EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
July, 1998, by and among Cinergy Corp., a Delaware corporation ("Cinergy"),
Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"), The
Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy,
Inc., an Indiana corporation ("PSI"), and M. Stephen Harkness (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this
Agreement collectively as the "Company".
WHEREAS, the Company desires to secure the continued employment of the
Executive with the Company in accordance with this Agreement;
WHEREAS, the Executive is willing to continue to remain in the employ
of the Company and any successor thereto, on the terms and conditions set forth
in this Agreement and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of the date
first set forth above setting forth the terms and conditions for the employment
relationship of the Executive;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
a. The Company agrees to employ the Executive, and the Executive agrees
to be employed, in accordance with the terms and provisions of this
Agreement for the period set forth below (the "Employment Period").
b. The Employment Period of the Executive as provided in Section 1(a)
will commence on July 1, 1998, (the "Effective Date") and shall
continue until December 31, 2001; provided, however, commencing on
January 1, 2000, and each January 1 thereafter (the "Renewal Date"),
the Employment Period of this Agreement shall automatically be
extended for one (1) additional year if neither the Company not the
Executive shall have given between December 1 and December 15 prior to
each applicable Renewal Date written notice to the other of its intent
to terminate this Agreement.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Company in such responsible
executive capacity or capacities as the Board of Directors of Cinergy
or Cinergy Services (the Board of Directors of Cinergy or Cinergy
Services, as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy or the Chief
Operating Officer of Cinergy may from time to time determine and shall
have such responsibilities, duties and authority as may be assigned to
him from time to time during the Employment Period by the Board or the
Chief Executive Officer of Cinergy or the Chief Operating Officer of
Cinergy that are consistent with such responsibilities, duties and
authority. Upon the Effective Date of this Agreement, the Executive
shall initially serve as Executive Vice President and Chief Operating
Officer, Trigen-Cinergy Solutions LLC for the Company, but consistent
with the foregoing provisions of this Section 2(a), may be assigned to
any other position or positions by either the Board or the Chief
Executive Officer of Cinergy or the Chief Operating Officer of Cinergy
during the Employment Period.
b. Place of Performance. In connection with the Executive's employment,
the Executive shall be based at the offices of the Company at 1000
East Main Street, Plainfield, Indiana, and, except for required
business travel to an extent substantially consistent with the present
business travel obligations of executives of the Company who have
positions of authority comparable to that of the Executive, the
Executive shall not be required to relocate to a new principal place
of business which is more than thirty (30) miles from Plainfield,
Indiana.
3. Compensation. The Executive shall receive the following compensation for
his services under this Agreement.
a. Salary. The Executive's annual base salary (the "Annual Base Salary"),
payable not less often than semi-monthly, shall be at the annual rate
of not less than $192,612.00. The Board may, from time to time, direct
such upward adjustments in the Annual Base Salary as the Board deems
to be necessary or desirable, including without limitation adjustments
in order to reflect increases in the cost of living. Any increase in
the Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except for
across-the-board salary reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, PSI or CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period and so long as the Executive is employed
by the Company, the Executive shall be eligible, and the Company shall
take such actions as may be necessary or required to cause the
Executive to become eligible, to participate in all short-term and
long-term incentive, stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company who are considered Tier III executives for
compensation purposes, including, but not limited to, Cinergy's Annual
Incentive Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan,
Cinergy's Executive Supplemental Life Insurance Program, the Senior
Executive Supplement portion of Cinergy's Supplemental Executive
Retirement Plan (effective January 1, 1999), and Cinergy's Excess
Pension Plan, or any successors thereto, except with respect to any
plan, practice, policy or program to which the Executive has waived
his rights in writing.
c. Fringe Benefits and Perquisites. During the Employment Period and so
long as the Executive is employed by the Company, the Executive shall
be entitled to the following additional fringe benefits:
(i) The Company shall furnish to the Executive an automobile and
shall pay all of the related expenses for gasoline, insurance,
maintenance and repairs;
(ii) The Company shall pay the initiation fee and the annual dues,
assessments and other membership charges of the Executive for
membership charges of the Executive for membership in a country
club selected by the Executive;
(iii)The Company shall provide paid vacation for four (4) weeks per
year (or longer if permitted by the Company's policy); and
(iv) The Company shall furnish to the Executive annual financial
planning and tax preparation services. In addition, the Executive
shall be entitled to receive such other fringe benefits in
accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his
position and at least comparable to those received by other
senior executives of the Company.
d. Expenses. The Company agrees to reimburse the Executive for all
expenses, including those for travel and entertainment, properly
incurred by him in the performance of his duties under this Agreement
in accordance with the policies established from time to time by the
Board.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
b. By the Company for Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
4(c) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
The breach by the Executive of the confidentiality provisions set
forth in Section 8 of this Agreement, or
(iii)The conviction of the Executive for the commission of a felony,
including the entry of a guilty or nolo contendere plea, or any
willful or grossly negligent action or inaction by the Executive
that has a materially adverse effect on the Company.
For purposes of this definition of "Cause," no act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
Notwithstanding the above definition of "Cause", the Company may
terminate the Executive's employment during the Employment Period
for a reason other than Cause, but the obligations placed upon
the Company in Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base Salary as specified
in Section 3(a) of this Agreement, or any other benefit or
payment described in Section 3 of this Agreement, except for
across-the-board salary reductions similarly affecting all
management personnel of Cinergy, Cinergy Services, CG&E, and PSI,
and changes to the employee benefits programs affecting all
management personnel of those corporations, provided that such
changes (either individually or in the aggregate) will not result
in a material adverse change with respect to the benefits which
the Executive was entitled to receive as of the Effective Date;
(ii) The material reduction without his consent of the Executive's
title, authority, duties or responsibilities from those in effect
immediately prior to the reduction;
(iii)Any breach by the Company of any other material provision
(including but not limited to the place of performance as
specified in Section 2(b);
(iv) The Executive's disability due to physical or mental illness or
injury which precludes the Executive from performing any job for
which he is qualified and able to perform based upon his
education, training or experience; or
(v) Any event which constitutes a "Change in Control" as defined in
Section 4(f) of this Agreement.
d. Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party to this Agreement given in accordance
with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision in this Agreement
relied upon;
(ii) To the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated; and
(iii)If the Date of Termination (as defined in Section 4(e)) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30)
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstances which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or
circumstances in enforcing the Executive's or the Company's
rights under this Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be;
(ii) If the Executive's employment is terminated by the Company other
than for Cause, the date on which the Company notifies the
Executive of such termination; and
(iii)If the Executive's employment is terminated by reason of death,
the date of death.
f. Change in Control. A "Change in Control" shall be deemed to have
occurred if any of the following events occur after the Effective
Date:
(i) Any "person" or "group" (within the meaning of Subsection 13(d)
and Paragraph 14(d)(2) of the Securities Exchange Act of 1934
(the "1934 Act") is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Cinergy (not including in the securities
beneficially owned by such Person any securities acquired
directly from Cinergy or its affiliates) representing fifty
percent (50%) or more of the combined voting power of Cinergy's
then outstanding securities, excluding any person who becomes
such a beneficial owner in connection with a transaction
described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii)During any period of two consecutive years, individuals who at
the beginning of that period constitute Cinergy's Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by Cinergy's shareholders
was approved or recommended by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of that period or whose appointment,
election or nomination for election was previously so approved or
recommended cease for any reason to constitute a majority of
Cinergy's Board of Directors; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportions as
their ownership of Cinergy immediately prior to such sale.
g. Person. "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include:
(i) The Company or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under an employee
benefit plan of Cinergy or any of its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the stockholders
of Cinergy in substantially the same proportions as their
ownership of stock of the Company.
5. Obligations of the Company Upon Termination.
a. Certain Terminations. During the Employment Period, if the Company
shall terminate the Executive's employment (other than in the case of
a termination for Cause), the Executive shall terminate his employment
for Good Reason or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as
"Termination"):
(i) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of:
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent most previously paid;
(2) an amount equal to the Cinergy Annual Incentive Plan target
percentage benefit for the fiscal year that includes the
Date of Termination multiplied by a fraction the numerator
of which shall be the number of days from the beginning of
such fiscal year to and including the Date of Termination
and the denominator of which shall be three hundred and
sixty-five (365);
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2), and (3) shall be
referred to in this Agreement as the "Accrued Obligations".)
The amounts specified in this Section 5(a)(i) shall be paid
within thirty (30) days after the Date of Termination. The
Accrued Obligations described in this Section are payable to
the Executive regardless of whether a Change in Control has
occurred.
(ii) Prior to the occurrence of a Change in Control, and in the
event of Termination other than by reason of the Executive's
death, then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted
using an interest rate equal to the prime rate
promulgated by CitiBank, N.A. and in effect as of the
Date of Termination (the "Prime Rate") of the Annual
Base Salary, and the Cinergy Annual Incentive Plan
target percentage payable through the end of the
Employment Period, each at the rate, and using the same
goals and factors, in effect at the time Notice of
Termination is given, and paid within thirty (30) days
of the Date of Termination;
(2) the Company shall pay to the Executive the present
value (discounted at the Prime Rate) of all amounts to
which the Executive would have been entitled had he
remained in employment with the Company until the end
of the Employment Period under the Cinergy Executive
Supplemental Life Insurance Program;
(3) the Company shall pay to the Executive the value of all
deferred compensation amounts whether or not then
payable; and
(4) the Company shall continue, until the end of the
Employment Period, medical and welfare benefits to the
Executive and/or the Executive's family at least equal
to those which would have been provided if the
Executive's employment had not been terminated
(excluding benefits to which the Executive has waived
his rights in writing), such benefits to be in
accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the
"M&W Plans") of the Company as in effect and applicable
generally to other senior executives of the Company and
their families during the ninety (90) day period
immediately preceding the Date of Termination;
provided, however, that if the Executive becomes
employed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such
other plan during such applicable period of
eligibility.
(iii)From and after the occurrence of a Change in Control and in
the event of Termination other than by reason of the
Executive's death, then in lieu of any further salary
payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any other benefits payable
pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum
severance payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately
prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and
(y) the higher of the amount paid to the Executive
pursuant to all incentive compensation or bonus plans
or programs maintained by the Company, in the year
preceding that in which the Date of Termination occurs
or in the year preceding that in which the Change in
Control occurs; and
(2) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which
the Executive is receiving immediately prior to the
Notice of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason),
except for any benefits that were waived by the
Executive in writing. Benefits otherwise receivable by
the Executive pursuant to this Section 5(a)(iii)(2)
shall be reduced to the extent comparable benefits are
actually received by or made available to the Executive
without cost during the thirty-six (36) month period
following the Executive's termination of employment
(and any such benefits actually received by the
Executive shall be reported to the Company by the
Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
b. Termination by the Company for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7 of this
Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for
Good Reason, the Company shall have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations and the amounts determined under
Section 5(c), plus any other earned but unpaid compensation, in each
case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to retirement benefits
under Cinergy's Non-Union Employees' Pension Plan, and its Excess
Pension Plan, or any successor thereto, the Executive shall be
eligible to participate in the Senior Executive Supplement portion of
Cinergy's Supplemental Executive Retirement Plan effective January 1,
1999.
d. Survival of Section 5(c). The provisions of Section 5(c) shall survive
the expiration or termination of this Agreement for any reason.
e. Certain Tax Consequences. In the event that the Executive becomes
entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be
subject to any excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of an Excise Tax on the Severance Benefits
and any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to
the Severance Benefits. For purposes of determining whether any of the
Severance Benefits will be subject to the Excise Tax and the amount of
such Excise Tax,
(i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Severance Benefits, or
(2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause
(i), above), and
(iii)the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum
reduction in federal income taxes which would be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and
local income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
f. Value Creation Plan and Stock Options. Upon termination of employment
for any reason, the Executive's entitlement to restricted shares and
performance shares under the Value Creation Plan of the Cinergy 1996
Long-Term Incentive Compensation Plan and any stock options granted
under the Cinergy Stock Option Plan or the Cinergy 1996 Long-Term
Incentive Compensation Plan shall be determined in reference to the
terms of the appropriate plan, any applicable administrative
guidelines and written agreements (all such plans, administrative
guidelines and written agreements referred to in this Agreement
collectively as the "Stock-Related Documents").
g. Other Fees and Expenses. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred in disputing
any such termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
other contract or agreement entered into after the date hereof with the
Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, program, policy or
practice of, or any contract or agreement entered into after the date
hereof with, the Company at or subsequent to the Date of Termination, shall
be payable in accordance with such benefit, plan, program, policy or
practice, or contract or agreement, except as explicitly modified by this
Agreement.
7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and
5(a)(iii)(2) of this Agreement, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains
other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the
interpretation, terms, validity or enforceability of (including any dispute
about the amount of any payment pursuant to) this Agreement, the Company
agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any such dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such dispute is arbitrable, shall be settled by arbitration. This agreement
to arbitrate includes but is not limited to all claims for any form of
illegal discrimination, improper or unfair treatment or dismissal, and all
tort claims. The Executive shall still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, shall be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party shall bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, shall be
borne equally by the parties.
9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of Cinergy, all of its subsidiary companies and affiliates,
as well as all successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data relating to the
Cinergy Companies, and their respective businesses, that shall have been
obtained by the Executive during the Executive's employment by the Company
and that shall not have been or now or subsequently have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior written consent of
the Company or as may otherwise by required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive
understands that during the Employment Period, the Cinergy Companies may be
required from time to time to make public disclosure of the terms or
existence of the Executive's employment relationship in order to comply
with various laws and legal requirements. In addition to all other remedies
available to the Company in law and equity, this Agreement is subject to
termination by the Company for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8.
10. Successors.
a. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon the
Company, and its successors and assigns.
c. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
M. Stephen Harkness
Cinergy Corp./PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana 46168
If to the Company:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the
other in writing in accordance with this Agreement. All notices and
communications shall be effective when actually received by the
addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have under this
Agreement, including without limitation the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. This instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof; and subject to any
agreements evidencing stock option or restricted stock grants
described in Section 3(b) and the Stock-Related Documents described in
Section 5(f) hereof, and all promises, representations,
understandings, arrangements and prior agreements are merged into this
Agreement and accordingly superseded.
g. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together will constitute one
and the same instrument.
h. The Company and the Executive agree that Cinergy shall be authorized
to act for the Company with respect to all aspects pertaining to the
administration and interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: __/s/ James E. Rogers_____
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
___/s/ M. Stephen Harkness___
M. Stephen Harkness