EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the 1st day of January
1995, by and among CINergy Corp., a Delaware corporation ("CINergy"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), CINergy
Services, Inc., a Delaware corporation ("CINergy Services"), CINergy
Investments, Inc., a Delaware corporation ("CINergy Investments"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and William J. Grealis (the
"Executive"). CINergy, CG&E, CINergy Services, CINergy Investments and PSI
will sometimes be referred to hereinafter collectively as the "Corporation."
WHEREAS, the Corporation desires that the Executive become an employee
in accordance herewith;
WHEREAS, the Executive is willing to commit himself to the employ of the
Corporation and any successor thereto, on the terms and conditions herein set
forth and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Employment 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 Corporation agrees to employ the Executive, and the
Executive agrees to be employed, in accordance with the terms and provisions
of this Employment 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 January 16, 1995 (the "Effective Date") and shall
continue until June 30, 2000; provided, however, on each anniversary date
(which for purposes of this Employment Agreement shall mean January 1 of each
year subsequent to the Effective Date) commencing with the fourth anniversary
date from the Effective Date, the Employment Period of this Employment
Agreement may automatically be extended for one (1) additional year if the
Corporation shall have given notice to the Executive of its intent to extend
this Employment Agreement prior to such anniversary date and the Executive
shall not have objected to such extension in writing within ten (10) business
days of receipt of such notice.
2. Duties and Powers of Executive.
(a) Position. The Executive shall serve the Corporation 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 hereinafter 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
Employment Agreement, the Executive shall initially serve as President of
CINergy Investments and Vice President of Gas Operations for the Corporation,
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 Corporation, 139 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 Corporation 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 the current principal place of business of
the Corporation.
3. Compensation. The Executive shall receive the following
compensation for his services hereunder:
(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 $288,000. 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
Corporation under this Employment 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, CG&E,
CINergy Services and CINergy Investments.
(b) Profession Transition Allowance. In addition to the Annual
Base Salary, the Corporation shall pay to the Executive a profession
transition allowance (the "Profession Transition Allowance") in the amount of
$50,000, payable on January 16, 1995.
(c) Stock Options. The Executive shall be granted an option or
options under and pursuant to the terms of the CINergy Stock Option Plan (the
"Stock Option Plan"), together with any stock appreciation right(s) to which
he may be entitled with respect to the grant of such option or options
pursuant to the Stock Option Plan, to purchase one hundred thousand (100,000)
shares of CINergy Common Stock with a par value of $.01 per share (the "Common
Stock"). The option or options granted to the Executive hereunder and
pursuant to the Stock Option Plan (i) shall be granted to the Executive as
soon as administratively feasible after the Effective Date, but in any event
not later than April 1, 1995, (ii) shall vest at the rate of twenty percent
(20%) on each January 16 commencing on January 16, 1996, except that such
vesting schedule may be accelerated as provided with respect to the events
specified in the Stock Option Plan, (iii) shall have an exercise price equal
to one hundred percent (100%) of the "fair market value" (as such term is
defined in Section 9.1 of the Stock Option Plan) of the Common Stock and (iv)
shall expire ten (10) years from the date of the grant of such option(s). In
the event that the Stock Option Plan is amended to permit the grant of
dividend equivalency or similar rights with respect to any options which have
been or will be granted pursuant to the Stock Option Plan, then the Executive
shall be entitled to receive such dividend equivalency rights with respect to
all options which have been or may be granted to him pursuant to the Stock
Option Plan or otherwise.
(d) Retirement, Incentive, Welfare Benefit Plans and Other
Benefits. During the Employment Period and so long as the Executive is
employed by the Corporation, the Executive shall be eligible, and the
Corporation 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 Corporation,
including but not limited to CINergy's Annual Incentive Plan, CINergy's
Performance Shares Plan, CINergy's Executive Supplemental Life Insurance
Program, CINergy's Stock Option Plan, CG&E's Management Retirement Plan, PSI's
Pension Plan, as amended and restated effective January 1, 1989 (the "PSI
Pension Plan"), PSI's Supplemental Retirement Plan, as amended and restated
effective January 1, 1989 (the "PSI Supplemental Retirement Plan"), PSI's
Excess Benefit Plan, as amended and restated effective January 1, 1989 (the
"PSI Excess Benefit Plan"), or any successors thereto, except with respect to
any benefits under any plan, practice, policy or program to which the
Executive has waived his rights in writing. With respect to the PSI
Supplemental Retirement Plan, the Executive shall be designated on or before
February 1, 1995 in a resolution adopted by the Board of Directors of PSI as
an employee eligible to participate in said plan.
(e) Fringe Benefits and Perquisites. During the Employment Period
and so long as the Executive is employed by the Corporation, the Executive
shall be entitled to the following additional fringe benefits: (i) the
Corporation shall furnish to the Executive an automobile selected by the
Executive at the Effective Date and shall pay all of the related expenses for
gasoline, insurance, maintenance and repairs, (ii) the Corporation 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 Corporation shall provide paid vacation for four (4)
weeks per year (or longer if permitted by the Corporation's policy) and (iv)
the Corporation 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 Corporation from time to time in effect,
commensurate with his position and at least comparable to those received by
other senior executives of the Corporation.
(f) Expenses. The Corporation agrees to reimburse the Executive
for all expenses, including those for travel and entertainment, properly
incurred by him in the performance of his duties hereunder in accordance with
the policies established from time to time by the Board.
(g) Relocation Benefits. The Executive shall be entitled to
reimbursement from the Corporation pursuant to the terms of the Corporation
Relocation Program in effect as of the day and year first written above, as
well as all actual expenses for temporary housing until such time as he has
moved into a new primary residence. The expenses described herein shall be
"grossed up" to provide for adverse tax consequences to the Executive.
(h) Reimbursement for Life Insurance Premiums. The Executive shall
be entitled to reimbursement from the Corporation on a monthly basis for the
cost of the payment of premiums by the Executive with respect to
a certain group universal life insurance policy with Connecticut Mutual Life
Insurance Co. for which the Executive is the insured.
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 Corporation 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 Corporation (other than any such failure resulting from the
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
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 Corporation. 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 Corporation. Notwithstanding the above definition of "Cause,"
the Corporation may terminate the Executive's employment during the Employment
Period for a reason other than Cause, but the obligations placed upon the
Corporation 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 CINergy, CG&E, CINergy
Services and CINergy Investments, 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 Corporation of any other material
provision (including but not limited to the place of performance
as specified in Section 2(b) hereof) of this Employment Agreement;
(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."
(d) Notice of Termination. Any termination by the Corporation
for Cause, or by the Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 10(b) of this Employment Agreement. For purposes of this Employment
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Employment 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 Corporation to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Corporation hereunder or
preclude the Executive or the Corporation from asserting such fact or
circumstance in enforcing the Executive's or the Corporation's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Corporation 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 Corporation other than for
Cause, the date on which the Corporation 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 on or after the
Effective Date:
(i) any corporation, person, other entity or group
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of more than fifty percent (50%)
of the then outstanding voting stock of CINergy otherwise than
through a transaction arranged by, or consummated with, the prior
approval of the Board;
(ii) the shareholders of CINergy approve a definitive
agreement to merge or consolidate with or into another corporation
in a transaction in which neither CINergy nor any of its
subsidiaries or affiliates will be the surviving corporation, or
to sell or otherwise dispose of all or substantially all of
CINergy's assets to any person or group other than CINergy or any
of its subsidiaries or affiliates, other than a merger or a sale
which will result in the voting securities of CINergy outstanding
prior to the merger or sale continuing to represent at least fifty
percent (50%) of the combined voting power of the voting
securities of the corporation surviving the merger or purchasing
the assets; or
(iii) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
Board of Directors of CINergy (and any new director whose election
by the Board of Directors of CINergy or whose nomination for
election by CINergy's stockholders was approved by a vote of at
least two thirds (2/3) of the directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority of CINergy's Board
of Directors.
(g) Person. "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the
Corporation 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 Corporation.
5. Obligations of the Corporation upon Termination.
(a) Certain Terminations. During the Employment Period, if
the Corporation 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 Corporation 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
theretofore 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) an amount equal to his vested accrued benefit under the
CINergy Performance Shares Plan, and (4) 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 theretofore paid. (The amounts
specified in clauses (1), (2), (3) and (4) shall be hereinafter
referred to 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.
(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 Corporation 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 such
Date of Termination; (2) the Corporation shall pay to the
Executive the present value (discounted at the Prime Rate) of all
benefits to which the Executive would have been entitled had he
remained in employment with the Corporation until the end of the
Employment Period, each, where applicable, at the rate of the
Annual Base Salary, and using the same goals and factors, in
effect at the time Notice of Termination is given, under the
CINergy Performance Shares Plan and the CINergy Executive
Supplemental Life Insurance Program minus the present value
(discounted at the Prime Rate) of the benefits to which he is
actually entitled under the above-mentioned plans and programs;
(3) the Corporation shall pay the value of all deferred
compensation amounts and all executive life insurance benefits
whether or not then vested or payable; and (4) the Corporation
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 Corporation as in effect and applicable
generally to other senior executives of the Corporation 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) hereof:
(1) The Corporation 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 Section 5(a)(ii) hereof, excluding Section
5(a)(ii)(4), and
(B) two (2) 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 Corporation, 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 twenty-four (24) month period after the Date of
Termination, the Corporation 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 twenty-
four (24) month period following the Executive's termination of employment
(and any such benefits actually received by the Executive shall be reported to
the Corporation 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 circumstance 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 Corporation 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 theretofore paid.
(c) Retirement Benefits on Termination. The
Corporation acknowledges that, as a consequence of entering into this
Employment Agreement, the Executive will forfeit material and substantial
pension benefits from his current employer. Accordingly, in addition to all
other payments to be made under the terms of this Employment Agreement and
notwithstanding any other provisions to the contrary in this Employment
Agreement, the Executive shall be entitled to an additional amount payable in
five (5) annual installments (the first installment commencing no later than
thirty (30) days after the Event of Termination (as defined hereinafter) and
each subsequent annual installment on the anniversary of the Event of
Termination and the amount of each such installment shall be equal to one
fifth (1/5) of the applicable amount determined pursuant to clause (i), (ii)
or (iii) of this Section 5(c)) upon his termination of employment, including a
termination resulting from death, Good Reason or with or without Cause, a
voluntary termination of his employment on or after attaining the age of
fifty-five (55), or failure to renew or extend this Employment Agreement as
provided in Section 1(b) (hereinafter referred to as an "Event of Termination"
for purposes of this Section 5(c)), but not including a voluntary termination
of his employment prior to attaining the age of fifty-five (55), as follows:
(i) prior to the date on which the Executive
attains the age of fifty-five (55), an amount equal to the
difference between (1) the actuarial equivalent of a straight life
annuity in the amount of two hundred and eighty-three thousand
dollars ($283,000) per annum at age sixty-two (62) discounted at
seven and one half percent (7 1/2%) to age fifty-five (55), and
(2) the actual amount of the sum of the actuarial equivalent of a
straight life annuity per annum earned under the Corporation's
Pension, Supplemental Retirement and Excess Benefit Plans in
effect on the date of the Event of Termination;
(ii) from and after the date on which the
Executive attains the age of fifty-five (55), but prior to the
date on which the Executive attains the age of sixty-two (62), the
greater of:
(1) an amount equal to the difference between (A) the actuarial
equivalent of a straight life annuity in the amount of two hundred and eighty-
three thousand dollars ($283,000) per annum at age sixty-two (62) discounted
at seven and one half percent (7 1/2%) to the Executive's age on the date of
the Event of Termination and (B) the actual amount of the sum of the actuarial
equivalent of a straight life annuity per annum earned under the Corporation's
Pension, Supplemental Retirement and Excess Benefit Plans in effect on the
date of the Event of Termination;
(2) an amount equal to the difference between (A) the sum of the
actuarial equivalent of a straight life annuity per annum earned under the
Corporation's Pension, Supplemental Retirement and Excess Benefit Plans as if
the Executive had been credited with thirty (30) years of service under such
plans in effect on the date of the Event of Termination and (B) the actual
amount of the sum of the actuarial equivalent of a straight life annuity per
annum earned under the Corporation's Pension, Supplemental Retirement and
Excess Benefit Plans in effect on the date of the Event of Termination; or
(3) the actual amount of the sum of the actuarial equivalent of a
straight life annuity per annum earned under the Corporation's Pension,
Supplemental Retirement and Excess Benefit Plans in effect on the date of the
Event of Termination;
(iii) from and after the date on which the Executive
attains the age of sixty- two (62), the greater of:
(1) an amount equal to the difference between (A) the actuarial
equivalent of a straight life annuity in the amount of two hundred and eighty-
three thousand dollars ($283,000) per annum at age sixty-two (62) and (B) the
actual amount of the sum of the actuarial equivalent of a straight life
annuity per annum earned under the Corporation's Pension, Supplemental
Retirement and Excess Benefit Plans in effect on the date of the Event of
Termination;
(2) an amount equal to the difference between (A) the sum of the
actuarial equivalent of a straight life annuity per annum earned under the
Corporation's Pension, Supplemental Retirement and Excess Benefit Plans as if
the Executive had been credited with thirty (30) years of service under such
plans in effect on the date of the Event of Termination and (B) the actual
amount of the sum of the actuarial equivalent of a straight life annuity per
annum earned under the Corporation's Pension, Supplemental Retirement and
Excess Benefit Plans in effect on the date of the Event of Termination; or
(3) the actual amount of the sum of the actuarial equivalent of a
straight life annuity per annum earned under the Corporation's Pension,
Supplemental Retirement and Excess Benefit Plans.
For purposes of this Section 5(c), the actuarial equivalent shall mean the
actuarial equivalent as defined in the Corporation's Pension Plan in which an
Executive is a participant on the date of the Event of Termination.
Furthermore, in connection with the computation of the amount(s) to be paid by
the Corporation to the Executive pursuant to this Section 5(c), the
Corporation shall be entitled to a credit or offset in an amount equal to the
aggregate lump sum balance in which the Executive is vested as of the
Effective Date under the terms of the Akin, Gump, Strauss, Hauer & Feld Target
Benefit Plan (or any rollover thereof) and the Akin, Gump, Strauss, Hauer &
Feld Defined Contribution Plan (or any rollover thereof); provided, however,
that the amount which is credited or offset pursuant to the preceding clause
against payments to be made to the Executive pursuant to this Section 5(c)
shall be credited or offset on a pro-rata or proportionate basis over the
number of years during which such payments are to be made to the Executive.
(d) The provisions of Section 5(c) shall survive the
expiration or termination of this Employment Agreement for any reason.
(e) 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 Code, the Corporation
shall pay to the Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any 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
Corporation, any Person whose actions result in a change in control or any
Person affiliated with the Corporation 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 Corporation'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 (a) the total amount of the
Severance Benefits or (b) 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 Corporation'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 could
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 Corporation, 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 Corporation 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 Corporation 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) The Corporation 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 Employment 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
Corporation 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 Corporation 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 Corporation. 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 Corporation 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
Employment Agreement.
(7) Full Settlement; Mitigation. Except as provided in
Sections 5(a)(ii)(4) and 5(a)(iii)(2) hereof, the Corporation's obligation to
make the payments provided for in this Employment Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Corporation 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 Employment
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 Corporation, 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 Employment Agreement, the
Corporation agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. 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
Corporation and that shall not have been or now or hereafter have become
public knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Employment Agreement). During the
Employment Period and thereafter, the Executive shall not, without the prior
written consent of the Corporation 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 Corporation 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.
9. Successors.
(a) This Employment Agreement is personal to the
Executive and, without the prior written consent of the Corporation, shall not
be assignable by the Executive otherwise than by will or the laws of descent
and distribution. This Employment 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 Corporation, and its successors and
assigns.
(c) The Corporation 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 Corporation
to assume expressly and agree to perform this Employment Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place.
10. Miscellaneous.
(a) This Employment 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 Employment Agreement
are not part of the provisions hereof and shall have no force or effect. This
Employment 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
Corporation to agree to amend, modify, repeal, waive, extend or discharge any
provision of this Employment 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, Esq.
CINergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45201
with a copy to:
John W. Griffin, Esq.
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
If to the Corporation:
CINergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45201
Attention: Vice President, General Counsel and Corporate
Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. All notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Employment Agreement shall not affect the validity or
enforceability of any other provision of this Employment Agreement.
(d) The Corporation may withhold from any amounts
payable under this Employment 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 Corporation's failure to
insist upon strict compliance with any provision of this Employment Agreement
or the failure to assert any right the Executive or the Corporation may have
hereunder, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Employment Agreement, or the right of the Corporation to terminate the
Executive's employment for Cause pursuant to Section 4(b) of this Employment
Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Employment Agreement.
(f) This instrument contains the entire agreement of
the Executive and the Corporation with respect to the subject matter hereof;
and all promises, representations, understandings, arrangements and prior
agreements are merged herein and superseded hereby.
(g) This Employment 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 Corporation and the Executive agree that
CINergy shall be authorized to act for the Corporation with respect to all
aspects pertaining to the administration and interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the Executive and the Corporation have caused
this Employment Agreement to be executed as of the day and year first above
written.
CINERGY CORP.
By _____________________________
Name:
Title:
THE CINCINNATI GAS & ELECTRIC COMPANY
By _____________________________
Name:
Title:
CINERGY SERVICES, INC.
By _____________________________
Name:
Title:
CINERGY INVESTMENTS, INC.
By _____________________________
Name:
Title:
PSI ENERGY, INC.
By _____________________________
Name:
Title:
EXECUTIVE
_____________________________
William J. Grealis