," no act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
Notwithstanding the above definition of "Cause", the Company may
terminate the Executive's employment during the Employment Period
for a reason other than Cause, but the obligations placed upon
the Company in Section 5 shall apply.
c. 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" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Agreement, or any other benefit or
payment described in Section 3 of this Agreement, except for
across-the-board salary reductions similarly affecting all
management personnel of Cinergy, Cinergy Services, CG&E, and PSI,
and changes to the employee benefits programs affecting all
management personnel of those corporations, provided that such
changes (either individually or in the aggregate) will not result
in a material adverse change with respect to the benefits which
the Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b);
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision in this Agreement
relied upon;
(ii) To the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)If the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) If the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)If the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Company Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent most previously paid;
(2) an amount equal to the Cinergy Annual Incentive Plan target
percentage benefit for the fiscal year that includes the
Date of Termination multiplied by a fraction the numerator
of which shall be the number of days from the beginning of
such fiscal year to and including the Date of Termination
and the denominator of which shall be three hundred and
sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan target percentage payable
through the end of the Employment Period, each at the rate,
and using the same goals and factors, in effect at the time
Notice of Termination is given, and paid within thirty (30)
days of the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under the Cinergy Executive Supplemental Life
Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts whether or not then payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination; provided, however, that if the
Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Company for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7 of this
Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for
Good Reason, the Company shall have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations and the amounts determined under
Section 5(c), plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and its Excess
Pension Plan, or any successor thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan effective January 1,
1999.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
other contract or agreement entered into after the date hereof with the
Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, program, policy or
practice of, or any contract or agreement entered into after the date
hereof with, the Company at or subsequent to the Date of Termination, shall
be payable in accordance with such benefit, plan, program, policy or
practice, or contract or agreement, except as explicitly modified by this
Agreement.
7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and
5(a)(iii)(2) of this Agreement, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains
other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of Cinergy, all of its subsidiary companies and affiliates,
as well as all successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data relating to the
Cinergy Companies, and their respective businesses, that shall have been
obtained by the Executive during the Executive's employment by the Company
and that shall not have been or now or subsequently have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior written consent of
the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Cinergy Companies may be
required from time to time to make public disclosure of the terms or
existence of the Executive's employment relationship in order to comply
with various laws and legal requirements. In addition to all other remedies
available to the Company in law and equity, this Agreement is subject to
termination by the Company for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon the
Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto. b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
John P. Steffen
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Company:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, and all promises, representations,
understandings, arrangements and prior agreements are merged into this
Agreement and accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
_____/s/ John P. Steffen_______
John P. Steffen
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 16th day of
February, 1999, by and among Cinergy Corp., a Delaware corporation ("Cinergy"),
Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and James L. Turner (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this
Agreement collectively as the "Company".
WHEREAS, the Executive is currently serving as President, Cincinnati
Gas & Electric Company, and the Company desires to secure the continued
employment of the Executive in accordance with this Agreement;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
in this Agreement and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of the date
first set forth above, setting forth the terms and conditions for the employment
relationship of the Executive during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company agrees to employ the Executive, and the Executive agrees
to be employed, in accordance with the terms and provisions of this
Agreement for the period set forth below (the "Employment Period").
b. The Employment Period of the Executive as provided in Section 1(a)
will commence on February 16, 1999, (the "Effective Date") and shall
continue until December 31, 2001; provided, however, commencing on
January 1, 2000, and each January 1 thereafter (the "Renewal Date"),
the Employment Period of this Agreement shall automatically be
extended for one (1) additional year if neither the Company nor the
Executive shall have given between December 1 and December 15 prior to
each applicable Renewal Date written notice to the other of its intent
to terminate this Agreement. The parties to this Agreement agree that
Cinergy shall be responsible for all of the premises, covenants, and
agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
or Cinergy Services (the Board of Directors of Cinergy or Cinergy
Services, as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Effective Date of this Agreement, the Executive
shall initially serve as President of The Cincinnati Gas & Electric
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy during the Employment
Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 139 and 221 East Fourth Street, Cincinnati, Ohio, and, except
for required business travel to an extent substantially consistent
with the present business travel obligations of executives of the
Company who have positions of authority comparable to that of the
Executive, the Executive shall not be required to relocate to a new
principal place of business which is more that thirty (30) miles from
the current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $210,000.00. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, PSI or CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier III executives for
compensation purposes, including, but not limited to, Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy s Non-Union Employees' Pension Plan,
the Senior Executive Supplement portion of Cinergy's Supplemental
Executive Retirement Plan, and Cinergy's Excess Pension Plan, or any
successors thereto, except with respect to any plan, practice, policy
or program to which the Executive has waived his rights in writing.
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to forty-five percent (45%) of the Executive's Annual Base Salary,
which benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less forty percent (40%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership charges of the Executive for membership in a country
club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy); and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Company for Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
The breach by the Executive of the confidentiality provisions set
forth in Section 8 of this Agreement, or
(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 the Company.
For purposes of this definition of "Cause," no act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
Notwithstanding the above definition of "Cause", the Company may
terminate the Executive's employment during the Employment Period
for a reason other than Cause, but the obligations placed upon
the Company in Section 5 shall apply.
c. 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" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Agreement, or any other benefit or
payment described in Section 3 of this Agreement, except for
across-the-board salary reductions similarly affecting all
management personnel of Cinergy, Cinergy Services, CG&E, and PSI,
and changes to the employee benefits programs affecting all
management personnel of those corporations, provided that such
changes (either individually or in the aggregate) will not result
in a material adverse change with respect to the benefits which
the Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b);
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision in this Agreement
relied upon;
(ii) To the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)If the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) If the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)If the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Company Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent most previously paid;
(2) an amount equal to the Cinergy Annual Incentive Plan target
percentage benefit for the fiscal year that includes the
Date of Termination multiplied by a fraction the numerator
of which shall be the number of days from the beginning of
such fiscal year to and including the Date of Termination
and the denominator of which shall be three hundred and
sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan target percentage payable
through the end of the Employment Period, each at the rate,
and using the same goals and factors, in effect at the time
Notice of Termination is given, and paid within thirty (30)
days of the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under the Cinergy Executive Supplemental Life
Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts whether or not then payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination; provided, however, that if the
Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Company for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7 of this
Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for
Good Reason, the Company shall have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations and the amounts determined under
Section 5(c), plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and its Excess
Pension Plan, or any successor thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
other contract or agreement entered into after the date hereof with the
Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, program, policy or
practice of, or any contract or agreement entered into after the date
hereof with, the Company at or subsequent to the Date of Termination, shall
be payable in accordance with such benefit, plan, program, policy or
practice, or contract or agreement, except as explicitly modified by this
Agreement.
7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and
5(a)(iii)(2) of this Agreement, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains
other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of Cinergy, all of its subsidiary companies and affiliates,
as well as all successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data relating to the
Cinergy Companies, and their respective businesses, that shall have been
obtained by the Executive during the Executive's employment by the Company
and that shall not have been or now or subsequently have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior written consent of
the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Cinergy Companies may be
required from time to time to make public disclosure of the terms or
existence of the Executive's employment relationship in order to comply
with various laws and legal requirements. In addition to all other remedies
available to the Company in law and equity, this Agreement is subject to
termination by the Company for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon the
Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
James L. Turner
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Company:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, and all promises, representations,
understandings, arrangements and prior agreements are merged into this
Agreement and accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
____/s/ James L. Turner__ ____
James L. Turner
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and Charles J.
Winger (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will
sometimes be referred to in this Employment Agreement collectively as the
"Company".
WHEREAS, the Executive is currently serving as Vice President,
Corporate Development of the Company, and the Company desires to secure the
continued employment of the Executive in accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective April 1, 1998 (the "1998 Employment Agreement");
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1998 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1998 Employment Agreement commenced as of
April 1, 1998 (the "Effective Date") and continued until December 31,
2000; provided, however, that on January 1, 1999, and each January 1
thereafter (the "Renewal Date"), the 1998 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1998 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1998 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1998 Employment Agreement
shall terminate and be of no force and effect. The parties to this
Agreement agree that Cinergy shall be responsible for all of the
premises, covenants, and agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President, Corporate Development for the
Company, but consistent with the foregoing provisions of this Section
2(a), may be assigned to any other position or positions by either the
Board or the Chief Executive Officer of Cinergy during the Employment
Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than Two Hundred Seventy-Five Thousand Dollars
($275,000.00) and the amount in effect as of the day before the
Commencement Date. The Board may, from time to time, direct such
upward adjustments in the Annual Base Salary as the Board deems to be
necessary or desirable, including without limitation adjustments in
order to reflect increases in the cost of living. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of the Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (both the Mid-Career
Benefit portion and the Senior Executive Supplement), and Cinergy's
Excess Pension Plan, or any successors thereto, except with respect to
any plan, practice, policy or program to which the Executive has
waived his rights in writing.
With regard to the Executive's retirement benefits, the Executive
shall be entitled to a "Contractual Retirement Supplement" (paid from
the Corporation's general assets) which extends to the Executive upon
retirement on or after age fifty-five (55) a non-qualified benefit
that, when added to the Executive's benefit under Cinergy's Non-Union
Employees' Pension Plan and Cinergy's Excess Pension Plan, or any
successors thereto, will provide total retirement income equivalent to
a full career employee with equal annual earnings. For purposes of the
preceding sentence, a "full career employee" shall mean an employee
with thirty-five (35) full years of "participation" under Cinergy's
Supplemental Executive Retirement Plan. In addition, the Contractual
Retirement Supplement will include a sum equal to the amount by which
the Executive's benefit under Cinergy's Non-Union Employees' Pension
Plan is reduced by application of the customary actuarial reduction
for early retirement if receipt of pension benefits under that plan
commences prior to the Executive's attainment of age sixty-two (62).
Upon his retirement on or after having attained age fifty (50), the
Executive shall be eligible for comprehensive medical and dental
insurance pursuant to the terms of Cinergy's Retirees' Medical Plan
and its Retirees' Dental Plan, or any successors thereto. However, the
Executive shall receive the full subsidy provided by the Company to
retirees for purposes of determining the amount of monthly premiums
due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in the
event that the Executive's employment is terminated following a Change
in Control, the Executive shall immediately be credited with and
vested in thirty-five (35) full years of "Participation" (as that term
is defined in Cinergy's Supplemental Executive Retirement Plan), and
the word "fifty (50)" shall be substituted for the word "fifty-five
(55)" in the first sentence of the second paragraph of this Section
3(b).
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less seventy percent (70%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) if the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan target
percentage benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be three hundred and sixty-five
(365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan benefit described in Section
3(b) of this Agreement payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days of
the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under Cinergy's Executive Supplemental Life Insurance
Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other senior executives of the Company (but on a
prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive
becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans
shall be secondary to those provided under such other plan
during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the event
of Termination other than by reason of the Executive's death, then in
lieu of any further salary payments to the Executive for periods
subsequent to the Date of Termination and in lieu of any other
benefits payable pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that would
have been due under Sections 5(a)(ii) of this Agreement,
excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the Executive's
Annual Base Salary in effect immediately prior to the
occurrence of the event or circumstance upon which the
Notice of Termination is based or in effect immediately
prior to the Change in Control, and (y) the higher of the
amount paid to the Executive pursuant to all incentive
compensation or bonus plans or programs maintained by the
Company, in the year preceding that in which the Date of
Termination occurs or in the year preceding that in which
the Change in Control occurs; and
(2) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life,
disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately
prior to the Notice of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in Control
which reduction constitutes Good Reason), except for any benefits
that were waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section 5(a)(iii)(2)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost
during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually
received by the Executive shall be reported to the Company by the
Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without Cause
or by the Executive for Good Reason if, in addition to all other
applicable Terminations, the Executive's employment is terminated
prior to a Change in Control without Cause at the direction of a
Person who has entered into an agreement with Cinergy or any of
its subsidiaries or affiliates, the consummation of which will
constitute a Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if the
circumstances or event which constitutes Good Reason occurs at
the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, the Mid-Career
Benefit portion of Cinergy's Supplemental Executive Retirement Plan,
and Cinergy's Excess Pension Plan, or any successors thereto, the
Executive shall be eligible to participate in the Senior Executive
Supplement portion of Cinergy's Supplemental Executive Retirement
Plan. It is expressly understood, however, that the Executive will not
receive simultaneously benefits from the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan and the Senior
Executive Supplement portion of that plan. Instead, the Executive will
receive benefits from either the Mid-Career Benefit portion of
Cinergy's Supplemental Executive Retirement Plan, the Senior Executive
Supplement portion of that plan, or any contractual, nonqualified
retirement benefit provided under Section 3(b) of this Agreement,
whichever is greatest.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for
which the Executive may qualify (except with respect to any benefit to
which the Executive has waived his rights in writing), nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Commencement
Date with the Company. Amounts which are vested benefits or that the
Executive is otherwise entitled to receive under any benefit, plan,
program, policy or practice of, or any contract or agreement entered into
after the date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as explicitly
modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Charles J. Winger
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: _/s/ James E. Rogers______
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
__/s/ Charles J. Winger_______
Charles J. Winger
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of March, 1999, by and among Cinergy Corp., a
Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), and Larry E. Thomas
(the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will sometimes be
referred to in this Employment Agreement collectively as the "Company".
WHEREAS, the Executive is currently serving as Vice President of the
Company and as President, Energy Delivery Business Unit of the Company, and the
Company desires to secure the continued employment of the Executive in
accordance with this Agreement;
WHEREAS, the Company entered into an Employment Agreement with the
Executive dated effective October 24, 1994 (the "1994 Employment Agreement"), as
amended by a First Amendment dated effective October 24, 1994, a Second
Amendment dated effective January 29, 1997, and a Third Amendment dated
effective May 1, 1998.
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement amending and
restating the 1994 Employment Agreement as of the date first set forth above,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company during the Employment Period (as defined in this
Agreement);
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company, and any successor thereto, agree to employ the Executive,
and the Executive agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").
b. The Employment Period of the 1994 Employment Agreement commenced as of
October 24, 1994 (the "Effective Date") and continued until December
31, 1997; provided, however, that on January 1, 1996, and each January
1 thereafter (the "Renewal Date"), the 1994 Employment Agreement was
automatically extended for one (1) additional year because neither the
Company nor the Executive gave written notice to the other between
December 1 and December 15 prior to any Renewal Date of its intent to
terminate the 1994 Employment Agreement. The Employment Period of the
Executive shall continue uninterrupted under this Agreement until
December 31, 2001; provided however, that on January 1, 2000, and each
Renewal Date thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year if, prior to
such Renewal Date, neither the Company nor the Executive shall have
given written notice to the other between December 1 and December 15
prior to any Renewal Date of its intent to terminate this Agreement.
For that portion of the Employment Period prior to, but not including
the commencement date ("Commencement Date") of this Agreement, the
1994 Employment Agreement, as amended, shall remain in full force and
effect. As of the Commencement Date, the 1994 Employment Agreement
shall terminate and be of no force and effect. The parties to this
Agreement agree that Cinergy shall be responsible for all of the
premises, covenants, and agreements set forth in this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
(the Board of Directors of Cinergy may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may from time to
time determine and shall have such responsibilities, duties and
authority as may be assigned to him from time to time during the
Employment Period by the Board or the Chief Executive Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Commencement Date of this Agreement, the Executive
shall initially serve as Vice President for the Company and President,
Energy Delivery Business Unit of the Company, but consistent with the
foregoing provisions of this Section 2(a), may be assigned to any
other position or positions by either the Board or the Chief Executive
Officer of Cinergy during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the principal executive offices of the
Company, 221 East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially consistent with
the present business travel obligations of executives of the Company
who have positions of authority comparable to that of the Executive,
the Executive shall not be required to relocate to a new principal
place of business which is more that thirty (30) miles from the
current principal place of business of the Company.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than Three Hundred Ninety Thousand Dollars ($390,000.00)
and the amount in effect as of the day before the Commencement Date.
The Board may, from time to time, direct such upward adjustments in
the Annual Base Salary as the Board deems to be necessary or
desirable, including without limitation adjustments in order to
reflect increases in the cost of living. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any increase thereof except for across-the-board salary
reductions similarly affecting all management personnel of the
Company.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier II executives for
compensation purposes, including, but not limited to Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, Cinergy's
Stock Option Plan, Cinergy's Nonqualified Deferred Incentive
Compensation Plan, Cinergy's Excess 401(k) Plan, Cinergy's Non-Union
Employees' 401(k) Plan, Cinergy's Non-Union Employees' Pension Plan,
Cinergy's Supplemental Executive Retirement Plan (the Senior Executive
Supplement), and Cinergy's Excess Pension Plan, or any successors
thereto, except with respect to any plan, practice, policy or program
to which the Executive has waived his rights in writing.
With regard to the Executive's retirement benefits, the Executive
shall be entitled to a "Contractual Retirement Supplement" (paid from
the Corporation's general assets) which extends to the Executive upon
retirement on or after age fifty-five (55) a non-qualified benefit
that, when added to the Executive's benefit under Cinergy's Non-Union
Employees' Pension Plan and Cinergy's Excess Pension Plan, or any
successors thereto, will provide total retirement income equivalent to
a full career employee with equal annual earnings. For purposes of the
preceding sentence, a "full career employee" shall mean an employee
with thirty-five (35) full years of "participation" under Cinergy's
Supplemental Executive Retirement Plan.
Upon his retirement on or after having attained age fifty (50), the
Executive shall be eligible for comprehensive medical and dental
insurance pursuant to the terms of Cinergy's Retirees' Medical Plan
and its Retirees' Dental Plan, or any successors thereto. However, the
Executive shall receive the full subsidy provided by the Company to
retirees for purposes of determining the amount of monthly premiums
due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in the
event that the Executive's employment is terminated following a Change
in Control, the Executive shall immediately be credited with and
vested in thirty-five (35) full years of "Participation" (as that term
is defined in Cinergy's Supplemental Executive Retirement Plan), and
the word "fifty (50)" shall be substituted for the word "fifty-five
(55)" in the first sentence of the second paragraph of this Section
3(b).
The Executive shall be a participant in Cinergy's Annual Incentive
Plan. The Executive shall be paid by the Company an annual benefit of
up to sixty percent (60%) of the Executive's Annual Base Salary, which
benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
The Executive shall be a participant in Cinergy's Long-Term Incentive
Plan (the "LTIP") implemented under Cinergy's 1996 Long-Term Incentive
Compensation Plan. The LTIP consists of two (2) parts: the Value
Creation Plan involving shares of restricted common stock of Cinergy
and options to purchase shares of common stock of Cinergy. The
Executive's annualized target award opportunity under the LTIP shall
be equal to no less seventy percent (70%) of his Annual Base Salary.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership in a country club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy), and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company 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.
e. Relocation Benefits. Following termination of the Executive's
employment for any reason (other than death), the Executive shall be
entitled to reimbursement from the Company for the reasonable costs of
relocating from the Cincinnati, Ohio, area to a new primary residence
in a manner that is consistent with the terms of the Company's
Relocation Program in effect as of the Commencement Date. The expenses
described in this Section shall be "grossed-up" to provide for adverse
tax consequences to the Executive.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Corporation for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) The breach by the Executive of the confidentiality provisions set
forth in Section 9 of this Agreement, or
(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 the Company. For purposes
of this definition of "Cause", no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. Notwithstanding the
above definition of "Cause", the Company may terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon the Company in
Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Employment Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Employment Agreement, or any other
benefit or payment described in Section 3 of this Employment
Agreement, except for across-the-board salary reductions
similarly affecting all management personnel of the Company, and
changes to the employee benefits programs affecting all
management personnel of the Company, provided that such changes
(either individually or in the aggregate) will not result in a
material adverse change with respect to the benefits which the
Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b));
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that:
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)if the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) if the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)if the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended 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 that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person 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 Cinergy or any of its subsidiaries;
(iii)an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period, if the
Company shall terminate the Executive's employment (other than in
the case of a termination for Cause), the Executive shall
terminate his employment for Good Reason or the Executive's
employment shall terminate by reason of death (termination in any
such case referred to as "Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not previously paid;
(2) an amount equal to Cinergy's Annual Incentive Plan
target percentage benefit described in Section 3(b) of
this Agreement for the fiscal year that includes the
Date of Termination multiplied by a fraction the
numerator of which shall be the number of days from the
beginning of such fiscal year to and including the Date
of Termination and the denominator of which shall be
three hundred and sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to
the extent not previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the event
of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by
CitiBank, N.A. and in effect as of the Date of Termination
(the "Prime Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan benefit described in Section
3(b) of this Agreement payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days of
the Date of Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all amounts to which the
Executive would have been entitled had he remained in
employment with the Company until the end of the Employment
Period under Cinergy's Executive Supplemental Life Insurance
Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts and all executive life
insurance benefits whether or not then vested or payable;
and
(4) the Company shall continue, until the end of the Employment
Period, medical and welfare benefits to the Executive and/or
the Executive's family at least equal to those which 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), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W
Plans") of the Company as in effect and applicable generally
to other senior executives of the Company and their families
during the ninety (90) day period immediately preceding the
Date of Termination or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other senior executives of the Company (but on a
prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive
becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans
shall be secondary to those provided under such other plan
during such applicable period of eligibility.
(iii)From and after the occurrence of a Change in Control and in the
event of Termination other than by reason of the Executive's
death, then in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and
in lieu of any other benefits payable pursuant to Section
5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum severance
payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive). The
Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Corporation for Cause or by the Executive Other
Than for Good Reason. Subject to the provisions of Section 7 of this
Employment Agreement, if the Executive's employment shall be
terminated for Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period other than a
termination for Good Reason, the Company shall have no further
obligations to the Executive under this Employment Agreement other
than the obligation to pay to the Executive the Accrued Obligations
and the amounts determined under Section 5(c), plus any other earned
but unpaid compensation, in each case to the extent not previously
paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and Cinergy's
Excess Pension Plan, or any successors thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan. It is expressly
understood, however, that the Executive will receive benefits from
either the Senior Executive Supplement portion of Cinergy's
Supplemental Executive Retirement Plan, or any contractual,
nonqualified retirement benefit provided under Section 3(b) of this
Agreement, whichever is greater.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Employment Agreement for any
reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Employment Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in
a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for
which the Executive may qualify (except with respect to any benefit to
which the Executive has waived his rights in writing), nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Commencement
Date with the Company. Amounts which are vested benefits or that the
Executive is otherwise entitled to receive under any benefit, plan,
program, policy or practice of, or any contract or agreement entered into
after the date hereof with, the Company at or subsequent to the Date of
Termination, shall be payable in accordance with such benefit, plan,
program, policy or practice, or contract or agreement, except as explicitly
modified by this Agreement.
7. Full Settlement: Mitigation. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to
any dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, the Company will reimburse or
pay all legal fees and expenses which the Executive may reasonably incur as
a result of the dispute as required by Section 7.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, all of its subsidiary companies and
affiliates, as well as all successors and assigns thereof all secret,
confidential information, knowledge or data relating to the Company, and
their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, and that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). During the Employment Period
and thereafter, the Executive shall not, without the prior written consent
of the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Company may be required
from time to time to make public disclosure of the terms or existence of
the Executive's employment relationship in order to comply with various
laws and legal requirements. In addition to all other remedies available to
the Company in law and equity, this Agreement is subject to termination by
the Company for Cause under Section 4(b) in the event the Executive
violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit of and be binding
upon the Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined above and any
successor to its businesses and/or assets that assumes and agrees to
perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the
effective date of a succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled
to under this Agreement if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Larry E. Thomas
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, all promises, representations, understandings,
arrangements and prior agreements are merged into this Agreement and
accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have caused this
Employment Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.;
THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By: /s/ James E. Rogers
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
/s/ Larry E. Thomas
Larry E. Thomas
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,349,513
<OTHER-PROPERTY-AND-INVEST> 645,250
<TOTAL-CURRENT-ASSETS> 1,451,977
<TOTAL-DEFERRED-CHARGES> 940,386
<OTHER-ASSETS> 459,022
<TOTAL-ASSETS> 9,846,148
<COMMON> 1,588
<CAPITAL-SURPLUS-PAID-IN> 1,598,884
<RETAINED-EARNINGS> 991,761
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,592,233
0
92,616
<LONG-TERM-DEBT-NET> 2,605,657
<SHORT-TERM-NOTES> 1,052,811
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 25,959
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,476,872
<TOT-CAPITALIZATION-AND-LIAB> 9,846,148
<GROSS-OPERATING-REVENUE> 1,402,279
<INCOME-TAX-EXPENSE> 77,564
<OTHER-OPERATING-EXPENSES> 1,168,130
<TOTAL-OPERATING-EXPENSES> 1,245,694
<OPERATING-INCOME-LOSS> 156,585
<OTHER-INCOME-NET> 32,796
<INCOME-BEFORE-INTEREST-EXPEN> 189,381
<TOTAL-INTEREST-EXPENSE> 60,772
<NET-INCOME> 128,609
1,364
<EARNINGS-AVAILABLE-FOR-COMM> 127,245
<COMMON-STOCK-DIVIDENDS> 71,422
<TOTAL-INTEREST-ON-BONDS> 50,077
<CASH-FLOW-OPERATIONS> 142,652
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
</TABLE>
- --------------------------------------------------------------------------------
CINERGY CORP.
as Issuer
TO
FIFTH THIRD BANK
Trustee
Indenture
Dated as of April 15, 1999
$200,000,000
6.125% Debentures due 2004
- -------------------------------------------------------------------------------
<PAGE>
...............................
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
ss. 310(a)(1)...............................................................609
(a)(2)...............................................................609
(a)(3)....................................................Not Applicable
(a)(4)....................................................Not Applicable
(b)..................................................................608
ss. 311(a)..................................................................613
(b)..................................................................613
ss. 312(a)..................................................................701
(b)...............................................................702(b)
(c)...............................................................702(c)
ss. 313(a)...............................................................703(a)
(b)...............................................................703(a)
(c)...............................................................703(a)
(d)...............................................................703(b)
ss. 314(a)..................................................................704
(b).......................................................Not Applicable
(c)(1)...............................................................102
(c)(2)...............................................................102
(c)(3)....................................................Not Applicable
(d).......................................................Not Applicable
(e)..................................................................514
ss. 315(a)..................................................................601
(b)..................................................................602
(c)..................................................................601
(d)..................................................................601
(e)..................................................................514
ss. 316(a)(1)(A)............................................................512
(a)(1)(B)............................................................513
(a)(2)....................................................Not Applicable
(b)..................................................................508
(c)...............................................................104(c)
ss. 317(a)(1)...............................................................503
(a)(2)...............................................................504
(b).................................................................1003
ss. 318(a)..................................................................107
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions................................................... 1
Section 102. Compliance Certificates and Opinions.......................... 9
Section 103. Form of Documents Delivered to Trustee........................ 9
Section 104. Acts of Holders; Record Dates................................ 10
Section 105. Notices, Etc., to Trustee and Company........................ 11
Section 106. Notice to Holders; Waiver.................................... 11
Section 107. Conflict with Trust Indenture Act............................. 11
Section 108. Effect of Headings and Table of Contents...................... 11
Section 109. Successors and Assigns........................................ 12
Section 110. Separability Clause........................................... 12
Section 111. Benefits of Indenture......................................... 12
Section 112. Governing Law................................................. 12
Section 113. Legal Holidays................................................ 12
Section 114. Certain Matters Relating to Currencies........................ 12
Section 115. Immunity of Incorporators, Stockholders, Officers and Directors13
Section 116. Counterparts...................................................13
Section 117. Assignment to Affiliate....................................... 13
ARTICLE TWO
The Debentures
Section 201. Form, Denominations and Terms................................. 13
Section 202. Execution, Authentication, Delivery and Dating................ 15
Section 203. Temporary Debentures.......................................... 15
Section 204. Debenture Registrar and Paying Agent.......................... 16
Section 205. Replacement Debentures........................................ 16
Section 206. Transfer and Exchange of Debentures........................... 17
Section 207. Payment of Interest; Interest Rights Preserved................ 28
Section 208. Persons Deemed Owners......................................... 29
Section 209. Cancellation.................................................. 30
Section 210. Computation of Interest....................................... 30
Section 211. CUSIP Numbers................................................. 30
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-1-
<PAGE>
ARTICLE THREE
Redemption of Debentures
Section 301. Redemption.................................................... 30
Section 302. Selection by Trustee of Debentures to Be Redeemed............. 32
Section 303. Notice of Redemption.......................................... 32
Section 304. Deposit of Redemption Price................................... 33
Section 305. Debentures Payable on Redemption Date......................... 33
Section 306. Debentures Redeemed in Part................................... 34
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture....................... 34
Section 402. Application of Trust Money.................................... 35
ARTICLE FIVE
Remedies
Section 501. Events of Default............................................. 35
Section 502. Acceleration of Maturity; Rescission and Annulment............ 36
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee37
Section 504. Trustee May File Proofs of Claim.............................. 37
Section 505. Trustee May Enforce Claims Without Possession of Debentures... 38
Section 506. Application of Money Collected................................ 38
Section 507. Limitation on Suits........................................... 38
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest........................................... 39
Section 509. Restoration of Rights and Remedies............................ 39
Section 510. Rights and Remedies Cumulative................................ 39
Section 511. Delay or Omission Not Waiver.................................. 39
Section 512. Control by Holders............................................ 40
Section 513. Waiver of Past Defaults....................................... 40
Section 514. Undertaking for Costs......................................... 40
Section 515. Waiver of Stay or Extension Laws.............................. 40
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-2-
<PAGE>
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities........................... 41
Section 602. Notice of Defaults............................................ 41
Section 603. Certain Rights of Trustee..................................... 41
Section 604. Not Responsible for Recitals.................................. 42
Section 605. May Hold Debentures........................................... 42
Section 606. Money Held in Trust........................................... 42
Section 607. Compensation and Reimbursement................................ 42
Section 608. Disqualification; Conflicting Interests....................... 43
Section 609. Corporate Trustee Required; Eligibility....................... 43
Section 610. Resignation and Removal; Appointment of Successor............. 43
Section 611. Acceptance of Appointment by Successor........................ 44
Section 612. Merger, Conversion, Consolidation or Successor to Business.... 45
Section 613. Preferential Collection of Claims Against Company............. 45
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders..... 45
Section 702. Preservation of Information; Communications to Holders........ 46
Section 703. Reports by Trustee............................................ 46
Section 704. Reports by Company............................................ 46
ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidations and Mergers Permitted.......................... 47
Section 802. Rights and Duties of Successor Company........................ 47
Section 803. Opinion of Counsel............................................ 48
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders............ 48
Section 902. Supplemental Indentures with Consent of Holders............... 48
Section 903. Execution of Supplemental Indentures.......................... 49
Section 904. Effect of Supplemental Indentures............................. 49
Section 905. Conformity with Trust Indenture Act........................... 49
Section 906. Reference in Debentures to Supplemental Indentures............ 50
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-3-
<PAGE>
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest................... 50
Section 1002. Maintenance of Office or Agency.............................. 50
Section 1003. Money for Debentures Payments to Be Held in Trust............ 50
Section 1004. Statement by Officers as to Default.......................... 51
Section 1005. Existence.................................................... 51
Section 1006. Maintenance of Properties.................................... 52
Section 1007. Payment of Taxes and Other Claims............................ 52
Section 1008. Book-Entry System............................................ 52
Section 1009. Liens........................................................ 52
Section 1010. Limitation on Sale and Lease-Back Transactions............... 54
Section 1011. Waiver of Certain Covenants.................................. 55
ARTICLE ELEVEN
Defeasance and Covenant Defeasance
Section 1101. Company's Option to Effect Defeasance or Covenant Defeasance. 55
Section 1102. Defeasance and Discharge..................................... 55
Section 1103. Covenant Defeasance.......................................... 55
Section 1104. Conditions to Defeasance or Covenant Defeasance.............. 56
Section 1105. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions................... 57
Section 1106. Reinstatement................................................ 58
Testimonium ............................................................. 59
Signatures .......................................................... 59
EXHIBITS
EXHIBIT A - FORM OF DEBENTURE
EXHIBIT B - FORM OF CERTIFICATE OF TRANSFER
EXHIBIT C - FORM OF CERTIFICATE OF EXCHANGE
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-4-
<PAGE>
INDENTURE, dated as of April 15, 1999, between CINERGY CORP., a
Delaware corporation, as Issuer (herein called the "Company"), having its
principal office at 139 East Fourth Street, Cincinnati, Ohio 45202, and FIFTH
THIRD BANK, a banking corporation duly organized under the laws of the State of
Ohio, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 6.125%
Debentures due 2004 (herein called the "Debentures," which term includes
Exchange Debentures as defined in Section 101) of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
All things necessary to make the Debentures, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their terms and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE ONE ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. DefinitionsSection 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Debenture Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Debenture, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Attributable Debt" means, with respect to any particular Sale and
Lease-Back Transaction, at the time of determination, the present value
(discounted at the rate of interest implicit in such transaction determined in
accordance with generally accepted accounting principles) of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such Sale and Lease-Back Transaction (including any period for which
such lease has been extended or may, at the option of the lessor, be extended).
"Board of Directors" means, with respect to any Person, either the
board of directors of such Person or any duly authorized committee of that board
or any Person duly authorized to act on behalf of that board.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law, regulation or executive order to close.
"Cedel" means Cedel Bank, societe anonyme.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company either by (i) its Chairman of the Board, its
Vice Chairman, its President, a Vice President, its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee, or (ii) any Person or Persons designated in a Board Resolution, or in a
Company Order previously delivered to the Trustee signed by any of the
foregoing, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means the total of all assets
(including revaluations thereof as a result of commercial appraisals, price
level restatement or otherwise) appearing on the most recent consolidated
balance sheet of the Company as of the date of determination, net of applicable
reserves and deductions, but excluding goodwill, trade names, trademarks,
patents, unamortized debt discount and all other like intangible assets (which
term shall not be construed to include such revaluations), less the aggregate of
the consolidated current liabilities of the Company appearing on such balance
sheet.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
"corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Debenture Custodian" means the Trustee, as custodian with respect to
the Debentures in global form, or any successor entity thereto.
"Debenture Register" and "Debenture Registrar" have the respective
meanings specified in Section 204.
"Debentures" has the meaning specified in the first paragraph of the
Recitals of the Company.
"Debt" means all obligations of the Company evidenced by bonds,
debentures, notes or similar evidences of indebtedness in each case for money
borrowed.
"Default" means any event that is or with the passage of time or the
giving of notice or both would become an Event of Default.
"Defaulted Interest" has the meaning specified in Section 207.
"Defeasance" has the meaning specified in Section 1102.
"Definitive Debenture" means a certificated Debenture registered in the
name of the Holder thereof and issued in accordance with Article Two hereof, in
the form of Exhibit A-1 hereto except that such Debenture shall not bear the
Global Debenture Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Debenture" attached hereto.
"Depositary" means The Depository Trust Company until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean such successor Depositary.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Offer" means an exchange offer pursuant to a registration
statement under the Securities Act, registering securities substantially
identical to the Debentures, as provided by the Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Exchange Debentures" means the Debentures issued in the Exchange Offer
pursuant to Section 206.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, in each case, as in effect in the United States on the date hereof.
"Global Debenture Legend" means the legend set forth in Section
206(f)(ii), which is required to be placed on all Global Debentures issued under
this Indenture.
"Global Debentures" means, individually and collectively, each of the
Restricted Global Debentures and the Unrestricted Global Debentures in the form
of Exhibit A hereto issued in accordance with Section 201, 206(b)(iv) or
206(d)(ii).
"Holder" means a Person in whose name a Debenture is registered in the
Debenture Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Debenture through a Participant.
"Initial Purchasers" means Salomon Smith Barney Inc., Barclays Capital
Inc., Chase Securities Inc. and Morgan Stanley & Co. Incorporated.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Issue Date" means the date the Debentures are originally issued under
this Indenture.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Debentures for use by such Holders
in connection with the Exchange Offer.
"Lien" means any mortgage, lien, pledge, security interest or other
encumbrance; provided, however, that the term "Lien" shall not mean any
easements, rights-of-way, restrictions and other similar encumbrances and
encumbrances consisting of zoning restrictions, leases, subleases, licenses,
sublicenses, restrictions on the use of property or defects in the title
thereto.
"Maturity", when used with respect to any Debenture, means the date on
which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined in
Regulation S.
"Offering Memorandum" means the Offering Memorandum dated April 13,
1999, offering Debentures for sale as provided therein.
"Officers' Certificate" means a certificate signed in the same manner and
by the same Persons as provided for in a Company Request or a Company Order, and
delivered to the Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 1004 shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
(external or in-house) counsel for the Company, and who shall be acceptable to
the Trustee.
"Outstanding", when used with respect to Debentures, means, as of the
date of determination, all Debentures theretofore authenticated and delivered
under this Indenture, except:
(i) Debentures theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Debentures for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Debentures; provided that, if
such Debentures are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Debentures as to which Defeasance has been effected pursuant to
Section 1102; and
(iv) Debentures which have been paid or in exchange for or in lieu of
which other Debentures have been authenticated and delivered pursuant to
this Indenture, other than any such Debentures in respect of which there
shall have been presented to the Trustee proof satisfactory to it that such
Debentures are held by a bona fide purchaser in whose hands such Debentures
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Debentures have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debentures which a Responsible Officer of the Trustee
knows to be so owned shall be so disregarded. Debentures so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Debentures and that the pledgee is not the Company or any
other obligor upon the Debentures or any Affiliate of the Company or of such
other obligor.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Debentures on behalf of the Company. The Trustee
shall initially be the Paying Agent.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Debenture" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Debenture
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Debenture.
"Private Placement Legend" means the legend set forth in Section
206(g)(i) hereof to be placed on all Debentures issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"Purchase Agreement" means the Purchase Agreement entered into by the
Company and the Initial Purchasers in connection with the sale of the
Debentures.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date", when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 16, 1999, between the Company and the Initial
Purchasers, for the benefit of themselves and the Holders, as the same may be
amended or modified from time to time in accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the Business Day immediately preceding such Interest Payment Date.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Debenture" means a Regulation S Temporary Global
Debenture or Regulation S Permanent Global Debenture, as appropriate.
"Regulation S Permanent Global Debenture" means a permanent global
Debenture in the form of Exhibit A-1 hereto bearing the Global Debenture Legend
and the Private Placement Legend, if applicable, and deposited with or on behalf
of and registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Debenture upon expiration of the Restricted Period.
"Regulation S Temporary Global Debenture" means a temporary global
Debenture in the form of Exhibit A-2 hereto bearing the Global Debenture Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Debentures
initially sold in reliance on Rule 903 of Regulation S.
"Responsible Officer" means any officer of the Trustee within the
Corporate Trust Office of the Trustee including any vice president, assistant
vice president, secretary, assistant secretary, trust officer, assistant trust
officer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer of the Trustee to whom
such matter is referred because of such officer's knowledge of and familiarity
with the particular subject.
"Restricted Definitive Debenture" means a Definitive Debenture bearing the
Private Placement Legend.
"Restricted Global Debenture" means a Global Debenture bearing the Private
Placement Legend.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Debenture" means the form of the Debentures initially
sold to QIBs.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any transaction entered into by
the Company with any Person providing for the leasing by the Company of any
assets which have been or are to be sold or transferred by the Company to such
Person.
"Secured Debt" has the meaning specified in Section 1006.
"Securities Act" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Special Record Date" for the payment of Defaulted Interest means a
date fixed by the Trustee pursuant to Section 207.
"Stated Maturity", when used with respect to the Debentures or any
installment of interest thereon, means the date specified in the Debentures as
the fixed date on which the principal thereof or such installment of interest is
due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Global Debenture" means a permanent global Debenture in
the form of Exhibit A-1 attached hereto that bears the Global Debenture Legend
and that has the "Schedule of Exchanges of Interests in the Global Debenture"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Debentures that do not bear
the Private Placement Legend.
"Unrestricted Definitive Debenture" means one or more Definitive
Debentures that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Government Obligation" has the meaning specified in Section 1104.
"U.S. Person" means (i) any individual resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is a
non-U.S. Person who has sole or shared investment discretion with respect to its
assets and no beneficiary of the trust (and no settler, if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. Person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided that the term "U.S. Person" shall not include (A) a
branch or agency of a U.S. Person that is located and operating outside the
United States for valid business purposes as a locally regulated branch or
agency engaged in the banking or insurance business, (B) any employee benefit
plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
organizations set forth in Section 902(o)(7) of Regulation S under the
Securities Act and any other similar international organizations, and their
agencies, affiliates and pension plans.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
Section 102. Compliance Certificates and OpinionsSection 102. Compliance
Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to
enable such individual to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(3) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to TrusteeSection 103. Form of
Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a certificate
or opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record DatesSection 104. Acts of Holders; Record
Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given, made
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to any
record date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Debentures shall be proved by the Debenture
Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Debenture shall bind every future Holder of
the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.
<PAGE>
Section 105. Notices, Etc., to Trustee and CompanySection 105. Notices, Etc., to
Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
Section 106. Notice to Holders; Waiver.Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Debenture Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be deemed conclusively to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture ActSection 107. Conflict with Trust
Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of ContentsSection 108. Effect of
Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and AssignsSection 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability ClauseSection 110. Separability Clause.
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of IndentureSection 111. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders of Debentures, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 112. Governing LawSection 112. Governing Law.
This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the State of New York.
Section 113. Legal HolidaysSection 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Debenture shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Debentures) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity,
provided that no interest shall accrue with respect to such payment for the
period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be.
Section 114. Certain Matters Relating to CurrenciesSection 114. Certain Matters
Relating to Currencies.
Whenever any action or Act is to be taken hereunder by the Holders of
Debentures denominated in different currencies or currency units, then for
purposes of determining the principal amount of Debentures held by such Holders,
the aggregate principal amount of the Debentures denominated in a foreign
currency or currency unit shall be deemed to be that amount of Dollars that
could be obtained for such principal amount on the basis of a spot exchange rate
specified to the Trustee for such series in an Officers' Certificate for
exchanging such foreign currency or currency unit into Dollars as of the date of
the taking of such action or Act by the Holders of the requisite percentage in
principal amount of the Debentures.
The Trustee shall segregate moneys, funds and accounts held by the
Trustee in one currency or currency unit from any moneys, funds or accounts held
in any other currencies or currency units, notwithstanding any provision herein
that would otherwise permit the Trustee to commingle such amounts.
Section 115. Immunity of Incorporators, Stockholders, Officers and
DirectorsSection 115. Immunity of Incorporators, Stockholders, Officers and
Directors.
No recourse shall be had for the payment of the principal of (and
premium, if any), or the interest, if any, on any Debentures of any series, or
for any claim based thereon, or upon any obligation, covenant or agreement of
this Indenture, against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or indirectly through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment of penalty or otherwise; it being expressly agreed
and understood that this Indenture and all the Debentures of each series are
solely corporate obligations, and that no personal liability whatever shall
attach to, or is incurred by, any incorporator, stockholder, officer or
director, past, present or future, of the Company or of any successor
corporation, either directly or indirectly through the Company or any successor
corporation, because of the incurring of the indebtedness hereby authorized or
under or by reason of any of the obligations, covenants or agreements contained
in this Indenture or in any of the Debentures of any series, or to be implied
herefrom or therefrom; and that all such personal liability is hereby expressly
released and waived as a condition of, and as part of the consideration for, the
execution of this Indenture and the issuance of the Debentures of each series.
Section 116. CounterpartsSection 116. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 117. Assignment to AffiliateSection 117. Assignment to Affiliate.
The Company will have the right at all times to assign by indenture
supplemental hereto any of its rights or obligations under the Indenture to a
direct, indirect, or wholly owned Affiliate of the Company; provided that, in
the event of any such assignment, the Company will remain liable for all such
obligations.
ARTICLE TWO ARTICLE TWO
The Debentures
Section 201. Form, Denominations and Terms.Section 201. Form, Denominations and
Terms.
(a) General. The Debentures and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Debentures may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Debentures shall be in denominations of $100,000 and any integral
multiple of $1,000 above that amount. The aggregate principal amount of
Debentures which may be authenticated and delivered under this Indenture is
limited to $200 million, except for Debentures authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Debentures
pursuant to the provisions hereof.
The terms and provisions contained in the Debentures shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Debenture conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Debentures. Debentures issued in global form shall be
substantially in the form of Exhibit A-1 attached hereto (including the Global
Debenture Legend thereon and the "Schedule of Exchanges of Interests in the
Global Debenture" attached thereto). Debentures issued in definitive form shall
be substantially in the form of Exhibit A-1 attached hereto (but without the
Global Debenture Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Debenture" attached thereto). Each Global Debenture
shall represent such of the outstanding Debentures as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Debentures from time to time endorsed thereon and that the aggregate
principal amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Debentures
represented thereby shall be made by the Trustee in accordance with instructions
given by the Holder thereof as required by Section 206 hereof.
(c) Temporary Global Debentures. Debentures offered and sold in
reliance on Regulation S shall be issued initially in the form of Exhibit A-2
attached hereto, which shall be deposited on behalf of the purchasers of the
Debentures represented thereby with the Trustee, at its Cincinnati office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as herein provided. The Restricted Period shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Debenture (except to the extent of any beneficial owners
thereof who acquired an interest therein during the Restricted Period pursuant
to another exemption from registration under the Securities Act and who will
take delivery of a beneficial ownership interest in a Rule 144A Global
Debenture, all as contemplated by Section 206(a)(ii)), and (ii) an Officers'
Certificate from the Company. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Debenture
shall be exchanged for beneficial interests in Regulation S Permanent Global
Debentures pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Debentures, the Trustee shall
cancel the Regulation S Temporary Global Debenture. The aggregate principal
amount of the Regulation S Temporary Global Debenture and the Regulation S
Permanent Global Debentures may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Debenture and the
Regulation S Permanent Global Debentures that are held by Participants through
Euroclear or Cedel Bank.
Section 202. Execution, Authentication, Delivery and Dating.Section 202.
Execution, Authentication, Delivery and Dating.
The Debentures shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President, one of its Vice
Presidents, or its Treasurer. The signature of any of these officers on the
Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Debentures executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Debentures. The Company Order shall specify the amount of
Debentures to be authenticated and whether the Debentures are to be Exchange
Debentures, and shall further specify the amount of such Debentures to be issued
as a Global Debenture and the form thereof. The Trustee in accordance with such
Company Order shall authenticate and deliver such Debentures as in this
Indenture provided and not otherwise.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
Section 203. Temporary Debentures.Section 203. Temporary Debentures.
Pending the preparation of definitive Debentures, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Debentures which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Debentures in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures upon surrender of the temporary Debentures at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Debentures the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Debentures of
authorized denominations. Until so exchanged the temporary Debentures shall in
all respects be entitled to the same benefits under this Indenture as definitive
Debentures.
Section 204. Debenture Registrar and Paying Agent.Section 204. Debenture
Registrar and Paying Agent.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Debenture Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Trustee is hereby
appointed "Debenture Registrar" for the purpose of registering Debentures and
transfers of Debentures as herein provided. The Trustee is also appointed to act
as Debenture Custodian with respect to the Global Debentures.
The Company shall also maintain an office or agency where Debentures may be
presented for payment. The Company initially appoints the Trustee to act as the
Paying Agent for the Debentures. The Depositary is hereby appointed the
Depositary for the Debentures.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Debentures, other than
exchanges pursuant to Section 203 or 906 not involving any transfer.
Section 205. Replacement Debentures.Section 205. Replacement Debentures.
If any mutilated Debenture is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Debenture of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Debenture and
(ii) such debenture or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Debenture has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Debenture, a new
Debenture of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
Section 206. Transfer and Exchange of DebenturesSection 206. Transfer and
Exchange of Debentures.
(a) Transfer and Exchange of Global Debentures. A Global Debenture may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Debentures will
be exchanged by the Company for Definitive Debentures if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 90 days after the date of such
notice from the Depositary or (ii) the Company in its sole discretion determines
that the Global Debentures (in whole but not in part) should be exchanged for
Definitive Debentures and delivers a written notice to such effect to the
Trustee; provided that in no event shall the Regulation S Temporary Global
Debenture be exchanged by the Company for Definitive Debentures prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Debenture
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act or (iii) there shall have occurred and be continuing a
default or an Event of Default and the Trustee receives a request from the
Depositary to issue Definitive Debentures. Upon the occurrence of any of the
preceding events, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Trustee. Global Debentures also may be replaced,
in whole or in part, as provided in Sections 203 and 205. Every Debenture
authenticated and delivered in exchange for, or in lieu of, a Global Debenture
or any portion thereof, pursuant to this Section 206 or Sections 203 or 205,
shall be authenticated and delivered in the form of, and shall be, a Global
Debenture. A Global Debenture may not be exchanged for another Debenture other
than as provided in this Section 206(a), however, beneficial interests in a
Global Debenture may be transferred and exchanged as provided in Section 206(b),
(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Debentures.
The transfer and exchange of beneficial interests in the Global Debentures shall
be effected through the Depositary, in accordance with the provisions of this
Supplemental Indenture and the Applicable Procedures. Beneficial interests in
the Restricted Global Debentures shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Debentures also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Debenture. Beneficial interests in any Restricted Global Debenture may
be transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Debenture in
accordance with the transfer restrictions set forth in the Private
Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Debentures may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global
Debenture may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted Global Debenture.
No written orders or instructions shall be required to be delivered to
the Debenture Registrar to effect the transfers described in this
Section 206(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Debentures. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 206(b)(i) above,
the transferor of such beneficial interest must deliver to the
Debenture Registrar either (A)(1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Debenture in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B)(1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Debenture in an amount equal to the beneficial interest to
be transferred or exchanged and (2) instructions given by the
Depositary to the Debenture Registrar containing information regarding
the Person in whose name such Definitive Debenture shall be registered
to effect the transfer or exchange referred to in (1) above; provided
that in no event shall Definitive Debentures be issued upon the
transfer or exchange of beneficial interests in the Regulation S
Temporary Global Debenture prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Debenture Registrar of any
certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance
with Section 206(f) hereof, the requirements of this Section 206(b)(ii)
shall be deemed to have been satisfied upon receipt by the Debenture
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interest in the Restricted
Global Debentures. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Debentures
contained in this Supplemental Indenture and the Debentures or
otherwise applicable under the Securities Act, the Trustee shall adjust
the principal amount of the relevant Global Debenture(s) pursuant to
Section 206(h).
(iii) Transfer of Beneficial Interests to Another Restricted
Global Debenture. A beneficial interest in any Restricted Global
Debenture may be transferred to a Person who takes delivery thereof in
the form of a beneficial interest in another Restricted Global
Debenture if the transfer complies with the requirements of Section
206(b)(ii) above and the Debenture Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the Rule 144A Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global
Debenture or the Regulation S Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Debenture for Beneficial Interests in the
Unrestricted Global Debenture. A beneficial interest in any Restricted
Global Debenture may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Debenture or transferred
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Debenture if the exchange or
transfer complies with the requirements of Section 206(b)(ii) above
and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Debenture Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Debenture, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Debenture, a certificate from such
holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Debenture Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Debenture Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
at a time when an Unrestricted Global Debenture has not yet been
issued, the Company shall issue and the Trustee shall authenticate,
pursuant to Section 202, one or more Unrestricted Global Debentures in
an aggregate principal amount equal to the aggregate principal amount
of beneficial interests transferred pursuant to subparagraph (B) or
(D) above.
Beneficial interests in an Unrestricted Global Debenture cannot be
exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Debenture.
<PAGE>
(c) Transfer or Exchange of Beneficial Interests for Definitive Debentures.
(i) Beneficial Interests in Restricted Global Debentures to Restricted
Definitive Debentures. If any holder of a beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial interest
for a Restricted Definitive Debenture or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Restricted
Definitive Debenture, then, upon receipt by the Debenture Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Debenture to be reduced accordingly pursuant to Section 206(h)
hereof, and the Company shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Debenture in the appropriate principal amount. Any Definitive Debenture
issued in exchange for a beneficial interest in a Restricted Global
Debenture pursuant to this Section 206(c) shall be registered in such name
or names and in such authorized denomination or denominations as the holder
of such beneficial interest shall instruct the Debenture Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Debentures to the
Persons in whose names such Debentures are so registered. Any Definitive
Debenture issued in exchange for a beneficial interest in a Restricted
Global Debenture pursuant to this Section 206(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer
contained therein.
(ii) Restrictions on Exchanges of Regulation S Temporary Global
Debentures. Notwithstanding Sections 206(c)(i)(A) and (C), a beneficial
interest in the Regulation S Temporary Global Debenture may not be
exchanged for a Definitive Debenture or transferred to a Person who takes
delivery thereof in the form of a Definitive Debenture prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Debenture
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Debentures to
Unrestricted Definitive Debentures. A holder of a beneficial interest in a
Restricted Global Debenture may exchange such beneficial interest for an
Unrestricted Definitive Debenture or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Debenture only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Debentures or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Debenture Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial
interest for a Definitive Debenture that does not bear the
Private Placement Legend, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Debenture that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Debenture Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the Debenture
Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Debentures to
Unrestricted Definitive Debentures. If any holder of a beneficial interest
in an Unrestricted Global Debenture proposes to exchange such beneficial
interest for a Definitive Debenture or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Debenture, then, upon satisfaction of the conditions set forth in Section
206(b)(ii) hereof, the Trustee shall cause the aggregate principal amount
of the applicable Global Debenture to be reduced accordingly pursuant to
Section 206(h), and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Debenture in the appropriate principal amount. Any Definitive
Debenture issued in exchange for a beneficial interest pursuant to this
Section 206(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Debenture Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Debentures to the Persons in whose names such
Debentures are so registered. Any Definitive Debenture issued in exchange
for a beneficial interest pursuant to this Section 206(c)(iv) shall not
bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Debentures for Beneficial
Interests.
(i) Restricted Definitive Debentures to Beneficial Interests
in Restricted Global Debentures. If any Holder of a Restricted
Definitive Debenture proposes to exchange such Debenture for a
beneficial interest in a Restricted Global Debenture or to
transfer such Restricted Definitive Debentures to a Person who
takes delivery thereof in the form of a beneficial interest in a
Restricted Global Debenture, then, upon receipt by the Debenture
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Debenture proposes to exchange such Debenture for a
beneficial interest in a Restricted Global Debenture, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Definitive Debenture is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Debenture is being
transferred to a Non-U.S. Person in an offshore transaction
in accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Debenture is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof, or
(E) if such Restricted Definitive Debenture is being
transferred to the Company or any of its subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Debenture is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Debenture, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Debenture, in the case
of clause (B) above, the Rule 144A Global Debenture, and in the case of
clause (C) above, the Regulation S Global Debenture.
(ii) Restricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of a Restricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Restricted Definitive
Debenture to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Debenture only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Debentures or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Debenture Registrar receives the following:
(1) If the Holder of such Definitive Debentures proposes to
exchange such Debentures for a beneficial interest in the
Unrestricted Global Debenture, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) If the Holder of such Definitive Debentures proposes to
transfer such Debentures to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted
Global Debenture, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), and if the
Debenture Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the Debenture
Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 206(d)(ii), the Trustee shall cancel the Definitive Debentures and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Debenture.
(iii) Unrestricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of an Unrestricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Debenture at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Debenture and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Debentures.
If any such exchange or transfer from a Definitive Debenture to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Debenture has not yet been issued, the
Company shall issue and the Trustee shall authenticate, pursuant to Section 202,
one or more Unrestricted Global Debentures in an aggregate principal amount
equal to the principal amount of Definitive Debentures so transferred.
(e) Transfer and Exchange of Definitive Debentures for Definitive
Debentures. Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 206(e), the Debenture Registrar
shall register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Debenture Registrar the Definitive Debentures duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Debenture Registrar duly executed by such Holder or by the Holder's attorney,
duly authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 206(e).
(i) Restricted Definitive Debentures to Restricted Definitive
Debentures. Any Restricted Definitive Debenture may be transferred to and
registered in the name of Persons who take delivery thereof in the form of
a Restricted Definitive Debenture if the Debenture Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Debentures to Unrestricted Definitive
Debentures. Any Restricted Definitive Debenture may be exchanged by the
Holder thereof for an Unrestricted Definitive Debenture or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Debenture if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Debentures or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Debenture Registrar receives the following:
(1) if the Holder of such Restricted Definitive Debentures
proposes to exchange such Debentures for an Unrestricted
Definitive Debenture, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted Definitive Debentures
proposes to transfer such Debentures to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Debenture, a certificate from such Holder in the form of Exhibit
B hereto, including the certifications in item (4) thereof;
and in each such case set forth in this subparagraph (D), if the Debenture
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Debentures to Unrestricted Definitive
Debentures. A Holder of Unrestricted Definitive Debentures may transfer
such Debentures to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Debenture. Upon receipt of a request to register
such a transfer, the Debenture Registrar shall register the Unrestricted
Definitive Debentures pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and
the Trustee shall authenticate, pursuant to Section 202, (i) one or more
Unrestricted Global Debentures in an aggregate principal amount equal to the
principal amount of the beneficial interests in the Restricted Global Debentures
tendered for acceptance by Persons that certify in the applicable Letters of
Transmittal that (x) they are not broker-dealers, (y) they are not participating
in a distribution of the Exchange Debentures and (z) they are not affiliates (as
defined in Rule 144) of the Company, and accepted for exchange in the Exchange
Offer and (ii) Definitive Debentures in an aggregate principal amount equal to
the principal amount of the Restricted Definitive Debentures accepted for
exchange in the Exchange Offer. Concurrently with the issuance of such
Debentures, the Trustee shall cause the aggregate principal amount of the
applicable Restricted Global Debentures to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Debentures so accepted
Definitive Debentures in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Debentures and Definitive Debentures issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend. (A) Except as permitted by
subparagraph (B) below, each Global Debenture and each Definitive
Debenture (and all Debentures issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THIS DEBENTURE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT
HAS ACQUIRED THIS DEBENTURE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
DEBENTURE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS DEBENTURE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE FIRST SUPPLEMENTAL
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS DEBENTURE IN VIOLATION OF THE
FOREGOING."
(B) Notwithstanding the foregoing, any Global Debenture or
Definitive Debenture issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this
Section 206 (and all Debentures issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Debenture Legend. Each Global Debenture shall bear a
legend in substantially the following form:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL,
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN."
(iii) Regulation S Temporary Global Debenture Legend. The Regulation S
Temporary Global Debenture shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
DEBENTURE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS
EXCHANGE FOR CERTIFICATED DEBENTURES, ARE AS SPECIFIED IN
THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL
DEBENTURE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST
HEREON."
(h) Cancellation and/or Adjustment of Global Debentures. At such time
as all beneficial interests in a particular Global Debenture have been exchanged
for Definitive Debentures or a particular Global Debenture has been redeemed,
repurchased or canceled in whole and not in part, each such Global Debenture
shall be returned to or retained and canceled by the Trustee in accordance with
Section 209. At any time prior to such cancellation, if any beneficial interest
in a Global Debenture is exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global
Debenture or for Definitive Debentures, the principal amount of Debentures
represented by such Global Debenture shall be reduced accordingly and an
endorsement shall be made on such Global Debenture by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Debenture, such other Global Debenture shall be increased accordingly and an
endorsement shall be made on such Global Debenture by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
<PAGE>
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global
Debentures and Definitive Debentures upon the Company's order or at
the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Debenture or to a Holder of a Definitive
Debenture for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to this Section 206).
(iii) The Debenture Registrar shall not be required to register
the transfer of or exchange any Debenture selected for redemption in
whole or in part, except the unredeemed portion of any Debenture being
redeemed in part.
(iv) All Global Debentures and Definitive Debentures issued upon
any registration of transfer or exchange of Global Debentures or
Definitive Debentures shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Global Debentures or Definitive Debentures
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Debentures during a period
beginning at the opening of business 15 days before the day of any
selection of Debentures for redemption under Section 301 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Debenture so selected for
redemption in whole or in part, except the unredeemed portion of any
Debenture being redeemed in part or (c) to register the transfer of or
to exchange a Debenture between a record date and the next succeeding
Interest Payment Date.
(vi) The Trustee shall authenticate Global Debentures and
Definitive Debentures in accordance with the provisions of Section
202.
(vii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 206
to effect a registration of transfer or exchange may be submitted by
facsimile.
Section 207. Payment of Interest; Interest Rights PreservedSection 207. Payment
of Interest; Interest Rights Preserved.
Interest on any Debenture which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Debenture (or one or more Predecessor Debentures) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Debenture Register, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Debentures (or their respective Predecessor Debentures)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Debenture.
Section 208. Persons Deemed Owners.Section 208. Persons Deemed Owners.
Prior to due presentment of a Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Debenture is registered as the owner of such
Debenture for the purpose of receiving payment of principal of, premium (if any)
and (subject to Section 207) interest on such Debenture and for all other
purposes whatsoever, whether or not such Debenture be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 209. Cancellation.Section 209. Cancellation.
The Company at any time may deliver to the Trustee for cancellation
any Debentures previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and may deliver to the
Trustee for cancellation any Debentures previously authenticated hereunder
which the Company has not issued and sold. The Trustee shall cancel and
destroy all Debentures surrendered for registration of transfer, exchange,
payment or cancellation and shall deliver certificates of destruction to
the Company, all in accordance with its customary practices. The Company
may not issue new Debentures to replace Debentures it has paid in full or
delivered to the Trustee for cancellation.
Section 210. Computation of Interest.Section 210. Computation of Interest.
Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 211. CUSIP NumbersSection 211. CUSIP Numbers.
The Company in issuing the Debentures may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee may use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Debentures or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Debentures, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE THREE ARTICLE THREE
Redemption of Debentures
Section 301. RedemptionSection 301. Redemption.
The Debentures shall not be subject to redemption prior to their Stated
Maturity except as follows:
(a) Optional Redemption. The Debentures are redeemable, in whole or
from time to time in part, at the option of the Company on any date (each, a
"Redemption Date") at a redemption price equal to the greater of (a) 100% of the
principal amount of the Debentures to be redeemed and (b) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
(exclusive of interest accrued to such Redemption Date) discounted to such
Redemption Date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either
case, accrued and unpaid interest on the principal amount being redeemed to such
Redemption Date. Notwithstanding the foregoing, installments of interest on the
Debentures that are due and payable on an Interest Payment Date falling on or
prior to the relevant Redemption Date will be payable to the Holders of such
Debentures registered as such at the close of business on the relevant Regular
Record Date according to their terms and the provisions of Sections 207 and 208.
"Treasury Rate" means, with respect to any Redemption Date for
Debentures (a) the yield, under the heading that represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication that is published
weekly by the Board of Governors of the Federal Reserve System and that
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Final Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Redemption Date. As used in the
immediately preceding sentence and in the definition of "Reference Treasury
Dealer Quotations" below, the term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in The City of New York are authorized or obligated by law or executive order to
close.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures.
"Independent Investment Banker" means Salomon Smith Barney Inc. or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date
for Debentures (a) the average of four Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (b) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc.,
Barclays Capital Inc., Chase Securities Inc. and Morgan Stanley & Co.
Incorporated and their respective successors; provided, however, that if any of
the foregoing shall cease to be a primary U.S. Government securities dealer in
the City of New York (a "Primary Treasury Dealer"), the Company will substitute
therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York
City time, on the third Business Day preceding such Redemption Date.
"Final Maturity Date" means April 15, 2004.
Notice of any redemption by the Company will be mailed at least 30 days but
not more than 60 days before the relevant Redemption Date to each holder of
Debentures to be redeemed. If less than all the Debentures are to be redeemed at
the option of the Company, the Trustee will select, in such manner as it deems
fair and appropriate, the Debentures to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the Redemption Date interest will cease to accrue on the Debentures or
portions thereof called for redemption.
Section 302. Selection by Trustee of Debentures to Be RedeemedSection 302.
Selection by Trustee of Debentures to Be Redeemed.
If less than all the Debentures are to be redeemed (unless all the
Debentures are to be redeemed or unless such redemption affects only a single
Debenture), the particular Debentures to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Debentures of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of a portion of the principal amount of any Debenture
of such series, provided that the unredeemed portion of the principal amount of
any Debenture shall be in an authorized denomination (which shall not be less
than the minimum authorized denomination) for such Debenture. If less than all
the Debentures are to be redeemed (unless such redemption affects only a single
Debenture), the particular Debentures to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Debentures not previously called for redemption in accordance with the preceding
sentence.
The Trustee shall promptly notify the Company in writing of the
Debentures selected for redemption as aforesaid and, in case of any Debentures
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Debenture, whether such
Debenture is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Debenture shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Debenture.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debentures redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debentures which has been or is to be
redeemed.
Section 303. Notice of RedemptionSection 303. Notice of Redemption.
Notice of redemption shall be given to each Holder of Debentures to be
redeemed, at such Holder's address appearing in the Debenture Register.
All notices of redemption shall identify the Debentures to be redeemed
and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Debentures consisting of more than a
single Debenture are to be redeemed, the identification (and, in the case of
partial redemption of any such Debentures, the principal amounts) of the
particular Debentures to be redeemed and, if less than all the Outstanding
Debentures consisting of a single Debenture are to be redeemed, the principal
amount of the particular Debenture to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and
payable upon each such Debenture to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where each such Debenture is to be surrendered for
payment of the Redemption Price.
Notice of redemption of Debentures to be redeemed shall be irrevocable.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice. In
any case, failure to give such notice by mail or any defect in the notice to the
Holder of any Debenture designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Debenture.
Section 304. Deposit of Redemption PriceSection 304. Deposit of Redemption
Price.
On or before any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Debentures
which are to be redeemed on that date.
Section 305. Debentures Payable on Redemption DateSection 305. Debentures
Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Debentures shall cease to bear interest. Upon surrender of any
such Debenture for redemption in accordance with said notice, such Debenture
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 207.
Section 306. Debentures Redeemed in PartSection 306. Debentures Redeemed in
Part.
Any Debenture which is to be redeemed only in part shall be surrendered
at the office or agency of the Company designated pursuant to Section 1002
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Debenture without service charge, a new Debenture
or Debentures and of like tenor, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Debenture so surrendered; provided,
however, that a Depositary need not surrender a Global Debenture for a partial
redemption and may be authorized to make a notation on such Global Debenture of
such partial redemption. In the case of a partial redemption of a Global
Debenture, the Depositary, and in turn, the participants in the Depositary,
shall have the responsibility to select any Debentures to be redeemed by random
lot.
ARTICLE FOUR ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.Section 401. Satisfaction
and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Debentures theretofore authenticated and delivered (other than
(i) Debentures which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306 and (ii) Debentures for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all such Debentures not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable or
(ii) will become due and payable at their Stated Maturity within
one year, and the Company, in the case of (A)(i) or (ii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness evidenced by such Debentures not theretofore
delivered to the Trustee for cancellation, for principal and interest
to the date of such deposit (in the case of Debentures which have
become due and payable) or to the Stated Maturity, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Debentures and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
ARTICLE FIVE ARTICLE FIVE
Remedies
Section 501. Events of Default.Section 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Debenture when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of any Debenture at its
Maturity; or
(3) default in the performance, or breach, of any covenant, agreement
or condition of the Company in this Indenture or the Debentures, and
continuance of such default for a period of 90 days after there has been
given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 35% in principal
amount of the Outstanding Debentures a written notice specifying such
default and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(4) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 90
consecutive days; or
(5) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action.
Section 502. Acceleration of Maturity; Rescission and AnnulmentSection 502.
Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than those specified in Sections 501(4)
and 501(5)) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 35% in principal amount of the Outstanding
Debentures may declare the principal of all the Debentures to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal shall become
immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default
specified in Sections 501(4) or 501(5), all Outstanding Debentures will ipso
facto become due and payable without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Debentures, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest on all Debentures,
(B) the principal of any Debentures which have become due otherwise
than by such declaration of acceleration and interest thereon at the rate
borne by the Debentures,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607; and
(2) all Events of Default, other than the nonpayment of the principal of
Debentures which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
TrusteeSection 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Debenture when
such interest becomes due and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the principal of any Debenture at the
Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by the Debentures, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to the Debentures occurs and is
continuing, the Trustee may in its discretion, subject to applicable law,
proceed to protect and enforce its rights and the rights of the Holders by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of ClaimSection 504. Trustee May File
Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Debentures), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of DebenturesSection
505. Trustee May Enforce Claims Without Possession of Debentures.
All rights of action and claims under this Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607, be for the ratable benefit of the
Holders of the Debentures in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.Section 506. Application of Money
Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal of, premium
(if any) or interest, upon presentation of the Debentures and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for principal of,
premium (if any) and interest on the Debentures in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Debentures for principal and interest, respectively.
THIRD: The balance, if any, to the Company.
Section 507. Limitation on Suits.Section 507. Limitation on Suits.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 35% in principal amount of the Outstanding
Debentures shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Debenture shall have the right, which is absolute and unconditional, to
receive payment of the principal of, premium (if any) and (subject to Section
307) interest on such Debenture on the respective Stated Maturities expressed in
such Debenture (or, in the case of redemption, on the Redemption Date), and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.Section 509. Restoration of
Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.Section 510. Rights and Remedies
Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not WaiverSection 511. Delay or Omission Not
Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by HoldersSection 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures may on behalf of the Holders of all the Debentures waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of, premium (if any) or interest
on any Debenture, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 514. Undertaking for Costs.Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of the suit, and the court may assess reasonable
costs, including reasonable attorney's fees, against any party litigant in the
suit having due regard to the merits and good faith of the claims or defenses
made by the party litigant; but the provisions of this Section shall not apply
to any suit instituted by the Company, to any Suit instituted by the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the outstanding Debentures of any series,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of or interest on any Debenture on or after the Stated Maturity of
such Debenture (or, in the case of redemption, on or after the Redemption Date).
Section 515. Waiver of Stay or Extension Laws.Section 515. Waiver of Stay or
Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.Section 601. Certain Duties and
Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults.Section 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 501(3), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
Section 603. Certain Rights of Trustee.Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors of the Company may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
Section 604. Not Responsible for Recitals.Section 604. Not Responsible for
Recitals.
The recitals contained herein and in the Debentures, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Debentures. The Trustee shall not be accountable for the use or
application by the Company of the Debentures or the proceeds thereof.
Section 605. May Hold Debentures.Section 605. May Hold Debentures.
The Trustee, any Paying Agent, any Debenture Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Debentures and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Debenture Registrar or such other agent.
Section 606. Money Held in Trust.Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
Section 607. Compensation and ReimbursementSection 607. Compensation and
Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the reasonable costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Company under this Section 607 shall survive the
satisfaction and discharge of this Indenture. To secure the Company's payment
obligations in this Section 607, the Trustee shall have a lien prior to the
Debentures on all money or property held or collected by the Trustee, except
that held in trust to pay principal and interest on the Debentures. Such lien
shall survive the satisfaction and discharge of this Indenture. When the Trustee
incurs expenses or renders services after a Default or an Event of Default
specified in Sections 501(4) or 501(5) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under U.S. Code,
Title 11 or any other similar foreign, federal or state law for the relief of
debtors.
Section 608. Disqualification; Conflicting Interests.Section 608.
Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required; Eligibility.Section 609. Corporate
Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.Section 610.
Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Debentures, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Debentures
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Debenture for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.Section 611. Acceptance of
Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and, such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 612. Merger, Conversion, Consolidation or Successor to BusinessSection
612. Merger, Conversion, Consolidation or Successor to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated with the same effect
as if such successor Trustee had itself authenticated such Debentures.
Section 613. Preferential Collection of Claims Against Company.Section 613.
Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor). For purposes of Section 311(b) (4) and
(6) of the Trust Indenture Act, the following terms shall mean:
(a) "cash transaction" means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the goods
or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange, acceptance
or obligation which is made, drawn, negotiated or incurred by the Company for
the purpose of financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is secured by documents
evidencing title to, possession of, or a lien upon, the goods, wares or
merchandise or the receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security, provided the security
is received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation.
ARTICLE SEVEN ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.Section
701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) on each Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Debenture Registrar; provided, however, that no such list need be
furnished so long as the Trustee is acting as Debenture Registrar.
Section 702. Preservation of Information; Communications to Holders.Section 702.
Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Debentures, and the corresponding
rights and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
(c) Every Holder of Debentures, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 703. Reports by Trustee.Section 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Reports so required to be transmitted at stated intervals of not more than 12
months shall be transmitted no later than January 31, in each calendar year,
commencing in January 2000.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Debentures are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Debentures are listed on any stock exchange.
Section 704. Reports by Company.Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. In the event the Company is not subject to Section 13 or 15(d) of
the Exchange Act, it shall file with the Trustee upon request the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
ARTICLE EIGHT ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidations and Mergers Permitted.Section 801. Consolidations
and Mergers Permitted.
Nothing contained in this Indenture or in any of the Debentures shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of the assets or property of the Company or its
successor or successors as an entirety, or substantially as an entirety, to any
other corporation (whether or not affiliated with the Company or its successor
or successors) authorized to acquire and operate the same; provided, however,
the Company hereby covenants and agrees that, upon any such consolidation,
merger, sale, conveyance, transfer or other disposition, the due and punctual
payment of the principal of (premium, if any) and interest on all of the
Debentures, according to their tenor, and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be kept or
performed by the Company, shall be expressly assumed, by supplemental indenture
(which shall conform to the provisions of the Trust Indenture Act as then in
effect) satisfactory in form to the Trustee executed and delivered to the
Trustee by the entity formed by such consolidation, or into which the Company
shall have been merged, or by the entity which shall have acquired such assets
or property.
Section 802. Rights and Duties of Successor CompanySection 802. Rights and
Duties of Successor Company.
In case of any such consolidation, merger, sale, conveyance, transfer
or other disposition and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of,
premium, if any, and interest on all of the Debentures and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Company, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as the party of the first part, and thereupon the predecessor corporation shall
be relieved of all obligations and covenants under this Indenture and the
Debentures. Such successor corporation thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company or any other
predecessor obligor on the Debentures, any or all of the Debentures issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor company, instead
of the Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Debentures which previously shall have been signed and delivered by the officers
of the predecessor Company to the Trustee for authentication, and any Debentures
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Debentures so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Debentures theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Debentures had been issued at the date of the
execution hereof.
Nothing contained in this Indenture or in any of the Debentures shall
prevent the Company from merging into itself or acquiring by purchase or
otherwise all or any part of the property of any other corporation (whether or
not affiliated with the Company).
Section 803. Opinion of CounselSection 803. Opinion of Counsel.
The Trustee may receive an Opinion of Counsel as conclusive evidence
that any such consolidation, merger, sale, conveyance, transfer or other
disposition, and any such assumption, comply with the provisions of this
Article.
ARTICLE NINE ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of HoldersSection 901.
Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Debentures; or
(2) to add to the covenants of the Company for the benefit of the Holders,
or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the Holders;
or
(4) to cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this Indenture, provided
that such action pursuant to this Clause (4) shall not adversely affect the
interests of the Holders in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations which may be therein contained.
Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
Holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 902.
Section 902. Supplemental Indentures with Consent of HoldersSection 902.
Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Debentures, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Debenture affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any Debenture, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the place of payment where, or the coin or currency in which, any
Debenture or interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1011, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Debenture affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental IndenturesSection 903. Execution of
Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, in
addition to the documents required by Section 102, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental IndenturesSection 904. Effect of
Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture ActSection 905. Conformity with
Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 906. Reference in Debentures to Supplemental IndenturesSection 906.
Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Debentures.
ARTICLE TEN ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and InterestSection 1001. Payment of
Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of, premium (if
any) and interest on the Debentures in accordance with the terms of the
Debentures and this Indenture.
Section 1002. Maintenance of Office or AgencySection 1002. Maintenance of Office
or Agency.
The Company shall maintain in the City of Cincinnati, an office or agency
where Debentures may be presented or surrendered for payment, where Debentures
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Debentures and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
City of Cincinnati, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
Section 1003. Money for Debentures Payments to Be Held in TrustSection 1003.
Money for Debentures Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it shall,
on or before each due date of the principal of or interest on any of the
Debentures, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of, premium (if any) or interest on any
Debentures, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Debentures) in the making
of any payment in respect of the Debentures, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Debenture and remaining unclaimed for 18 months after such principal, premium or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Debenture shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
Section 1004. Statement by Officers as to DefaultSection 1004. Statement by
Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 1005. ExistenceSection 1005. Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holders.
Section 1006. Maintenance of PropertiesSection 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary.
Section 1007. Payment of Taxes and Other ClaimsSection 1007. Payment of Taxes
and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 1008. Book-Entry SystemSection 1008. Book-Entry System.
If the Debentures cease to trade in the Depositary's book-entry
settlement system, the Company covenants and agrees that it shall use reasonable
efforts to make such other book-entry arrangements that it determines are
reasonable for the Debentures.
Section 1009. Liens.
The Company shall not issue, assume or guarantee any Debt secured by a
Lien upon any property or assets (other than cash) of the Company without at the
same time effectively providing that the outstanding Debentures (together with
any other indebtedness or obligation then existing or thereafter created ranking
equally with the Debentures) shall be secured equally and ratably with (or prior
to) such Debt for so long as such Debt shall be so secured. The foregoing
restriction on Liens shall not, however, apply to:
(a) Liens in existence on the date of original issuance of the Debentures;
(b) (i) any Lien created or arising over any property which is acquired,
constructed or created by the Company, but only if (A) such Lien secures only
principal amounts (not exceeding the cost of such acquisition, construction or
creation) of Debt incurred for the purposes of such acquisition, construction or
creation, together with any costs, expenses, interest and fees incurred in
relation thereto or a guarantee given in respect thereof, (B) such Lien is
created or arises on or before 90 days after the completion of such acquisition,
construction or creation and (C) such Lien is confined solely to the property so
acquired, constructed or created; or (ii) any Lien to secure Debt of the Company
incurred in connection with a specifically identifiable project where the Lien
relates and is confined to a property or properties (including, without
limitation, shares or other rights of ownership in the entity(ies) which own
such property or project) involved in such project and acquired by the Company
after the date of original issuance of the Debentures and the recourse of the
creditors in respect of such Debt is limited to any or all of such project and
property (including the foregoing shares or other rights of ownership;
(c) any Lien securing amounts not more than 90 days overdue or otherwise
being contested in good faith;
(d) (i) rights of financial institutions to offset credit balances in
connection with the operation of cash management programs established for the
benefit of the Company or in connection with the issuance of letters of credit
for the benefit of the Company; (ii) any Lien securing Debt of the Company
incurred in connection with the financing of accounts receivable; (iii) any Lien
incurred or deposits made in the ordinary course of business, including, but not
limited to, (A) any mechanics', materialmen's, carriers', workmen's, vendors' or
other like Liens and (B) any Liens securing amounts in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
any Lien upon specific items of inventory or other goods and proceeds of the
Company securing obligations of the Company in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods; (v) any Lien incurred or
deposits made securing the performance of tenders, bids, leases, trade contracts
(other than for borrowed money), statutory obligations, surety bonds, appeal
bonds, government contracts, performance bonds, return-of-money bonds and other
obligations of like nature incurred in the ordinary course of business; (vi) any
Lien constituted by a right of set off or right over a margin call account or
any form of cash or cash collateral or any similar arrangement for obligations
incurred in respect of the hedging or management of risks under transactions
involving any currency or interest rate swap, cap or collar arrangements,
forward exchange transaction, option, warrant, forward rate agreement, futures
contract or other derivative instrument of any kind; (vii) any Lien arising out
of title retention or like provisions in connection with the purchase of goods
and equipment in the ordinary course of business; and (viii) any Lien securing
reimbursement obligations under letters of credit, guarantees and other forms of
credit enhancement given in connection with the purchase of goods and equipment
in the ordinary course of business;
(e) (i) Liens on any property or assets acquired from a corporation which
is merged with or into the Company and is not created in anticipation of any
such transaction (unless such Lien was created to secure or provide for the
payment of any part of the purchase price of such corporation) and (ii) any Lien
on any property or assets existing at the time of acquisition thereof by the
Company and which is not created in anticipation of such acquisition (unless
such Lien was created to secure or provide for the payment of any part of the
purchase price of such property or assets);
(f) (i) Liens required by any contract or statute in order to permit the
Company to perform any contract or subcontract made by it with or at the request
of a governmental entity or any department, agency or instrumentality thereof,
or to secure partial, progress, advance or any other payments by the Company to
such governmental unit pursuant to the provisions of any contract or statute;
(ii) any Lien securing industrial revenue, development or similar bonds issued
by or for the benefit of the Company, provided that such industrial revenue,
development or similar bonds are nonrecourse to the Company; and (iii) any Lien
securing taxes or assessments or other applicable governmental charges or
levies;
(g) (i) any Lien which arises pursuant to any order of
attachment, distraint or similar legal process arising in connection
with court proceedings and any Lien which secures the reimbursement
obligation for any bond obtained in connection with an appeal taken in
any court proceeding, so long as the execution or other enforcement of
such Lien arising pursuant to such legal process is effectively stayed
and the claims secured thereby are being contested in good faith and,
if appropriate, by appropriate legal proceedings, or any Lien in favor
of a plaintiff or defendant in any action before a court or tribunal as
security for costs or expenses; or (ii) any Lien arising by operation
of law or by order of a court or tribunal or any lien arising by an
agreement of similar effect, including, without limitation, judgement
liens; or
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Liens referred to in
the foregoing clauses, for amounts not exceeding the principal amount of the
Debt secured by the Lien so extended, renewed or replaced, provided that such
extension, renewal or replacement Lien is limited to all or a part of the same
property or assets that were covered by the Lien extended, renewed or replaced
(plus improvements on such property or assets).
Notwithstanding the foregoing restrictions, the Company shall be
entitled, in addition to amounts permitted by this Section 1009, to create
Indebtedness secured by Liens to the extent provided in the second paragraph of
Section 1010.
Section 1010. Limitation on Sale and Lease-Back Transactions.
So long as any of the Debentures remain Outstanding, the Company shall
not enter into any Sale and Lease-Back Transaction unless: (i) such transaction
involves a lease for a temporary period not to exceed three years; (ii) such
transaction is between the Company and an affiliate of the Company; (iii) the
Company would be entitled to incur Debt secured by a Lien on the assets or
property involved in such transaction at least equal in amount to the
Attributable Debt with respect to such Sale and Lease-Back Transaction, without
equally and ratably securing the Debentures, as provided in Section 1009; (iv)
such transaction is entered into within 90 days after the initial acquisition by
the Company of the assets or property subject to such transaction; (v) the
Company, within the 12 months preceding the sale or transfer or the 12 months
following the sale or transfer, regardless of when such sale or transfer may
have been made by the Company, applies in the case of a sale or transfer for
cash, an amount equal to the net proceeds thereof and, in the case of a sale or
transfer otherwise than for cash, an amount equal to the fair value of the
assets so leased at the time of entering into such arrangement (as determined by
the Board of Directors of the Company), (a) to the retirement of Debt, incurred
or assumed by the Company which by its terms matures at, or is extendible or
renewable at the option of the obligor to, a date more than 12 months after the
date of incurring, assuming or guaranteeing such Debt or (b) to investment in
any assets of the Company.
Notwithstanding the restrictions on Liens set forth in Section 1009 and
restrictions on Sale and Lease-Back Transactions set forth in this Section 1010,
the Company shall be entitled, in addition to amounts permitted under such
restrictions, to create Indebtedness secured by Liens, or to enter into Sale and
Lease-Back Transactions; provided that, after giving effect thereto, the
aggregate outstanding amount of all such Indebtedness secured by Liens plus
Attributable Debt resulting from such Sale and Lease-Back Transactions shall not
exceed 10% of Consolidated Net Tangible Assets.
Section 1011. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in this Indenture if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Debentures shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.
ARTICLE ELEVEN ARTICLE ELEVEN
Defeasance and Covenant Defeasance
Section 1101. Company's Option to Effect Defeasance or Covenant
DefeasanceSection 1101. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may elect, at its option at any time, to have Section 1102 or
Section 1103 applied to the Outstanding Debentures upon compliance with the
conditions set forth below in this Article. Any such election shall be evidenced
by a Board Resolution.
Section 1102. Defeasance and DischargeSection 1102. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to the Outstanding Debentures, the Company shall be deemed to have been
discharged from its obligations with respect to such Debentures as provided in
this Section on and after the date the conditions set forth in Section 1104 are
satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Debentures and to have satisfied all
its other obligations under such Debentures and this Indenture insofar as such
Debentures are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), subject to the following
which shall survive until otherwise terminated or discharged hereunder: (1) the
rights of Holders of such Debentures to receive, solely from the trust fund
described in Section 1104 and as more fully set forth in such Section, payments
in respect of the principal of, premium (if any) and interest on such Debentures
when payments are due, (2) the Company's obligations with respect to such
Debentures under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (4) this Article.
Subject to compliance with this Article, the Company may exercise its option (if
any) to have this Section applied to the Outstanding Debentures notwithstanding
the prior exercise of its option (if any) to have Section 1103 applied to such
Debentures.
Section 1103. Covenant DefeasanceSection 1103. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Debentures, (1) the Company shall be released from its
obligations under Sections 801, 1006 and 1007, and (2) the occurrence of any
event specified in Sections 501(3) (with respect to any of Sections 1006 and
1007) or 501(4) shall be deemed not to be or result in an Event of Default, in
each case with respect to such Debentures as provided in this Section on and
after the date the conditions set forth in Section 1104 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Debentures, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(3)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Debentures shall be unaffected thereby.
Section 1104. Conditions to Defeasance or Covenant DefeasanceSection 1104.
Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1102 or Section 1103 to the then Outstanding Debentures:
(1) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee which satisfies the requirements
contemplated by Section 609 and agrees to comply with the provisions of this
Article applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefits of the Holders of such Debentures, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or any such other qualifying trustee)
to pay and discharge, the principal of, premium (if any) and interest on such
Debentures on the respective Stated Maturities, in accordance with the terms of
this Indenture and such Debentures. As used herein, "U.S. Government Obligation"
means (x) any security which is (i) a direct obligation of the United States of
America for the payment of which the full faith and credit of the United States
of America is pledged or (ii) an obligation of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i) or (ii),
is not callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation
which is specified in Clause (x) above and held by such bank for the account of
the holder of such depositary receipt, or with respect to any specific payment
of principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
(2) In the event of an election to have Section 1102 apply to such
Debentures, the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of
this instrument, there has been a change in the applicable Federal income tax
law, in either case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of such Debentures will not recognize
gain or loss for Federal income tax purposes as a result of the deposit,
Defeasance and discharge to be effected with respect to such Debentures and will
be subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit, Defeasance and discharge
were not to occur.
(3) In the event of an election to have Section 1103 apply to such
Debentures, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of such Debentures will not recognize
gain or loss for Federal income tax purposes as a result of the deposit and
Covenant Defeasance to be effected with respect to such Debentures and will be
subject to Federal income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit and Covenant Defeasance were not
to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that such Debentures, if then listed on any securities
exchange, will not be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Debentures shall have occurred
and be continuing at the time of such deposit or, with regard to any such event
specified in Sections 501(5) and 501(6), at any time on or prior to the 90th day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to
have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Debentures are in default within the meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the trust
arising from such deposit constituting an investment company within the meaning
of the Investment Company Act unless such trust shall be registered under such
Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
Section 1105. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous ProvisionsSection 1105. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 1106, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1104 in respect of the
Outstanding Debentures shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Debentures and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Debentures, of all sums due and to become due thereon in respect of
principal and interest, but money so held in trust need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1104 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Debentures.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1104 with
respect to the Outstanding Debentures which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to such Debentures.
Section 1106. ReinstatementSection 1106. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to the Outstanding Debentures by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
obligations under this Indenture and such Debentures from which the Company has
been discharged or released pursuant to Section 1102 or 1103 shall be revived
and reinstated as though no deposit had occurred pursuant to this Article with
respect to such Debentures, until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust pursuant to Section 1105 with respect
to such Debentures in accordance with this Article; provided, however, that if
the Company makes any payment of principal of or interest on any such Debenture
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Debentures to receive such payment
from the money so held in trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
CINERGY CORP.
By /s/ William L. Sheafer
William L. Sheafer
Vice President and Treasurer
FIFTH THIRD BANK
By /s/ Kerry R. Byrne
Kerry R. Byrne
Vice President
<PAGE>
EXHIBIT A-1
------------------
(FORM OF FACE OF DEBENTURE)
No. R-1 $__________
CUSIP No.
CINERGY CORP.
6.125% DEBENTURE DUE 2004
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.])footnote reference)FICIAL INTEREST
HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT
HAS ACQUIRED THIS DEBENTURE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS DEBENTURE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR (E) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS DEBENTURE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION"
AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS DEBENTURE IN VIOLATION OF THE
FOREGOING.
- --------
1 This should be included only if the Debenture is issued in global form.
CINERGY CORP., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereafter referred to), for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum
of Two Hundred Million and No/100 Dollars ($200,000,000) on April 15, 2004, and
to pay, on April 15 and October 15 of each year, commencing October 15, 1999
(each an "Interest Payment Date"), interest thereon from April 16, 1999 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for at the rate of 6.125% per annum, until the principal hereof is paid
or made available for payment. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of twelve 30-day
months. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the Business Day immediately preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Debentures of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture.
Subject to agreements with or the rules of DTC or any successor
book-entry security system or similar system with respect to Global Debentures,
payment of the principal of (and premium, if any) and interest on this Debenture
will be made at the office or agency of the Company maintained for that purpose
in the City of Cincinnati, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Debenture Register.
Any payment on this Debenture due on any day which is not a Business
Day need not be made on such day, but may be made on the next succeeding
Business Day with the same force and effect as if made on the due date and no
interest shall accrue for the period from and after such date, unless such
payment is a payment at maturity or upon redemption, in which case interest
shall accrue thereon at the stated rate for such additional days.
As used herein, "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the City
of New York are authorized or obligated by law, regulation or executive order to
close.
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-1-1
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed.
CINERGY CORP.
By..............................
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Debentures of the series designated therein referred
to in the within-mentioned Indenture.
FIFTH THIRD BANK,
as Trustee
By...............................
Authorized Signatory
A-1-2
<PAGE>
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized issue of securities of the Company
(herein called the "Debentures"), issued under an Indenture, dated as of April
15, 1999 (the "Indenture") between the Company and Fifth Third Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Debentures and of the terms
upon which the Debentures are, and are to be, authenticated and delivered. This
Debenture is one of the series designated on the face hereof, limited in
aggregate principal amount to $200,000,000. Capitalized terms used herein shall
have the meanings assigned to them in the Indenture unless otherwise indicated.
The Debentures will not be subject to any sinking fund.
The Debentures are redeemable, in whole or from time to time in part, at the
option of the Company on any date (each, a "Redemption Date") at a redemption
price equal to the greater of (a) 100% of the principal amount of the Debentures
to be redeemed and (b) the sum of the present values of the remaining scheduled
payments of principal and interest thereon (exclusive of interest accrued to
such Redemption Date) discounted to such Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on
the principal amount being redeemed to such Redemption Date. Notwithstanding the
foregoing, installments of interest on the Debentures that are due and payable
on an Interest Payment Date falling on or prior to the relevant Redemption Date
will be payable to the Holders of such Debentures registered as such at the
close of business on the relevant Regular Record Date according to the terms
hereof and the provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for Debentures (a)
the yield, under the heading that represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication that is published weekly by
the Board of Governors of the Federal Reserve System and that establishes yields
on actively traded United States Treasury securities adjusted to constant
maturity under the caption "Treasury Constant Maturities," for the maturity
corresponding to the Comparable Treasury Issue (if no maturity is within three
months before or after the Final Maturity Date, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue shall be
determined and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (b) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semiannual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
Business Day preceding the Redemption Date. As used in the immediately preceding
sentence and in the definition of "Reference Treasury Dealer Quotations" below,
the term "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Independent Investment Banker as having a maturity comparable to the
remaining term of the Debentures to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures.
"Independent Investment Banker" means Salomon Smith Barney Inc. or, if such firm
is unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee
after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date for the
Debentures (a) the average of four Reference Treasury Dealer Quotations for such
Redemption Date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (b) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc., Barclays
Capital Inc., Chase Securities Inc. and Morgan Stanley & Co. Incorporated and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company will substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York
City time, on the third Business Day preceding such Redemption Date.
"Final Maturity Date" means April 15, 2004.
Notice of any redemption by the Company will be mailed at least 30 days but not
more than 60 days before the relevant Redemption Date to each holder of
Debentures to be redeemed. If less than all the Debentures are to be redeemed at
the option of the Company, the Trustee will select, in such manner as it deems
fair and appropriate, the Debentures to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after the
Redemption Date interest will cease to accrue on the Debentures or portions
thereof called for redemption.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of the Debentures or certain restrictive covenants and Events of
Default with respect to the Debentures upon compliance with certain conditions
set forth in the Indenture.
If an Event of Default with respect to Debentures shall occur and be continuing,
the principal of the Debentures may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures any time by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Debentures at the time Outstanding. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Debentures at the time Outstanding, on behalf of the Holders of all Debentures,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Debenture shall be conclusive and
binding upon such Holder and upon all future Holders of this Debenture and of
any Debenture issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Debenture.
As provided in and subject to the provisions of the Indenture, the Holder of
this Debenture shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Debentures, the Holders of not less than 35% in principal amount of the
Debentures at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonably satisfactory indemnity, and the Trustee shall
not have received from the Holders of a majority in principal amount of
Debentures at the time Outstanding a direction inconsistent with such request,
and shall have failed to institute any such proceeding, for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Debenture for the enforcement
of any payment of principal hereof or any premium or interest hereon on or after
the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium (if any) and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed. As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Debenture is registrable in
the Debenture Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company in any place where the principal
of, premium (if any) and interest on this Debenture are payable, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Debenture Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Debentures of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Debentures are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple of $1,000 above that amount.
The transfer of Debentures may be registered and Debentures may be exchanged as
provided in the Indenture.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Debenture is registered as the owner hereof for all
purposes, whether or not this Debenture be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Debenture which are defined in the Indenture shall have
the meanings assigned to them in the Supplemental Indenture unless otherwise
indicated.
A-1-3
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________ to transfer this Debenture on the
books of the Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name
appears on the face of this Debenture)
Signature Guarantee:
A-1-4
<PAGE>
[SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE]2
[The following exchanges of a part of this Global Debenture for an
interest in another Global Debenture or for a Definitive Debenture, or exchanges
of a part of another Global Debenture or Definitive Debenture, for an interest
in this Global Debenture, have been made:
Principal
Amount of Amount of Amount of Signature of
decrease in increase in this Global authorized
Principal Principal Debenture officer of
Amount of Amount of following such Trustee or
Date of this Global this Global decrease (or Debenture
Exchange Debenture Debenture increase) Custodian)
- --------
1 This should be included only if the Debenture is issued in global form.
A-1-5
<PAGE>
EXHIBIT A-2
(FACE OF REGULATION S TEMPORARY GLOBAL DEBENTURE)
The form of this Debenture shall be the same as Exhibit A-1, except
that the following new paragraph shall be added immediately prior to the first
paragraph thereof:
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL DEBENTURE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED DEBENTURES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL DEBENTURE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
A-2-1
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Re: 6.125% Debentures due 2004 of Cinergy Corp.,
a Delaware corporation
Reference is hereby made to the Indenture dated as of April 15, 1999 among
Cinergy Corp. (the "Company") and Fifth Third Bank, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in
the principal amount of $___________ in such Debenture[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest
in the 144A Global Debenture or a Definitive Debenture Pursuant to Rule 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Debenture is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Debenture for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable Blue Sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Debenture will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Rule 144A
Global Debenture and/or the Definitive Debenture and in the Indenture and the
Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest
in the Temporary Regulation S Global Debenture, the Regulation S Global
Debenture or a Definitive Debenture pursuant to Regulation S. The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore Debentures market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Debenture will be subject to the restrictions
on Transfer enumerated in the Private Placement Legend printed on the Regulation
S Global Debenture, the Temporary Regulation S Global Debenture and/or the
Definitive Debenture and in the Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Debenture pursuant to any provision of the Securities
Act other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Debentures and Restricted Definitive Debentures and pursuant
to and in accordance with the Securities Act and any applicable Blue Sky
securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Debenture or an Unrestricted Definitive Debenture.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable Blue Sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Debenture will no longer be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Debentures, on Restricted
Definitive Debentures and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable Blue Sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Debenture will
no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Debentures, on
Restricted Definitive Debentures and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
B-1
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Debenture (CUSIP __________), or
(ii) |_| Regulation S Global Debenture (CUSIP __________); or
(b) |_| a Restricted Definitive Debenture.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Debenture (CUSIP __________), or
(ii) |_| Regulation S Global Debenture (CUSIP __________), or
(iii)|_| Unrestricted Global Debenture without Transfer restrictions
(CUSIP __________); or
(b) |_| a Restricted Definitive Debenture; or
(c) |_| an Unrestricted Definitive Debenture,
in accordance with the terms of the Indenture.
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Re: 6.125% Debentures due 2004 of Cinergy Corp.,
a Delaware corporation
(CUSIP: )
Reference is hereby made to the Indenture dated as of April 15, 1999 among
Cinergy Corp. (the "Company") and Fifth Third Bank, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________________, (the "Owner") owns and proposes to exchange the
Debenture[s] or interest in such Debenture[s] specified herein, in the principal
amount of $_______________ in such Debenture[s] or interests (the "Exchange").
In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Debentures or Beneficial Interests in a
Restricted Global Debenture for Unrestricted Definitive Debentures or Beneficial
Interests in an Unrestricted Global Debenture
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to beneficial interest in an Unrestricted Global Debenture. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Debenture for a beneficial interest in an Unrestricted Global Debenture
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Debentures and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Debenture is being acquired in compliance with any applicable Blue Sky
securities laws of any state of the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Unrestricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the
Definitive Debenture is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Debenture is being acquired in compliance with any applicable Blue Sky
securities laws of any state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in an Unrestricted Global Debenture. In connection with the
Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest
in an Unrestricted Global Debenture, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable Blue Sky securities
laws of any state of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Debenture to
Unrestricted Definitive Debenture. In connection with the Owner's Exchange of a
Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the
Owner hereby certifies (i) the Unrestricted Definitive Debenture is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Debentures and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive
Debenture is being acquired in compliance with any applicable Blue Sky
securities laws of any state of the United States.
2. Exchange of Restricted Definitive Debentures or Beneficial Interests in
Restricted Global Debentures for Restricted Definitive Debentures or Beneficial
Interests in Restricted Global Debentures.
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Restricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
a Restricted Definitive Debenture with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Debenture is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Debenture issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Debenture and in the Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in a Restricted Global Debenture. In connection with the
Exchange of the Owner's Restricted Definitive Debenture for a beneficial
interest in the [CHECK ONE] "144A Global Debenture," "Regulation S Global
Debenture," with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Debentures and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable Blue Sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Debenture and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
[Insert Name of Owner]
By:
Name:
Title:
C-1
