Document:

Exhibit 10.1

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”),
effective as of April 11, 2006 (the “Effective
Date”), is entered into by and between Vistula Communications Services, Inc., a
Delaware corporation (the “Company”),
and John K. Markley (the “Employee”).

 

WHEREAS, the Company
desires to employ the Employee upon the terms and conditions set forth in this
Agreement; and

 

WHEREAS, the
Employee desires to be employed by the Company, and to perform the duties
assigned to him hereunder, upon the terms and conditions set forth herein;

 

NOW, THEREFORE, in
consideration of the transactions contemplated hereby and the respective
covenants and agreements of the parties herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:

 

1.     Employment.
The Company hereby agrees to employ the Employee, and the Employee hereby
agrees to serve the Company, on the terms and conditions hereinafter set forth
in this Agreement.

 

2.     Term.
The employment of the Employee by the Company hereunder shall commence on
the Effective Date and continue until terminated by either party in accordance
with this Agreement (the “Employment
Period”).

 

3.     Position
and Duties. During the Employment Period, the Employee shall serve as
the Company’s “Chief Executive Officer,” responsible for directing the overall
business and operations of the Company, and shall faithfully perform all duties
and responsibilities consistent with his position as Chief Executive Officer
and the duties and responsibilities relating to the business or operations of
the Company (or its subsidiaries) consistent with his position as a senior
executive officer as the Company’s Board of Directors (the “Board of Directors”), any committee
thereof or the Chairman of the Board of Directors may direct from time to time.
Without limiting the generality of the foregoing, it is anticipated that the
Employee’s primary duties and responsibilities shall be overseeing and
directing the overall business and operations of the Company, including
pursuing or reviewing potential financings, mergers and acquisitions,
generating or approving business plans, establishing corporate strategy,
pursuing or reviewing material commercial ventures and relationships, steering
the Company’s operations toward management approved forecasts and budgets, and
advising the Board of Directors on material business matters affecting the
Company. In the performance of the Employee’s

 

 

duties and responsibilities hereunder, the Employee shall regularly
report to the Board of Directors. In addition, the Employee agrees to serve as
a director of the Company, and, subject to the fiduciary duties of its
directors, the Company agrees to use its best efforts to nominate and cause the
Employee to be elected as a director of the Company as soon as reasonably
possible on or after the date hereof.

 

The Employee will fulfill his duties and responsibilities to the
Company hereunder from his residence office currently located in Campton, New
Hampshire, or at such location in the Northeastern United States as he
reasonably determines. Notwithstanding the foregoing, the Employee agrees to
travel as is otherwise necessary, in the Board of Directors’ reasonable
determination, to fulfill his duties and responsibilities as set forth in this
Agreement.

 

4.     Best
Efforts. The Employee’s employment with the Company shall be full time,
and the Employee shall devote his best efforts and all of his business time to
the performance of his duties and responsibilities as set forth in this
Agreement. The Employee shall not, while an employee of the Company, engage in
any other gainful occupation or activity which conflicts with or impinges upon
the full and faithful performance of the Employee’s duties, or otherwise
violates any other term or provision of this Agreement (or any other agreement
entered into by the Employee in connection with his employment with the
Company) or any Company policy. Notwithstanding the above, the Employee shall
not be prohibited from being involved in civic, religious or charitable
activities (including serving on not-for-profit boards) and serving on boards
and committees of for-profit entities so long as such activities do not
materially interfere with the performance of his duties hereunder or otherwise
violate any provision of this Agreement, provided,
the Board of Directors has given its previous consent in each instance to such
activities, which consent shall not be unreasonably withheld, conditioned or
delayed.

 

5.     Compensation.

 

(a)           Base
Compensation. During the Employment Period, the Company shall pay to the
Employee an annual base salary of Two Hundred and Ninety Thousand U.S. Dollars
($290,000.00) (as adjusted pursuant to this Section 5(a), the “Base Compensation”). The Base
Compensation shall be paid to the Employee in arrears and in accordance with
the normal payroll schedules of the Company in effect from time to time, less
all appropriate withholdings for federal, state and local taxes, employee
benefits and other mandated charges. Subject to any contractual restrictions or
other legal prohibitions binding upon the Company, the Board of Directors
agrees to review annually the Base Compensation of the Employee and to consider
any adjustments that may be warranted in the discretion of the Board of
Directors and as seem fair and prudent after taking into account the success of
the Company, the Company’s cash position and forecast, and the compensation of
other similarly situated executives in the business segments in which the

 

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Company operates; provided, that there shall be no obligation on the
Company to increase the Base Compensation.

 

(b)           Stock
Options. Partly as an inducement to the Employee’s acceptance of employment
with the Company hereunder, the Company shall grant to the Employee two
non-qualified stock options to purchase an aggregate of 4,000,000 shares of the
Company’s common stock under the Company’s Amended and Restated 2004 Stock
Incentive Plan (the “Plan”), subject to the Employee’s execution and delivery
of a stock option agreement, the form, terms and provisions of which shall be
substantially consistent with those implemented by the Company for executive
officer stock option grants, generally. One of such options shall be for
3,052,000 shares of the Company’s common stock. The other option shall be for
948,000 shares of the Company’s common stock and the grant of such option shall
be subject to the ratification by the stockholders of the Company of an
increase in the number of shares under the Plan from 8,000,000 shares to at
least 16,000,000 shares at the next annual or special meeting of stockholders
of the Company. The options shall vest as follows: 16.67% of the shares covered
by each such option shall vest on the six month anniversary of the date of
grant of such option, and (iii) an additional 2.78% of the shares covered by
each such option shall vest on each monthly anniversary of the original date of
grant of such option thereafter, until fully vested. The options shall also
provide for acceleration of vesting upon a “change of control” (as defined in
the applicable option agreement) of the Company and a termination of employment
without Cause (as defined herein). The Company agrees to use its commercially
reasonable efforts to register the Employee’s option shares subject to an
option, at its expense, on a registration statement on Form S-8 covering Plan
shares, or like registration statement, as soon as reasonably practicable
following the grant of such option (or if such grant is conditional, upon the
satisfaction of the conditions of the grant). The exercise price of the options
shall be the fair market value of the common stock of the Company as determined
by the Board of Directors (or compensation committee of the Board of Directors)
on the date of the option grant. The Employee shall also be eligible for
additional equity compensation grants and awards, from time to time, in the
discretion of the Board of Directors and subject to applicable Company plans
governing the terms and eligibility for such grants and awards.

 

6.     The
Employee’s Benefits. As an employee of the Company, the Employee shall
be entitled to receive and enjoy the following benefits during the Employment
Period:

 

(a)           Participation
in Company Benefit Plans. The Employee shall be entitled to participate in
and to receive benefits under all applicable employee benefit plans, policies,
practices, programs and arrangements offered by the Company from time to time
during the Employment Period to its employees generally, subject to and on a
basis consistent with the terms, conditions, and overall administration of such
plans and arrangements by the Company. Notwithstanding the provisions of this
Section 6(a), nothing contained herein is intended, or shall be construed, to
require the Company to

 

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institute or maintain any benefit plan or arrangement, provided, however, that the benefits offered
to the Employee shall be comparable to those offered to the Company’s senior
executive personnel. In addition, nothing contained herein shall limit the
right of the Company to modify, suspend or discontinue any and all benefit
plans or arrangements.

 

(b)           Vacation;
Sick and Personal Leave; Holidays. The Employee shall be entitled to an
amount of paid vacation, sick leave and personal leave as is made available to
comparably situated Company personnel generally pursuant to then current
Company policy; provided that the Employee
shall be eligible to accrue up to at least four (4) weeks of paid vacation per
full calendar year of employment in accordance with the Company’s vacation
accrual policy. In addition to the foregoing, the Employee shall be entitled to
receive all paid holidays given by the Company to its U.S. employees generally.

 

(c)           Business
Expense Reimbursement. The Company shall promptly reimburse the Employee
for all reasonable, ordinary and necessary business expenses paid or incurred
by the Employee in performing his duties and responsibilities hereunder, provided
that the Employee shall have (i) submitted such documentation as may be
requested by the Company in accordance with the expense policies of the Company
in effect from time to time to substantiate each reimbursement request and (ii)
otherwise complied with the expense reimbursement policies of the Company then
in effect. Without limiting the foregoing, the Company’s reimbursement
obligation hereunder shall not include reimbursement for country club dues or
similar payments for which the Company is not entitled to take a deduction on
its federal income tax return.

 

(d)           Indemnification.
The Employee, his heirs and his estate shall be eligible for indemnification
and advancement of expenses to the fullest extent authorized under the
Company’s bylaws, certificate of incorporation and applicable law. During such
time as the Employee shall serve as an officer or director of the Company, the
Company shall maintain a D&O insurance or similar policy in form and
coverage reasonably acceptable to the Board of Directors, and the Employee
shall receive the same benefits provided to any of the Company’s officers and
directors under such policy and any additional D&O insurance or similar
policy, indemnification agreement, Company policy or the certificate of
incorporation or bylaws of the Company.

 

7.     Termination.
The Employee’s employment with the Company hereunder may be terminated as
follows:

 

(a)           Termination
for Cause. The Employee’s employment with the Company may be terminated by
the Board of Directors at any time for “Cause.” 
As used herein, “Cause”
shall mean, as reasonably determined by the Board of Directors: (i) theft,
fraud, embezzlement, misappropriation of assets, gross negligence, willful
misconduct, breach of fiduciary duty or trust by the Employee in each case in
connection with the performance of his duties hereunder; (ii) a material breach
of this Agreement by

 

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the Employee (which shall be deemed to include, without limitation, a
breach of Sections 8, 9, 10, 11 and 13 hereof by the Employee); (iii) the
Employee’s conviction of, or plea of guilty or nolo
contendere to, theft, fraud, a felony, or a crime or civil violation
which involves moral turpitude; (iv) the Employee’s breach of (A) insider
trading policies of the Company, or (B) applicable securities laws, rules or
regulations (including rules of the Securities and Exchange Commission or any
other regulatory authority including the NASD or any stock exchange) in
connection with the trading of securities; (v) the Employee’s repeated or
ongoing failure to comply with the reasonable directions and instructions of
the Board of Directors in connection with the performance of the Employee’s
duties and responsibilities hereunder (provided, however, in no
event shall the Company’s financial performance or failure to achieve
projections in the absence of any of the expressly stated elements of “Cause”
in this Section 7(a) be considered Cause hereunder); (vi) the Employee’s
material breach of the Company’s employment policies and procedures established
from time to time by the Company including, without limitation, the Company’s
code of ethics adopted by its Board of Directors; or (vii) the Employee’s use
or possession of illegal drugs or excessive use of alcohol, while performing
Company duties or while on Company premises; provided, however,
that, with respect to the conditions described in this items (i), (ii),
(iv)(A), (v), and (vi), no determination of Cause shall be made by the Board of
Directors on such basis unless the Board of Directors has provided written
notice to the Employee of the existence of such condition, the Employee has
been granted a reasonable opportunity to appear before the Board of Directors
in order to respond to such determination, and the Employee fails to cure such
condition within fourteen (14) days to the reasonable satisfaction of the Board
of Directors (except for breaches of this Agreement (including, without
limitation, breaches of Sections 8, 9, 10 and 11 of this Agreement) which cannot
be cured and for which the Company and the Board of Directors need not give any
opportunity to cure). If the Company is represented by outside counsel during
the Employee’s appearance before the Board of Directors hereunder, the Employee
shall have the right to appear with his own counsel, at his cost and expense.
Upon termination for Cause, the Company shall have no obligation to provide the
Employee with any severance hereunder; provided,
that, the Company shall pay to the Employee all Base Compensation and accrued
benefits owing as of the date of termination in accordance with the Company’s
normal practices then in effect.

 

(b)           Termination
for Death or Disability. The Employee’s employment hereunder shall
terminate immediately upon the Employee’s death or Disability. For purposes
hereof, the term “Disability”
shall be used herein as defined in the Company’s disability insurance policy in
effect with respect to the Employee or, absent same, shall mean the Employee’s
inability, by reason of physical or mental incapacity (determined by a licensed
physician reasonably acceptable to the Employee and the Board of Directors), to
materially perform the essential functions of his job, with or without a
reasonable accommodation by the Company, for an aggregate of ninety (90) days
during any twelve (12) month period, as the case may be. Once the Employee has
become

 

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Disabled, payment of any further Base Compensation and benefits, if
any, shall be subject to the Company’s disability insurance coverage in effect
with respect to the Employee. If the Employee’s employment shall be terminated
due to death or Disability, the Company shall have no severance obligations to
the Employee or the Employee’s heirs, beneficiaries, administrators, executors
or other personal representatives under this Agreement; provided, that, the Company shall pay to the Employee all Base
Compensation and accrued benefits owing as of the date of termination in
accordance with the Company’s normal practices then in effect.

 

(c)           Termination
Without Cause. The Employee’s employment with the Company may be terminated
by the Board of Directors at any time without Cause, but in the event of any
such termination, the Company shall pay for the severance payments and benefits
described in this Section 7(c). In the event that a termination without Cause
occurs at any time on or before the Employee’s twelve month anniversary of
employment, he shall be entitled to receive, as severance, (1) twelve (12)
months of Base Compensation, which amount shall be paid over time in accordance
with the Company’s payroll practice, less all withholdings required under then
current Company policy and applicable law or regulation, and (2) continued
medical benefits under the Company’s general employee plans for twelve (12)
months following the termination date (with respect to this clause (2), the
Company shall continue to carry the Employee under the Company’s medical plans
and pay the Company’s portion of the costs associated with continuing such
coverage under the Plans, with the Employee continuing to be responsible for
his portion of such payments via applicable withholdings, as per normal Company
policies governing the provision of medical benefits coverage to all employees of
the Company). In the event that a termination without Cause occurs at any time
after the Employee’s twelve month anniversary of employment, he shall be
entitled to receive, as severance, (1) eighteen (18) months of Base
Compensation, which shall be paid over time in accordance with the Company’s
payroll practice, less all withholdings required under then current Company
policy and applicable law or regulation, and (2) continued medical benefits
under the Company’s general employee plans for eighteen (18) months following
the termination date (with respect to this clause (2), the Company shall
continue to carry the Employee under the Company’s medical plans and pay the
Company’s portion of the costs associated with continuing such coverage under
the Plans, with the Employee continuing to be responsible for his portion of
such payments via applicable withholdings, as per normal Company policies
governing the provision of medical benefits coverage to all employees of the
Company). The Employee’s receipt of any severance under this Section 7(c) shall
be conditioned upon and subject to the Employee’s prior execution of a standard
employment release and waiver agreement in a form reasonably satisfactory to
the Company (the “Release”).
No payments of severance hereunder shall be made until the revocation period,
if any, referred to in the Release shall have expired. In addition, the parties
hereto agree to accelerate the Base Compensation severance payments
contemplated hereby as necessary to avoid triggering the employee excise tax
provisions of the American Jobs Creation Act of 2004.

 

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(d)           Termination
by the Employee. The Employee’s employment with the Company may be
terminated by the Employee at any time with or without Good Reason. In the
event of a termination of the Employee’s employment with the Company by the
Employee upon his voluntary termination or resignation (other than a
termination of employment with the Company by the Employee for “Good Reason,”
as defined below), the Company shall not have any obligation to provide
Employee with any severance or benefits hereunder; provided, that, the Company shall pay to the Employee all Base
Compensation and accrued benefits owing as of the date of termination in accordance
with the Company’s normal practices then in effect. The Employee agrees to
provide the Board of Directors with at least sixty (60) days’ prior written
notice of his voluntary cessation of employment hereunder, subject to the Board
of Directors’ right to waive, upon notice to the Employee, such requirement and
accelerate the effectiveness of the Employee’s voluntary cessation of
employment to an earlier time and date (but not earlier than the date of the
Employee’s giving of notice of his voluntary cessation of employment to the
Board of Directors), it being mutually understood and agreed that the Company
shall to continue to pay or furnish to the Employee his Base Compensation and
benefits during the time of continued employment, if any, following the Employee’s
notice of his voluntary cessation of employment up through the effective date
of termination. A termination of the Employee’s employment with the Company by
the Employee for Good Reason shall be treated as a termination without Cause
under Section 7(c). For purposes hereof, the term “Good Reason” shall mean that (i) the
Employee’s primary place of employment is moved by the Board of Directors (not
at the request of the Employee) to a location greater than 50 miles from his
current location (without a corresponding permission from the Board of
Directors allowing the Employee to telecommute), provided, the Employee
has delivered written notice of termination in respect of this clause (i)
within thirty (30) days following the execution and delivery by the Company at
the Board of Directors’ direction of a lease or other binding agreement
committing the Company to such relocation, the terms of which were authorized
and approved by the Board of Directors (provided,
if the Board of Directors notifies the Employee of the Board of Directors’
decision to cancel its planned relocation, the Board of Directors shall be
deemed to have cured the event of “Good Reason” and the Employee’s notice of
resignation shall be deemed revoked, and the status quo shall be maintained,
unless the Employee has already accepted employment with another employer);
(ii) the Company has breached any material term of this Agreement; (iii) a
material reduction in the Employee’s duties and responsibilities as the
Company’s Chief Executive Officer hereunder, (iv) a material demotion in the
Employee’s position at the Company, or (v) the Company has reduced the
Employee’s Base Compensation due hereunder; provided, however,
that with respect to each of the conditions described above in items (i), (ii),
(iii), (iv) and (v), the Employee may not establish “Good Reason” unless he has
provided written notice to the Board of Directors of the existence of such
condition and the Company fails to cure such condition within the 30-day period
following receipt of such notice.

 

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(e)           Public
Statements. Upon termination of the Employee’s employment for any reason,
the Board of Directors of the Company will direct and control the issuance and
content of any announcement, release or other statement to any employees,
commercial partners, insurers, directors, shareholders and clients of the
Company and its subsidiaries, and the press.

 

(f)            Status
upon Termination. The termination of the Employee’s employment hereunder,
for any reason whatsoever, shall constitute the termination of this Agreement
(subject to the surviving provisions hereof as set forth in Section 14(k)
hereof) and the Employee’s effective termination or resignation from any other
positions or duties with the Company and all of its subsidiaries, including his
membership on the Board of Directors of the Company and its subsidiaries,
unless otherwise mutually agreed to by the parties hereto.

 

8.     Non-competition
and Confidentiality.

 

(a)           Non-competition.
During the Employment Period and for the longer of (i) one year following the
date of termination of employment hereunder or (ii) the period in which
the Employee receives severance under the provisions of Section 7(c) or Section
7(d) (collectively, the “Covered Period”),
the Employee agrees not to engage in any Competitive Activity anywhere in the
United States or any foreign territory where the Company or any subsidiary of
the Company is then conducting business on behalf of any party other than the
Company or any subsidiary of the Company. As used herein, the term “Competitive Activity” shall mean the
following:  (i) any line of business
engaged in by the Company or any of its subsidiaries during the one-year period
prior to termination of the Employee’s employment which accounted for greater
than 25% of the gross revenues of the Company and its subsidiaries, on a
consolidated basis (a “Competitive
Business”); (ii) serving as an officer, director, employee,
consultant, advisor, agent or representative of any person, corporation,
partnership, limited liability company, sole proprietorship, association or
other business enterprise engaged in a Competitive Business (each a “Competitive Enterprise”);
(iii) owning or acquiring, directly or indirectly, any interest in any
Competitive Enterprise; (iv) soliciting any employee of the Company or any
of the Company’s subsidiaries to leave the employ of the Company or such
subsidiary or hiring any of the foregoing persons; provided, however, by way of clarification, the Employee shall not
be deemed in breach of this clause (iv) in the event he or his new employer
launches a general job search (through advertisement, job posting, or
recruiter) that does not exclusively target the Company’s employees; or (v)
soliciting or inducing, explicitly or implicitly, any Client (as defined below)
to withdraw, curtail or cancel its business relationships with the Company or
any subsidiary thereof, provided, however,
the Employee shall not be deemed in breach of this clause (v) as a result of
mass advertising or mass marketing campaigns aimed at prospects on customer
lists obtained by the Employee or his new employer from sources other than the
Company, and not in violation of this Agreement, and which do not expressly
target the Company’s Clients in particular. The Company acknowledges and agrees
that nothing contained in this Section

 

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8 shall be interpreted to prohibit or preclude the Employee, (x) in
connection with the fulfillment of his duties and responsibilities hereunder,
from terminating the services of any employee, agent or other representative of
the Company (or any subsidiary thereof) at the Board of Directors’ request or
in the ordinary course of business, or (y) from owning less than five percent
(5%) of the capital stock or other equity interests of any publicly-traded
company listed on a major securities exchange or securities market (e.g.,
NASDAQ).

 

As used herein, the term “Client”
shall mean any customer of the Company or any person or entity which was a
customer of the Company within the past year, in each case as of the end of the
Employment Period, as evidenced by the records of the Company or its
subsidiaries.

 

(b)           Confidentiality.
During and after the Employment Period, the Employee shall not, except as may
otherwise be required by law, directly or indirectly disclose to any person or
entity, or use or cause to be used in any manner adverse to the interests of
the Company or any subsidiary thereof, any Confidential Information (as defined
below). The Employee agrees that, upon the termination or expiration of the
Employment Period, all tangible Confidential Information and Company property
and duplicates thereof in the possession or control of the Employee, in any form
or format, shall forthwith be returned to the Company and shall not be retained
by the Employee or furnished or communicated to any third party in any form
whatsoever. Prior to any disclosure of Confidential Information required by
law, the Employee shall provide prompt notice thereof to the Company’s Board of
Directors and chief financial officer so as to allow the Company to seek
appropriate injunctive relief and shall reasonably assist the Company in its
efforts to limit such disclosure. The Employee further acknowledges and agrees
to abide by his continuing obligation to not make use of any material
non-public information with respect to the Company in a manner violative of
applicable securities laws.

 

As used in this Section 8(b), the term “Confidential Information” shall mean the following:  (i) information disclosed to the Employee or
known by the Employee as a consequence of the Employee’s relationship with the
Company or any subsidiary thereof, not generally known in the industry of the
Company’s (or a subsidiary’s) business, about the Company’s or any of its
subsidiary’s business, employees, customers, directors, officers, partners, or
shareholders; sales or marketing methods; business plans, methods and
forecasts; customer, prospect and vendor lists; finances, products, or
services; or trade marks, trade secrets and other intellectual property,
including without limitation, material non-public information about the
Company’s or any of its subsidiary’s operations or business; and (ii)
information disclosed to the Employee or known by the Employee as a consequence
of the Employee’s relationship with the Company or any subsidiary thereof, not
generally known in the businesses in which the customers of the Company or its
subsidiaries are or may be engaged, about the business, products, processes,
trade information and services of any such customer.

 

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(c)           Severability.
The invalidity or unenforceability of this Section 8 in any respect shall not
affect the validity or enforceability of this Section 8 in any other respect,
or of any other provision of this Agreement. In the event that any provision of
this Section 8 shall be held invalid or unenforceable by a court of competent
jurisdiction by reason of the geographic or business scope or the duration
thereof or for any other reason, such invalidity or unenforceability shall
attach only to the particular aspects of such provision found invalid or
unenforceable as applied and shall not affect or render invalid or
unenforceable any other provision of this Section 8 or the enforcement of such
provision in other circumstances, and, to the fullest extent permitted by law,
this Section 8 shall be construed as if the geographic or business scope or the
duration of such provision or other basis on which such provision has been
challenged had been more narrowly drafted so as not to be invalid or
unenforceable, so that the Agreement is construed broadly so as to capture as
much of the original intent as possible.

 

9.     Business
Opportunities. During the Covered Period and in accordance with
Employee’s obligations under applicable law, the Employee agrees to bring all
business opportunities to the Company relating to or otherwise associated with
the business or businesses conducted by the Company or a subsidiary thereof
during the Employment Period, and any businesses reasonably related thereto.

 

10.  Rights
to Work Product. The Employee agrees that all work performed by the
Employee pursuant hereto shall be the sole and exclusive property of the
Company, in whatever stage of development or completion. During the Employment
Period, the Employee will disclose to the Company all ideas, concepts,
inventions, product ideas, new products, discoveries, methods, software,
business plans and business opportunities developed by him during working time
through the use of Company resources, which relate directly or indirectly to
the Company’s business or the business of any of its subsidiaries or their
respective clients, including without limitation, any process, product or
product improvement, product ideas, new products, discoveries, methods or
software which may or may not be patentable or copyrightable, and any trade
names, trademarks or slogans. With respect to any copyrightable works prepared
in whole or in part by the Employee pursuant to this Agreement, including
compilations of lists or data, the Employee agrees that all such works will be
prepared as “work-for-hire” within the meaning of the Copyright Act of 1976, as
amended (the “Act”), of
which the Company shall be considered the “author” within the meaning of the
Act. In the event (and to the extent) that such works or any part or element
thereof is found as a matter of law not to be a “work-for-hire” within the
meaning of the Act, the Employee hereby assigns to the Company the sole and
exclusive right, title and interest in and to all such works, and all copies of
any of them, without further consideration, and agrees, to the extent
reasonable under the circumstances, to cooperate with the Company to register,
and from time to time to enforce, all patents, copyrights and other rights and
protections relating to such works in any and all countries. To that end, the
Employee agrees to execute and deliver all documents requested by the Company
in connection therewith, and the Employee hereby irrevocably designates and
appoints the Company as the Employee’s agent and

 

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attorney-in-fact (and affords the Company an irrevocable proxy, coupled
with an interest) to act for and on behalf of the Employee and in the
Employee’s stead to execute, register and file any such applications, and to do
all other lawfully permitted acts to further the registration, protection and
issuance of patents, copyrights or similar protections with the same legal
force and effect as if executed by the Employee. The Company shall reimburse
the Employee for all reasonable and documented costs and expenses incurred by
the Employee pursuant to this Section 10.

 

11.  No
Disparaging Statements. The Employee and the Company mutually agree
that the Employee and the Company’s officers, directors and human resources
personnel shall refrain from making any disparaging statements, either orally
or in writing, about the other party, any subsidiary of the Company, or about
any directors, officers, shareholders, commercial partners, employees, agents
or other representatives of the Company or any subsidiary thereof. The
foregoing shall not restrict the Company from disclosing to third parties the
Employee’s termination of employment with the Company or, where appropriate,
the circumstances thereof.

 

12.  Injunctive
Relief. The Employee acknowledges and agrees that the Company and its
subsidiaries are engaged in a highly competitive business and that the
protections of the Company and each such subsidiary set forth in Sections 8, 9,
10 and 11 of this Agreement are fair and reasonable and of vital concern to the
Company and its subsidiaries. Further, the Employee acknowledges and agrees
that monetary damages for any violation of Sections 8, 9, 10 or 11 will not
adequately compensate the Company and its subsidiaries with respect to any such
violation. Therefore, in the event of a breach by the Employee of any of the
terms and provisions contained in Sections 8, 9, 10 or 11 of this Agreement,
the Company (and/or its affected subsidiaries) shall be entitled to institute
legal proceedings to obtain damages for any such breach and/or to enforce the
specific performance of this Agreement by the Employee and to enjoin the
Employee from any further violations. The remedies available to the Company and
its subsidiaries pursuant to this Section 12 may be exercised cumulatively by
the Company (and its subsidiaries) in conjunction with all other rights and
remedies provided by law. The Employee agrees that the provisions of this
Section 12, and the provisions of Sections 8, 9, 10, 11 and 13 shall survive
the termination or expiration of this Agreement and the termination or
expiration of the Employee’s employment with the Company, regardless of how the
Employee’s employment may be or has been terminated.

 

13.  Representations.
The Employee represents and warrants to the Company that the execution and
delivery by the Employee of this Agreement and the performance by the Employee
of his obligations hereunder will not, with or without the giving of notice
and/or the passage of time, (i) violate any judgment, writ, injunction or order
of any court, arbitrator or governmental agency applicable to the Employee, or
(ii) conflict with, result in the breach of any provision of or the termination
of, or constitute a default under, any agreement to which the Employee is a
party or by which the Employee is or may be bound. The Employee represents that
he understands the tax consequences to

 

11

 

him of this Agreement, including the tax treatment of any severance
payable to him hereunder, including any impact arising from the application of
the American Jobs Protection Creation Act of 2004, as amended, on the payments
and benefits afforded the Employee under this Agreement. The Employee agrees to
indemnify and hold harmless the Company from any liability, damage, expense,
judgment or claim incurred, entered or made against the Company arising from a
breach by the Employee of any representation, warranty or covenant under this
Section 13, including all documented expenses and reasonable fees of counsel,
incurred or paid by the Company in connection with the foregoing.

 

14.  Miscellaneous.

 

(a)           Governing
Law; Disputes. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of New York
without regard to its conflicts of law principles. Actions to enforce this Agreement
shall be brought only in a state or federal court located in the State of New
York (New York County). Each party irrevocably (a) submits to the personal
jurisdiction of such courts and waives any objection to the laying of venue
therein or any inconvenient forum, (b) consents to service of process at the
address given under Section 14(e) hereof, and (c) waives any other requirement
(whether imposed by statute, rule of court, or otherwise) with respect to
personal jurisdiction or service of process. The Company shall not be deemed in
violation or breach of this Agreement as a result of any action or inaction on
the part of the Company which was authorized or directed by the Employee.

 

(b)           Payment
of Legal Fees. The Company shall reimburse the Employee for documented
legal fees incurred by him in connection with the negotiation, execution and
delivery of this Agreement, up to a maximum of $5,000, within five (5) business
days of the Employee’s submission to the Company’s chief financial officer of
reasonable documentation in support of the Employee’s incurrence of such
expenses.

 

(c)           No
Mitigation. The Company agrees that, if the Employee’s employment is
terminated during the term of this Agreement, the Employee is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Employee by the Company. Further, the amount of any payment provided
hereunder shall not be reduced by any compensation earned by the Employee.
Notwithstanding the foregoing, the Company may suspend payment of any severance
payments due the Employee under this Agreement in the event that the Board of
Directors reasonably determines that the Employee has violated any of the
provisions of Sections 8 through 11, inclusive, or Section 13, of this Agreement
during the Covered Period; provided, however, if such determination is
subsequently shown to be incorrect the suspended payments shall be promptly
paid to the Employee together with interest thereon at a rate of 5% per annum.

 

(d)           Modification;
Waiver; Discharge; Offer of Employment. No provision of this Agreement may
be modified, amended, waived or discharged unless such

 

12

 

waiver, modification, amendment or discharge is agreed to in writing
and signed by the Employee and a duly authorized representative of the Company
other than the Employee. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. Until signed by both parties hereto, this
Agreement represents a non-binding offer of employment only, and shall be
revocable by either party hereto upon notice to the other party.

 

(e)           Notices.
All notices and other communications provided for hereunder shall be in writing
and shall be delivered to each party hereto by personal delivery, by priority
overnight delivery sent via a nationally recognized courier (charges for the
account of sender), by facsimile transmission or by registered or certified
U.S. mail, return receipt requested, addressed as follows:

 

if to the Company, to:

 

Vistula Communications
Services, Inc.

Suite 801, 405 Park
Avenue

New York, NY 10022

Attn:  Chairman of the Board of Directors

Facsimile: (212) 832-7563

 

with a copy to:

 

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

Attention: Paul Bork,
Esq.

Facsimile: (617) 832-7000

 

if to the Employee, to
the Employee’s latest residence address most recently on file with the Company,

 

or to such other address as either party may specify by notice to the
other party given as aforesaid. Such notices shall be deemed to be effective
five (5) business days after the same shall have been deposited, postage
prepaid, in the U.S. mail, upon personal delivery, if the same shall have been
delivered by hand, one (1) business day after deposit with such overnight
courier, if sent via priority overnight delivery, or upon receipt of electronic
facsimile confirmation, as the case may be. As used herein, a “business day” shall mean any weekday
other than a federal U.S. holiday.

 

13

 

(f)            Assignment.
This Agreement may not be assigned by the Employee. This Agreement shall be
binding upon and inure to the benefit of the Employee, the Company, and the
Company’s successors and assigns. Any assignment in contravention of this
Section 14(f) shall be null and void.

 

(g)           Integration.
This Agreement and the documents and instruments contemplated hereby (the
“Ancillary Agreements”) set forth the entire agreement of the parties hereto in
respect of the subject matter contained herein and therein and supersedes all
prior and contemporaneous conflicting agreements, promises, covenants,
arrangements, understandings, communications, representations or warranties,
whether oral or written, by any party hereto (or representative of either party
hereto). No agreements or representations, whether written, oral, express or
implied, with respect to the subject matter hereof have been made by either
party that are not set forth expressly in this Agreement or the Ancillary
Agreements. In the event of a conflict between this Agreement and any other
agreement between the parties, this Agreement shall prevail to the limited
extent of the specific subject matter of the conflict. Nothing herein shall
modify or reduce any obligations of the Employee under any separate agreement
between the Employee and the Company.

 

(h)           Invalidity.
If any provision of this Agreement shall be determined by any court of
competent jurisdiction to be unenforceable or invalid to any extent, the
remainder of this Agreement shall not be affected thereby, and this Agreement
shall be construed to the fullest extent possible so as to give effect to the
intentions of the provision found unenforceable or invalid.

 

(i)            Headings.
All headings contained in this Agreement are for reference purposes only and
shall not in any way effect the meaning or interpretation of any provision or
provisions of this Agreement.

 

(j)            Counterparts.
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.

 

(k)           Survival.
This Agreement shall terminate upon the termination of the Employee’s
employment with the Company for any reason; provided, however, that the provisions of Sections
6(c), 7, 8, 9, 10, 11, 12, 13, and 14 hereof (and any other operative
provisions of this Agreement which, by logical context, are necessary to
interpret and enforce this Agreement so as to give effect to the parties’
intent) shall survive the termination of this Agreement or the Employee’s
employment with the Company hereunder.

 

[Signature page follows.]

 

14

 

IN WITNESS WHEREOF, the parties have executed this Agreement
on the dates set forth below, effective as of the Effective Date.

 

 

	
   

  	
  Vistula Communications Services, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Rupert Galliers-Pratt

  	
   

  
	
   

  	
   

  	
  Name: Rupert Galliers-Pratt

  
	
   

  	
   

  	
  Title: Chairman

  
	
   

  	
   

  	
  Date:  April 11, 2006

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ John K. Markley

  	
   

  
	
   

  	
  Name: John K. Markley

  

 

15Exhibit 10.1

 

KEEPWELL AGREEMENT

 

This KEEPWELL AGREEMENT (this “Agreement”) is
entered into as of April 10, 2006  (the “Effective
Date”) by and between DUKE CAPITAL LLC, a Delaware limited liability company (“Duke
Capital”) and THE CINCINNATI GAS & ELECTRIC COMPANY, an Ohio corporation (“CG&E”)
(Duke Capital and CG&E are sometimes referred to herein individually as a “Party”
and collectively as the “Parties”).

 

WHEREAS, pursuant to
the Agreement and Plan of Merger, dated as of May 8, 2005, as amended (the “Merger
Agreement”) by and among Duke Energy Corporation (formerly Duke Energy Holding
Corp.), a Delaware corporation (“Duke Energy”), Cinergy Corp., a Delaware
corporation (“Cinergy”) and the other parties thereto, the Mergers and the
Restructuring Transactions (as defined therein) have been consummated;

 

WHEREAS, as a result
thereof, Cinergy and Duke Capital are direct wholly-owned subsidiaries of Duke
Energy, and each of CG&E and Duke Energy North America, LLC, a Delaware
limited liability company (“DENA”), is an indirect wholly-owned subsidiary of
Duke Energy;

 

WHEREAS, DENA is an
indirect wholly-owned subsidiary of Duke Capital;

 

WHEREAS, immediately
prior to the Effective Date, each of Duke Energy Hanging Rock, LLC; Duke Energy
Washington, LLC; Duke Energy Vermillion, LLC (“Duke Vermillion”), Duke Energy
Fayette, LLC; and Duke Energy Lee, LLC (collectively, the “DENA Midwest
Companies”) was a direct or indirect wholly-owned subsidiary of DENA;

 

WHEREAS, each DENA
Midwest Company is a single-purpose entity that owns all of, or solely with
respect to Duke Vermillion, a 75 percent undivided ownership interest in (and, except
with respect to Duke Vermillion, operates), an electric generation facility located
in the Midwest United States;

 

WHEREAS, pursuant to
section 4.08 of the Merger Agreement, following receipt of all required
consents and approvals, as promptly as practicable on or after the Effective
Date, (i) DENA, Duke Capital and other applicable subsidiaries of Duke Energy shall
distribute upstream successively to Duke Energy, and Duke Energy thereupon
shall contribute to Cinergy, which in turn shall contribute to CG&E, the
DENA Midwest Companies; and (ii) CG&E shall cause each of the DENA Midwest 

 

 

Companies to merge with and
into CG&E, with CG&E being the surviving legal entity in each such
merger (collectively, the “CG&E/DENA Mergers”); and

 

WHEREAS, Duke
Capital is willing to ensure that the acquisition as hereinabove described by
CG&E of the DENA Midwest Companies does not result in CG&E sustaining
any cash deficits resulting from its ownership and operation of the Facilities
(as defined below), subject to the terms and provisions of this Agreement (it
being understood that CG&E shall be entitled to all cash surpluses
resulting from its ownership and operation of the Facilities, subject to the
terms and provisions of this Agreement);

 

NOW, THEREFORE, to
that end and in consideration of the premises and the mutual benefits to arise
from this Agreement, the Parties, intending to be legally bound, hereby agree
as follows:

 

1.             Definitions.
 Except to the extent otherwise expressly
provided herein, the capitalized terms used in this Agreement shall have the
meanings defined in this Section.

 

“Business
Day” shall mean any day, other than a Saturday, Sunday
or a day on which banks located in New York, New York shall be authorized or
required by law to close.

 

“Costs”
shall mean for any calendar quarter the sum of (a) prudently
incurred actual natural gas costs in respect of natural gas consumed by the Facilities;
(b) prudently incurred direct transportation and storage costs associated with
the gas consumed; (c) prudently incurred related natural gas imbalance costs; (d)
costs realized pursuant to hedging activities in accordance with the Protocols
referred to in Section 7; (e) prudently incurred costs incurred by CG&E
under and in compliance with the Transferred Contracts; and (f) prudently
incurred costs described below to the extent the costs were actually incurred
by CG&E:

 

(i)            Facilities
Work Force Wages and Salaries:  The
actual wages, salaries and incentives paid or provided to employees working at,
or principally in support of, the Facilities together with an appropriate
allocation of costs relating to payroll insurance and taxes, group medical,
life insurance and other employee benefits including vacation, holidays and
salary continuation;

 

(ii)           Transportation,
Travel and Relocation Expense.  The
cost of transportation , travel and relocation expense of the Facilities’ work
force in accordance with CG&E’s established policies; 

 

(iii)          Communication
Expense.  The actual cost of postage,
long distance telephone, cellular phone, and teletype expense incurred in the
direct operation of the Facilities;

 

2

 

(iv)          Computer
Services.  The actual cost of
computer services expenses incurred in the direct operation of the Facilities; 

 

(v)           Materials
and Equipment.  The actual cost of
equipment,  consumables, materials,
supplies, spare parts, tools and miscellaneous supplies used by the Facilities
to the extent not capitalized under CG&E’s capitalization policy; 

 

(vi)          Transportation
of Materials and Equipment.     The
actual cost of transportation expense related to materials and equipment for
the Facilities, including the cost of loading, hauling, unloading, and
insurance;

 

(vii)         Subcontracts.     The actual cost of subcontracts relating
to operation of the Facilities to the extent not capitalized under CG&E’s
capitalization policy;

 

(viii)        Utilities.     The actual cost of all water, sewer, electricity,
telephone, waste disposal and other utilities for the Facilities;

 

(ix)           Legal
Expenses.     The actual cost of
attorneys’ fees and costs incurred in connection with any labor or commercial
matter related to the operation of the Facilities;

 

(x)            Claims
and Judgments.     The actual cost of
attorneys’ fees, costs, settlements, and/or judgments incurred in connection
with any litigation, claims or disputes arising out of or in connection with
the ownership and operation of the Facilities, 
except (A) those expenses, fines and penalties resulting from CG&E’s
negligent acts or omissions or its operation of the Facilities in a manner in
violation of this Agreement or any law, or government regulation, order or
consent decree, (B) those expenses, fines and penalties resulting from CG&E’s
gross negligence or willful misconduct, and (C) fees, costs, settlements,
and/or judgments for which CG&E is reimbursed by proceeds of
insurance;  

 

(xi)           Capital
Equipment and Expenditures.  The incremental
depreciation associated with the purchase of a capital item or other capital
expenditure, as defined by CG&E’s capitalization policy, on or after the
Effective Date;

 

(xii)          Permit
Costs.  The actual costs for the
procurement or maintenance of environmental or other governmental permits for
the Facilities, including fees and periodic testing;

 

(xiii)         Insurance
Expenses.  The premiums and other
cost incurred by CG&E to maintain necessary and prudent insurance coverage;
and

 

3

 

(xiv)        Other.  All other actual direct costs prudently incurred
in connection with the Facilities, including but not limited to independent
system operator/regional transmission organization charges (such as operating
balancing reserve charges and
administrative fees (but excluding, for the avoidance of doubt, uninstructed
deviation penalties)) and the cost of emission allowances expensed for the
period.

 

“Cumulative
Operating Deficit” shall mean for any quarter in a
calendar year the deficit, if any, that results from adding the Deficit or
Surplus, as the case may be, for such quarter to all Deficits and/or Surpluses
for all previous quarters in such calendar year. For the avoidance of doubt,
Deficits and Surpluses from previous calendar years shall not be counted in
calculating the Cumulative Operating Deficit.

 

“Contribution
Payment Amount” shall mean for any quarter in a
calendar year an amount equal to the Cumulative Operating Deficit for such
quarter, if any, restated as a positive number, (i) reduced by any Contribution
Payment Amounts paid by Duke Capital with respect to previous quarters of such
year, and (ii) increased by any Cumulative Refund Amounts paid by CG&E with
respect to previous quarters of such year.  Notwithstanding the previous sentence, for any
quarter in which there is a Surplus the Contribution Payment Amount for such
quarter shall be $0.00.

 

“Cumulative
Refund Amount” shall mean for any quarter in a
calendar year in which there is a Surplus an amount equal to: (i) the total of
Contribution Payment Amounts paid by Duke Capital with respect to previous
quarters of such year reduced by (ii) (a) the total of Cumulative Refund
Amounts paid by CG&E with respect to previous quarters of such year plus (b)
the Cumulative Operating Deficit.  For
any quarter in which there is a Deficit the Cumulative Refund Amount shall be
$0.00.

 

“Deficit”
shall mean for a particular calendar quarter the amount, if any, expressed as a
negative number, by which the total Costs attributable to operating the
Facilities during such quarter exceed the total Revenues generated by operating
the Facilities.  In making  such calculation: (i) for a calendar quarter
in which CG&E acquires or disposes of its direct or indirect ownership
interest in a Facility, only those Costs and Revenues attributable to the
period of ownership by CG&E shall be counted; and (ii) in instances where
CG&E has less than a 100% ownership interest in a Facility, whether direct
or indirect, only a proportionate share of the Costs and Revenues as determined
in relation to CG&E’s ownership share shall be counted.

 

“Duke
Capital LOC” shall mean one or more irrevocable standby
letters of credit issued by one or more (i) United States banks or (ii)
non-United States banks maintaining United States branches, in each case having
a minimum rating of A by Standard & Poor’s or A2 by Moody’s, having a term
of one-year subject to renewal or replacement for successive one-year periods
for the term of this Agreement, and providing for the payment of Contribution
Payment Amounts under the provisions of this Agreement in an aggregate amount
not less than the total budgeted amount of operations and maintenance expense
and capital expenditures, less total budgeted operating revenues, for the

 

4

 

Facilities for the year in
question, in form and substance mutually agreeable to the Parties.

 

“Facility”
or “Facilities” shall mean, respectively,
each of, or the collective reference to one or more of, the following electric
generation facilities to the extent and only during the period that it is
owned, directly or indirectly, in whole or in part by CG&E:

 

The Fayette
Energy Facility, a natural gas-fired combined cycle generating facility located
near Masontown, Pennsylvania with a nominal capacity of 620 MW;

 

The Hanging
Rock Energy Facility, a natural gas-fired electric generation plant located in
Lawrence County, Ohio with a nominal capacity of 1,240 MW;

 

The Lee Energy
Facility, a natural gas-fired, simple cycle electric generation plant located
in Lee County, Illinois with a nominal capacity of 640 MW;

 

The Vermillion
Energy Facility, a 648 MW gas-fired generation facility located in Vermillion
County, Indiana; and

 

The Washington
Energy Facility, a natural gas-fired electric generation facility located in
Washington County, Ohio with a nominal capacity of 620 MW.

 

“Investment
Grade” shall mean a rating of long term debt
securities that is equal to or better than Baa3, if the rating is provided by Moody’s,
and BBB-, if the rating is provided by Standard and Poor’s.

 

“LIBOR” means, for any day, the rate equal to the arithmetic mean of the listed
banks’ offer rates for one-month U.S. Dollar deposits fixed at 11:00 a.m.
London time as shown on the Telerate screen on such day, provided banks are
open for business in London, Houston and New York on such day (“Banking Day”),
and if such day is not a Banking Day, then on the next Banking Day

 

“Moody’s”
shall mean Moody’s Investor Services, Inc.

 

“Revenues”
shall mean for any calendar quarter the sum of the following amounts earned or
accrued during such quarter: (a) actual megawatt-hours generated by the
Facilities multiplied by the locational marginal prices at the applicable
commercial pricing nodes in the regional transmission organizations in which
the Facilities are located; (b) all capacity revenues generated by the
Facilities; (c) all Facility-specific ancillary services revenues; (d) revenues
received by CG&E under the Transferred Contracts; and (e) revenues realized
pursuant to hedging activities in accordance with the Protocols referred to in
Section 7.

 

5

 

“Standard
& Poor’s” shall mean Standard & Poor’s Rating
Group, a division of McGraw Hill Co., Inc.

 

“Surplus”
shall mean for a particular calendar quarter the
amount, if any, expressed as a positive number, by which the total Revenues
generated by operating the Facilities exceed or equal the total Costs
attributable to operating the Facilities during such quarter.  In making 
such calculation: (i) for a calendar quarter in which CG&E acquires
or disposes of its direct or indirect ownership interest in a Facility, only
those Costs and Revenues attributable to the period of ownership by CG&E
shall be counted; and (ii)  in instances
where CG&E has less than a 100% ownership interest in a Facility, whether
direct or indirect, only a proportionate share of the Costs and Revenues as
determined in relation to CG&E’s ownership share shall be counted.

 

“Transferred
Contracts” has the meaning set forth on Exhibit A.

 

2.             Contribution
Obligation.  Within
60 Calendar Days after the end of each calendar quarter, Duke Capital shall pay
to CG&E the Contribution Payment Amount, if any, for such quarter.  In the
event that Duke Capital shall fail to pay to CG&E the Contribution Payment
Amount within five Business Days of the date on which such payment is required
to be made pursuant to this Section 2, then the Contribution Payment Amount
shall accrue interest from such date through (and including) the date of actual
payment at a rate equal to LIBOR (for such day and as redetermined monthly)
plus 2.0% per annum.

 

3.             Refund Obligation.  Within 60 Calendar Days after the end of each
calendar quarter, CG&E shall pay to Duke Capital the Cumulative Refund
Amount, if any, for such quarter.  In the event that CG&E shall fail to pay
to Duke Capital the Cumulative Refund Amount within five Business Days of the
date on which such payment is required to be made pursuant to this Section 3,
then the Cumulative Refund  Amount shall
accrue interest from such date through (and including) the date of actual
payment at a rate equal to LIBOR (for such day and as redetermined monthly)
plus 2.0% per annum.

 

4.             Term.  This Agreement shall take effect on the
Effective Date and, unless the Parties otherwise agree, shall expire upon the
tenth anniversary of the Effective Date.

 

5.             Survival of Payment Obligations.  The obligation of Duke Capital to pay the
Contribution Payment Amount, if any, with respect to the last calendar quarter
of the term of this Agreement shall survive the expiration of this Agreement.
The obligation of CG&E to pay the Cumulative Refund Amount, if any, with
respect to the last calendar quarter of the term of this Agreement shall survive
the expiration of this Agreement.

 

6

 

6.             Separate Books and Records.  CG&E
agrees to maintain such books and records in respect of the Facilities as shall
be sufficient to enable the accurate calculation of amounts, if any, to be paid
by or refunded to Duke Capital pursuant to this Agreement.  For the avoidance of doubt, the parties
understand and acknowledge that all Costs and Revenues shall be calculated by
CG&E using amounts recorded in CG&E’s accounting books and records for
the applicable calendar quarter.

 

7.             Implementation Rules, Procedures and
Practices.  The
Parties shall by mutual agreement establish rules, procedures and practices to
be used by the Parties in implementing this agreement (“Protocols”).  The Protocols shall address, among other
things, the results realized by CG&E, and the appropriate allocation
thereof to the Facilities, in respect of hedging arrangements established by or
on behalf of CG&E on or after the Effective Date (excluding, for the
avoidance of doubt, any results realized by CG&E or any other affiliate
thereof from settlements under or liquidation of the Transferred Contracts)
with respect to inputs (e.g., natural
gas and emission allowances) and outputs (e.g., power, capacity
and ancillary services) of the Facilities.

 

8.             Letter of Credit or Other Credit Support.  If during the term of this Agreement the senior
long-term, unsecured debt securities of Duke Capital cease to have an
Investment Grade rating from either Moody’s or Standard and Poor’s, Duke Capital
shall deliver to CG&E the Duke Capital LOC, provided that the Duke Capital
LOC may be terminated by Duke Capital at such point as it regains an Investment
Grade rating of its senior long-term, unsecured debt securities.  The Duke Capital LOC shall be redelivered to
CG&E at any subsequent time when such debt securities cease to be
Investment Grade.  As an alternative to delivering
the Duke Capital LOC as provided in this section, Duke Capital may request and
cause to be delivered to CG&E a guarantee of all of its payment obligations
hereunder by Duke Energy, in a form reasonably satisfactory to CG&E and
Duke Energy, to be in effect during all such times as the Duke Capital LOC
would otherwise be required hereunder.

 

9.             Representations and Warranties.  Each of CG&E and Duke Capital represents
and warrants that it is a validly existing corporation or limited liability
company in good standing under the laws of its jurisdiction of organization; it
is duly authorized to execute, deliver and perform this Agreement; that this
Agreement has been duly executed and delivered on behalf of CG&E and Duke
Capital; that this Agreement is a legal, valid and binding obligation of each
of CG&E and Duke Capital, enforceable against it in accordance with its
terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles; and that each
of CG&E’s and Duke Capital’s execution, delivery and performance of this
Agreement does not violate or constitute a breach of its organizational
documents or any material agreement or instrument to which CG&E or Duke
Capital is a party.

 

10.          Binding Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto, and to their
respective successors and assigns; provided, however, neither CG&E nor Duke
Capital shall be

 

7

 

permitted to
assign any of its respective rights or obligations under this Agreement without
the prior written consent of the other.

 

11.          Severability.  The provisions of this Agreement are
independent of and separable from each other. 
If any provision hereof shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.

 

12.          Third Party Beneficiaries.  This Agreement is solely for the benefit of
the Parties, and no provision of this Agreement shall be deemed to confer upon
third parties any rights, remedies, claims or cause of action.

 

13.          Notices.   All notices
and other communications hereunder shall be in writing and shall be deemed
given if delivered personally, by a nationally recognized overnight courier, by
facsimile or mailed by registered or certified mail (return receipt requested)
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice):

 

(a)           If to Duke Capital,
to:

 

526 South Church Street

Charlotte, NC 28201

 

 (b)          If to CG&E, to:

 

139 East Fourth Street

Cincinnati, Ohio 45202

 

All notices and other
communications given in accordance herewith shall be deemed given (i) on the
date of delivery, if hand delivered, (ii) on the date of receipt, if faxed
(provided a hard copy of such transmission is dispatched by first class mail within
48 hours), (iii) three Business Days after the date of mailing, if mailed by
registered or certified mail, return receipt requested, and (iv) one Business Day
after the date of sending, if sent by a nationally recognized overnight
courier.

 

14.          Governing
Law.   This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware without regard to its principles of conflicts of laws.

 

15.          Waivers; Amendments.  Neither this Agreement nor any provision
hereof may be waived, modified, altered or amended or terminated except by a
written instrument executed by Duke Capital and CG&E.

 

8

 

16.          Counterparts.  This Agreement may be executed in any number
of counterparts each of which when so executed and delivered shall be deemed an
original.

 

17.          Entire
Agreement. 
This Agreement contains the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all previous oral and
written negotiations, commitments, and understandings of the Parties with
respect to the Parties’ respective rights and obligations set forth
herein.  There exist no other
understandings, terms or conditions, written or oral, related to the rights and
obligations established by this Agreement, and neither Party has relied on any
representation, express or implied, not contained herein.

 

[Signature page follows.]

 

9

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first above
written.

 

	
   

  	
   

  	
   

  	
  DUKE CAPITAL LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  THE CINCINNATI GAS & ELECTRIC COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
								

 

10

 

EXHIBIT A

TRANSFERRED CONTRACTS

 

“Transferred Contracts” means the contracts, agreements
and instruments to which any of the DENA Midwest Companies is a party
immediately prior to the consummation of the CG&E/DENA Mergers and with
respect to which, upon consummation thereof, CG&E succeeds as a matter of
law to the rights and obligations of the respective DENA Midwest Companies
thereunder.

 

11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]