Exhibit 10.c


 


EMPLOYMENT AGREEMENT


 


This
EMPLOYMENT AGREEMENT is made and entered into as of the 11th day of
October, 2002 (the “Effective Date”), by and between Cinergy and William J.
Grealis      (the “Executive”).  This Agreement replaces and supersedes any
and all prior employment agreements between Cinergy and the Executive.  The capitalized words and terms used
throughout this Agreement are defined in Section 11.


 


Recitals


 


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


 


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


 


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


 


Agreement


 


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


 


1.                                      Employment
and Term.


 


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


 


b.                                      The
Employment Period of this Agreement will commence as of the Effective Date and
continue until December 31, 2004; provided that, commencing on December 31,
2002, and on each subsequent December 31, the Employment Period will be
extended for one (1) additional year unless either party gives the other party
written notice not to extend this Agreement at least ninety (90) days before
the extension would otherwise become effective.


 


2.                                      Duties
and Powers of Executive.


 


a.                                       Position.  The Executive will serve Cinergy as
Executive Vice President of the Company and he will have such responsibilities,
duties, and authority as are customary for someone of that position and such
additional duties, consistent with 


 


1

















 


his position,
as may be assigned to him from time to time during the Employment Period by the
Board of Directors or the Chief Executive Officer.  Executive shall devote substantially all of Executive’s business
time, efforts and attention to the performance of Executive’s duties under this
Agreement; provided, however, that this requirement shall not
preclude Executive from reasonable participation in civic, charitable or
professional activities or the management of Executive’s passive investments,
so long as such activities do not materially interfere with the performance of
Executive’s duties under this Agreement.


 


b.                                      Place
of Performance.  In connection with
the Executive’s employment, the Executive will be based at the principal
executive offices of Cinergy, 221 East Fourth Street, Cincinnati, Ohio.  Except for required business travel to an
extent substantially consistent with the present business travel obligations of
Cinergy executives who have positions of authority comparable to that of the
Executive, the Executive will not be required to relocate to a new principal
place of business that is more than thirty (30) miles from such location.


 


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


 


a.                                       Salary.  The Executive’s Annual Base Salary, payable
in pro rata installments not less often than semi-monthly, will be at the
annual rate of not less than $550,008. 
Any increase in the Annual Base Salary will not serve to limit or reduce
any other obligation of Cinergy under this Agreement.  The Annual Base Salary will not be reduced except for
across-the-board salary reductions similarly affecting all Cinergy management
personnel.  If Annual Base Salary is
increased or reduced during the Employment Period, then such adjusted salary
will thereafter be the Annual Base Salary for all purposes under this
Agreement.


 


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


 


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


 


(ii)                                  Supplemental
Retirement Benefit.


 


(1)                                  Amount,
Form, Timing and Method of Payment. 
Upon Executive’s termination of employment (for any reason) with
Cinergy, the Executive will be entitled and fully vested in a supplemental
retirement benefit in an amount which, when expressed as an annual amount
payable during the life of the 


 


2

















 


Executive,
shall equal the excess of (1) 60% of the Executive’s Highest Average Earnings
over (2) his total aggregate annual benefit, payable in the form of a single
life annuity to the Executive, under all Executive Retirement Plans.  Except as described below, the form (e.g.,
the 100% joint and survivor annuity form of benefit), timing, and method of
payment of the supplemental retirement benefit payable under this Paragraph
will be the same as those elected by the Executive under the Pension Plan, and
the amount of such benefit shall be calculated after taking into account the
actuarial factors contained in the Pension Plan, provided, however,
that such benefit shall not be actuarially reduced for early commencement.


 


(2)                                  Death
Benefit.  If the Executive dies
prior to his retirement from Cinergy, and if his Spouse, on the date of his
death, is living on the date the first installment of the supplemental
retirement benefit would be payable under this Paragraph, the Spouse will be
entitled to receive the supplemental retirement benefit as a Spouse’s
benefit.  The form, timing, and method
of payment of any Spouse’s benefit under this Paragraph will be the same as
those applicable to the Spouse under the Pension Plan, and the amount of such
benefit shall be calculated after taking into account the actuarial factors
contained in the Pension Plan, provided, however, that such
benefit shall not be actuarially reduced for early commencement.


 


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


 


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


 


(B)                                Such
special payment election shall become operative only upon the occurrence of a
Change in Control and only if the Executive’s termination of employment occurs
either (1) prior to the occurrence of a Change in Control or (2) during the
24-month period commencing upon the occurrence of a Change in Control.  Once operative, such special payment 


 


3

















 


election shall
override any other payment election made by the Executive with respect to his
supplemental retirement benefit.


 


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


 


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


 


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


 


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


 


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


 


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


 


(E)                                 In
the event that the Executive makes a special payment election and pursuant to
that election he is entitled to receive a single lump sum cash payment payable after
the commencement of his supplemental retirement benefit in 


 


4

















 


another form
of payment, his lump sum cash payment shall be equal to the Actuarial
Equivalent (as that term is used in the Pension Plan with respect to lump sum
payments) of the remaining payments to be made in connection with his
supplemental retirement benefit.


 


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


 


(iv)                              The
Executive will be a participant in the Annual Incentive Plan and will be paid
pursuant to the terms and conditions of that plan, subject to the following:
(1) The maximum annual bonus shall be not less than one hundred five percent
(105%) of the Executive’s Annual Base Salary (the “Maximum Annual Bonus”); and
(2) The target annual bonus shall be not less than sixty percent (60%) of the
Executive’s Annual Base Salary (the “Target Annual Bonus”).


 


(v)                                 The
Executive will be a participant in the Long-Term Incentive Plan (the “LTIP”),
and the Executive’s annualized target award opportunity under the LTIP will be
equal to no less than ninety percent (90%) of his Annual Base Salary (the
“Target LTIP Bonus”).


 


(vi)                              For
purposes of Sections 3b(iv) and 3b(v), the Executive’s Annual Base Salary for
any calendar year shall be increased by the amount of any Nonelective Employer
Contributions made on behalf of the Executive during such calendar year under
the 401(k) Excess Plan.


 


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


 


(i)                                     Cinergy
will furnish to the Executive an automobile appropriate for the Executive’s
level of position, or, at Cinergy’s discretion, a cash allowance of equivalent
value.  Cinergy will also pay all of the
related expenses for gasoline, insurance, maintenance, and repairs, or provide
for such expenses within the cash allowance. 
All benefits provided pursuant to this Section 3c(i) shall be provided
in accordance with generally applicable procedures established from time to
time by Cinergy in its sole discretion.


 


5

















 


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


 


(iv)                              Cinergy
will furnish to the Executive annual financial planning and tax preparation
services, provided, however, that the cost to Cinergy of such
services shall not exceed $15,000 during any thirty-six (36) consecutive month
period.  Notwithstanding the preceding
sentence, in the event any  payment to
the Executive pursuant to this Section 3c(iv) is subject to any  federal, state, or local income or
employment taxes, Cinergy shall provide to the Executive an additional payment
in an amount necessary such that after payment by the Executive of all such
taxes (calculated after assuming that the Executive pays such taxes for the
year in which the benefit occurs at the highest marginal tax rate applicable),
including the taxes imposed on the additional payment, the Executive retains an
amount equal to the benefit provided pursuant to this Section 3c(iv).


 


(v)                                 Cinergy
will provide other fringe benefits in accordance with Cinergy plans, practices,
programs, and policies in effect from time to time, commensurate with his
position and at least comparable to those received by other Cinergy Tier II
executives.


 


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


 


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


 


f.                                         Stock
Options and Stock Appreciation Rights. 
Notwithstanding Section 5d, upon the occurrence of a Change in Control,
any stock options or stock appreciation rights then held by the Executive
pursuant to the LTIP or Cinergy Corp. Stock Option Plan shall, to the extent
not otherwise provided in the applicable Stock 


 


6

















 


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


 


4.                                      Termination
of Employment.


 


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


 


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


 


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


 


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


 


(iii)                               The
conviction of the Executive for the commission of a felony, including the entry
of a guilty or nolo contendere plea, or any willful or grossly negligent action
or inaction by the Executive that has a materially adverse effect on
Cinergy.  For purposes of this
definition of Cause, no act, or failure to act, on the Executive’s part will be
deemed “willful” unless it is done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive’s act, or failure to
act, was in the best interest of Cinergy.


 


(iv)                              Notwithstanding
the foregoing, Cinergy shall be deemed to have not terminated the employment of
the Executive for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution 


 


7

















 


duly adopted
by the affirmative vote of not less than a majority of the Board then in office
at a meeting of the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with his
counsel, to be heard by the Board), finding that, in the good faith opinion of
the Board, the Executive had committed an act set forth above in this Section
4b and specifying the particulars thereof in detail.


 


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


 


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


 


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


 


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


 


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


 


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


 


8

















 


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


 


                For purposes of determining whether Good
Reason exists with respect to a Qualifying Termination occurring on or within
24 months following a Change in Control, any claim by the Executive that Good
Reason exists shall be presumed to be correct unless the Company establishes to
the Board by clear and convincing evidence that Good Reason does not exist.


 


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


 


f.                                         Notice
of Termination.  Any termination of
the Executive’s employment by Cinergy or by the Executive during the Employment
Period (other than a termination due to the Executive’s death) will be
communicated by a written Notice of Termination to the other party to this
Agreement in accordance with Section 12b. 
For purposes of this Agreement, a “Notice of Termination” means a
written notice that specifies the particular provision of this Agreement relied
upon and that sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for terminating the Executive’s employment under the
specified provision.  The failure by the
Executive or Cinergy to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause will not
waive any right of the Executive or Cinergy under this Agreement or preclude
the Executive or Cinergy from asserting that fact or circumstance in enforcing
rights under this Agreement.


 


g.                                      The
Executive acknowledges and agrees that he shall not sell or otherwise dispose
of any shares of Company stock acquired pursuant to the exercise of a stock
option, other than shares sold in order to pay an option exercise price or the
related tax withholding obligation, until 90 days after the Date of
Termination.  Notwithstanding the
foregoing, Cinergy, in its sole discretion, may waive the restrictions
contained in the previous sentence.


 


5.                                      Obligations
of Cinergy Upon Termination.


 


a.                                       Certain
Terminations.


 


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


 


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


 


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


 


9

















 


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


 


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


 


(ii)                                  In
the event of a Qualifying Termination either prior to the occurrence of a
Change in Control, or more than twenty-four (24) months following the
occurrence of a Change in Control, Cinergy will pay the Accrued Obligations,
and Cinergy will have the following additional obligations described in this
Section 5a(ii); provided, however, that each of the benefits
described below in this Section 5a(ii) shall only be provided to the Executive
if, upon presentation to the Executive following a Qualifying Termination, the
Executive timely executes and does not timely revoke the Waiver and Release.


 


(1)                                  Cinergy
will pay to the Executive a lump sum amount, in cash, equal to three (3) times
the sum of the Annual Base Salary and the Annual Bonus.  For this purpose, the Annual Base Salary
will be at the rate in effect at the time Notice of Termination is given
(without giving effect to any reduction in Annual Base Salary, if any, prior to
the termination, other than across-the-board reductions), and shall include the
amount of any Nonelective Employer Contributions made on behalf of the
Executive under the 401(k) Excess Plan during the fiscal year in which the
Executive’s Qualifying Termination occurs, and the Annual Bonus will be the
higher of (A) the annual bonus earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in respect of the year ending
immediately prior to the fiscal year in which occurs the Date of Termination,
and (B) the annual bonus that would have been earned by the Executive pursuant
to any annual bonus or incentive plan maintained by Cinergy in respect of the
fiscal year in which occurs the Date of Termination, calculated 


 


10

















 


by projecting
Cinergy’s performance and other applicable goals and objectives for the entire
fiscal year based on Cinergy’s performance during the period of such fiscal
year occurring prior to the Date of Termination, and based on such other
assumptions and rates as Cinergy deems reasonable; provided, however
that for purposes of this Section 5a(ii)(1)(B), the Annual Bonus shall not be
less than the Target Annual Bonus, nor greater than the Maximum Annual Bonus
for the year in which the Date of Termination occurs.  This lump sum will be paid within thirty (30) days after the
expiration of the revocation period contained in the Waiver and Release.


 


(2)                                  Subject
to Clauses (A), (B) and (C) below, Cinergy will provide, until the end of the
Employment Period, medical and dental benefits to the Executive and/or the
Executive’s dependents at least equal to those that would have been provided if
the Executive’s employment had not been terminated (excluding benefits to which
the Executive has waived his rights in writing).  The benefits described in the preceding sentence will be in
accordance with the medical and welfare benefit plans, practices, programs, or
policies of Cinergy (the “M&W Plans”) as then currently in effect and
applicable generally to other Cinergy senior executives and their families.  In the event that any medical or dental
benefits or payments provided pursuant to this Section 5a(ii)(2)(B) are subject
to federal, state, or local income or employment taxes, Cinergy shall provide
the Executive with an additional payment in the amount necessary such that
after payment by the Executive of all such taxes (calculated after assuming
that the Executive pays such taxes for the year in which the payment or benefit
occurs at the highest marginal tax rate applicable), including the taxes imposed
on the additional payment, the Executive retains an amount equal to the medical
or dental benefits or payments provided pursuant to this Section 5a(ii)(2)(B).


 


(A)                              If,
as of the Executive’s Date of Termination, the Executive meets the eligibility
requirements for Cinergy’s retiree medical and welfare benefit plans, the
provision of those retiree medical and welfare benefit plans to the Executive
will satisfy Cinergy’s obligation under this Section 5a(ii)(2).


 


(B)                                If,
as of the Executive’s Date of Termination, the provision to the Executive of
the M&W Plan benefits described in this Section 5a(ii)(2) would either (1)
violate the terms of the M&W Plans (or any related insurance policies) or
(2) violate any of the Code’s nondiscrimination requirements applicable to the
M&W Plans, then Cinergy, in its sole 


 


11

















 


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


 


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


 


(3)                                  Cinergy
will pay the Executive a lump sum amount, in cash, equal to $15,000 in order to
cover tax counseling services through an agency selected by the Executive.  In the event
any  payment to the Executive pursuant
to this Section 5a(ii)(3) is subject to any 
federal, state, or local income or employment taxes, Cinergy shall
provide to the Executive an additional payment in an amount necessary such that
after payment by the Executive of all such taxes (calculated after assuming
that the Executive pays such taxes for the year in which his Date of
Termination occurs at the highest marginal tax rate applicable), including the
taxes imposed on the additional payment, the Executive retains an amount equal
to the payment provided pursuant to this Section 5a(ii)(3).  Such payment will be transferred to the Executive
within thirty (30) days of the expiration of the revocation period contained in
the Waiver and Release.


 


(iii)                               In
the event of a Qualifying Termination during the twenty-four (24) month period
beginning upon the occurrence of a Change in Control, Cinergy will pay the Accrued
Obligations listed in Sections 5a(i)(1) and (2), Cinergy will pay the Accrued
Obligations listed in Section 5a(i)(3) (but only if such Qualifying Termination
occurs after the calendar year in which occurs such Change in Control) and
Cinergy will have the following additional obligations described in this
Section 5a(iii); provided, however, that each of the benefits
described below in this Section 5a(iii) 


 


12

















 


shall only be
provided to the Executive if, upon presentation to the Executive following a
Qualifying Termination, the Executive timely executes and does not timely
revoke the Waiver and Release.


 


(1)                                  Cinergy
will pay to the Executive a lump sum severance payment, in cash, equal to three
(3) times the higher of (x) the sum of the Executive’s current Annual Base
Salary and Target Annual Bonus and (y) the sum of the Executive’s Annual Base
Salary in effect immediately prior to the Change in Control and the Change in
Control Bonus.  For purposes of the preceding
sentence, the Executive’s Annual Base Salary on any given date shall include
the amount of any Nonelective Employer Contributions made on behalf of the
Executive under the 401(k) Excess Plan during the fiscal year in which such
date occurs.  For purposes of this
Agreement, the Change in Control Bonus shall mean the higher of (A) the annual
bonus earned by the Executive pursuant to any annual bonus or incentive plan
maintained by Cinergy in respect of the year ending immediately prior to the
fiscal year in which occurs the Date of Termination or, if higher, immediately
prior to the fiscal year in which occurs the Change in Control, and (B) the
annual bonus that would have been earned by the Executive pursuant to any
annual bonus or incentive plan maintained by Cinergy in respect of the year in
which occurs the Date of Termination, calculated by projecting Cinergy’s
performance and other applicable goals and objective for the entire fiscal year
based on Cinergy’s performance during the period of such fiscal year occurring
prior to the Date of Termination, and based on such other assumptions and rates
as Cinergy deems reasonable, provided, however, that  for purposes of this Section 5a(iii)(1)(B),
such Change in Control Bonus shall not be less than the Target Annual Bonus,
nor greater than the Maximum Annual Bonus. 
This lump sum will be paid within thirty (30) days of the expiration of
the revocation period contained in the Waiver and Release.  Nothing in this Section 5a(iii)(1) shall
preclude the Executive from receiving the amount, if any, to which he is
entitled in accordance with the terms of the Annual Incentive Plan for the
fiscal year that includes the Date of Termination.


 


(2)                                  Cinergy
will pay to the Executive the lump sum present value of any benefits under the
Executive Supplemental Life Program under the terms of the applicable plan or
program as of the Date of Termination, calculated as if the Executive was fully
vested as of the Date of Termination. The lump sum present value, assuming commencement
at age 50 or the Executive’s age as of the Date of Termination if later, will
be determined using the interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees’ Pension Plan or any successor to that plan
for the plan 


 


13

















 


year that
includes the Date of Termination. To the extent no such interest rate is
provided therein, the annual interest rate applicable under Section 417(e)(3)
of the Code, or any successor provision thereto, for the second full calendar
month preceding the first day of the calendar year that includes the Date of
Termination will be used. This lump sum will be paid within thirty (30) days of
the expiration of the revocation period contained in the Waiver and Release.


 


(3)                                  The
Executive shall be fully vested in his accrued benefits as of the Date of
Termination under the Executive Retirement Plans, and his aggregate accrued
benefits thereunder and under Section 3b(ii) of this Agreement will be
calculated, and he will be treated for all purposes, as if he was credited with
three (3) additional years of age and service as of the Date of Termination, provided,
however, that to the extent a calculation is made regarding the
actuarial equivalent amount of any alternate form of benefit, the Executive
will not be credited with three additional years of age for purposes of such
calculation.  However, Cinergy will not
commence payment of such benefits prior to the date that the Executive has
attained, or is treated (after taking into account the preceding sentence) as
if he had attained, age 50.


 


(4)                                  For
a thirty-six (36) month period after the Date of Termination, Cinergy will
arrange to provide to the Executive and/or the Executive’s dependents life,
disability, accident, and health insurance benefits substantially similar to
those that the Executive and/or the Executive’s dependents are receiving
immediately prior to the Notice of Termination at a substantially similar cost
to the Executive (without giving effect to any reduction in those benefits
subsequent to a Change in Control that constitutes Good Reason), except for any
benefits that were waived by the Executive in writing.  If Cinergy arranges to provide the Executive
and/or the Executive’s dependents with life, disability, accident, and health
insurance benefits, those benefits will be reduced to the extent comparable
benefits are actually received by or made available to the Executive and/or the
Executive’s dependents during the thirty-six (36) month period following the
Executive’s Date of Termination.  The
Executive must report to Cinergy any such benefits that he or his dependents
actually receives or that are made available to him or his dependents.  In lieu of the benefits described in the
preceding sentences, Cinergy, in its sole discretion, may elect to pay to the
Executive a lump sum cash payment equal to thirty-six (36) times the monthly
premiums (or in the case of a self funded plan, the cost of COBRA continuation
coverage) that would have been paid by Cinergy to provide those benefits to the
Executive and/or the Executive’s dependents. 



 


14

















 


Nothing in
this Section 5a(iii)(4) will affect the Executive’s right to elect COBRA
continuation coverage in accordance with applicable law, and Cinergy will
provide the benefits or make the payment described in this Clause whether or
not the Executive elects COBRA continuation coverage, and whether or not the
Executive receives health coverage from another employer.  In the event that any benefits or payments
provided pursuant to this Section 5a(iii)(4) are subject to federal, state, or
local income or employment taxes, Cinergy shall provide the Executive with an
additional payment in the amount necessary such that after payment by the
Executive of all such taxes (calculated after assuming that the Executive pays
such taxes for the year in which the payment or benefit occurs at the highest
marginal tax rate applicable), including the taxes imposed on the additional payment,
the Executive retains an amount equal to the benefits or payments provided
pursuant to this Section 5a(iii)(4).


 


(5)                                  In
lieu of any and all other rights with respect to the automobile assigned by
Cinergy to the Executive, Cinergy will provide the Executive with a lump sum
payment in the amount of $50,000.  In
the event any  payment to the Executive
pursuant to this Section 5a(iii)(5) is subject to any  federal, state, or local income or employment taxes, Cinergy
shall provide to the Executive an additional payment in an amount necessary
such that after payment by the Executive of all such taxes (calculated after
assuming that the Executive pays such taxes for the year in which his Date of
Termination occurs at the highest marginal tax rate applicable), including the
taxes imposed on the additional payment, the Executive retains an amount equal
to the payment provided pursuant to this Section 5a(iii)(5).  Such payment will be transferred to the
Executive within thirty (30) days of the expiration of the revocation period
contained in the Waiver and Release.


 


(6)                                  Cinergy
will pay the Executive a lump sum amount, in cash, equal to $15,000 in order to
cover tax counseling services through an agency selected by the Executive.  In the event any  payment to the Executive pursuant to this Section 5a(iii)(6) is
subject to any  federal, state, or local
income or employment taxes, Cinergy shall provide to the Executive an
additional payment in an amount necessary such that after payment by the
Executive of all such taxes (calculated after assuming that the Executive pays
such taxes for the year in which his Date of Termination occurs at the highest
marginal tax rate applicable), including the taxes imposed on the additional
payment, the Executive retains an amount equal to the payment provided pursuant
to this Section 5a(iii)(6).  Such
payment will be transferred to the Executive within thirty (30) days 


 


15

















 


of the
expiration of the revocation period contained in the Waiver and Release.


 


(7)                                  Cinergy
will provide annual dues and assessments of the Executive for membership in a
country club selected by the Executive until the end of the Employment Period.


 


(8)                                  Cinergy
will provide outplacement services suitable to the Executive’s position until
the end of the Employment Period or, if earlier, until the first acceptance by
the Executive of an offer of employment. 
At the Executive’s discretion, 15% of Annual Base Salary may be paid in
lieu of outplacement services, which payment will be transferred to the
Executive within thirty (30) days of the expiration of the revocation period
contained in the Waiver and Release.


 


                For purposes of this Section 5a(iii), the
Executive will be deemed to have incurred a Qualifying Termination upon a
Change in Control if 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, 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 that constitutes Good Reason
occurs at the direction of such a Person.


 


b.                                      Termination
by Cinergy for Cause or by the Executive Other Than for Good Reason.  Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the Executive’s
employment is terminated for Cause during the Employment Period, or if the
Executive terminates employment during the Employment Period other than a
termination for Good Reason, Cinergy will have no further obligations to the
Executive under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations, plus any other earned but unpaid compensation,
in each case to the extent not previously paid.


 


c.                                       Certain
Tax Consequences.


 


(i)                                     In
the event that any benefits paid or payable to the Executive or for his benefit
pursuant to the terms of this Agreement or any other plan or arrangement in
connection with, or arising out of, his employment with Cinergy or a change in
ownership or effective control of Cinergy or of a substantial portion of its
assets (a “Payment” or “Payments”) would be subject to any Excise Tax, then the
Executive will be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes
(including any interest, penalties, additional tax, or similar items imposed
with respect thereto and the Excise Tax), including any Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon or assessable against the Executive due to
the Payments.


 


16

















 


(ii)                                  Subject
to the provisions of Section 5c, all determinations required to be made under
this Section 5c, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by the Accounting Firm, which
shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested
by the Company.  If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return.  All fees and
expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant
to this Section 5c, shall be paid by Cinergy to the Executive within five (5)
days of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon Cinergy and the Executive.  As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Cinergy should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. 
In the event of any Underpayment, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by Cinergy to or for the benefit of the Executive, and
Cinergy shall indemnify and hold harmless the Executive for any such
Underpayment, on an after-tax basis, including interest and penalties with
respect thereto.  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 Code Section 1274(b)(2)(B).


 


(iii)                               The
value of any non-cash benefits or any deferred payment or benefit paid or
payable to the Executive will be determined in accordance with the principles
of Code Sections 280G(d)(3) and (4). 
For purposes of determining the amount of the Gross-Up Payment, the
Executive will 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 applicable state and local income taxes at the
highest 


 


17

















 


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 that would
be obtained from deduction of those state and local taxes.


 


(iv)                              Notwithstanding
anything contained in this Agreement to the contrary, in the event that,
according to the Accounting Firm’s determination, an Excise Tax will be imposed
on any Payment or Payments, Cinergy will pay to the applicable government
taxing authorities as Excise Tax withholding, the amount of the Excise Tax that
Cinergy has actually withheld from the Payment or Payments in accordance with
law.


 


d.                                      Value
Creation Plan and Stock Options. 
Upon the Executive’s termination of employment for any reason, the
Executive’s entitlement to restricted shares and performance shares under the
Value Creation Plan and any stock options granted under the Cinergy Corp. Stock
Option Plan, the LTIP or any other stock option plan will be determined under
the terms of the appropriate plan and any applicable administrative guidelines
and written agreements, provided, however, that following the
occurrence of a Change in Control the terms of any such plan, administrative
guideline or written agreement shall not be amended in a manner that would
adversely affect the Executive with respect to awards granted to the Executive
prior to the Change in Control.


 


e.                                       Benefit
Plans in General.  Upon the
Executive’s termination of employment for any reason, the Executive’s
entitlements, if any, under all benefit plans of Cinergy, including but not
limited to the Deferred Compensation Plan, 401(k) Excess Plan, Cinergy Corp.
Supplemental Executive Retirement Plan and any vacation policy, shall be
determined under the terms of such plans, policies and any applicable
administrative guidelines and written agreements, provided, however,
that following the occurrence of a Change in Control the terms of such plans
and policies and any applicable administrative guidelines and written
agreements shall not be amended in a manner that would adversely affect the
Executive with respect to benefits earned by the Executive prior to the Change
in Control.


 


f.                                         Other
Fees and Expenses.  Cinergy will
also reimburse the Executive for all reasonable legal fees and expenses
incurred by the Executive (i) in successfully disputing a Qualifying
Termination that entitles the Executive to Severance Benefits or (ii) in
reasonably disputing whether or not Cinergy has terminated his employment for
Cause.  Payment will be made within five
(5) business days after delivery of the Executive’s written request for payment
accompanied by such evidence of fees and expenses incurred as Cinergy
reasonably may require.


 


6.                                      Non-Exclusivity of Rights.  Nothing in this Agreement will prevent or
limit the Executive’s continuing or future participation in any benefit, plan,
program, policy, or practice provided by Cinergy and for which the Executive
may qualify, except with respect to any benefit to which the Executive has
waived his rights in writing or any plan, 


 


18

















 


program,
policy, or practice that expressly excludes the Executive from
participation.  In addition, nothing in
this Agreement will limit or otherwise affect the rights the Executive may have
under any other contract or agreement with Cinergy entered into after the
Effective Date.  Amounts that are vested
benefits or that the Executive is otherwise entitled to receive under any
benefit, plan, program, policy, or practice of, or any contract or agreement
entered into after the Effective Date with Cinergy, at or subsequent to the
Date of Termination, will be payable in accordance with that benefit, plan,
program, policy or practice, or that contract or agreement, except as
explicitly modified by this Agreement. 
Notwithstanding the above, in the event that the Executive receives
Severance Benefits under Section 5a(ii) or 5a(iii), (a) the Executive shall not
be entitled to any benefits under any severance plan of Cinergy, including but
not limited to the Severance Opportunity Plan for Non-Union Employees of
Cinergy Corp. and (b) if the Executive receives such Severance Benefits as a
result of his termination for Good Reason, as that term is defined in Section
4d(iv), Cinergy’s obligations under Sections 5a(ii) and 5a(iii) shall be
reduced by the amount of any benefits payable to the Executive under any
short-term or long-term disability plan of Cinergy, the amount of which shall
be determined by Cinergy in good faith.


 


7.                                      Full Settlement: 
Mitigation. 
Except as otherwise provided herein, Cinergy’s obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement will not be affected by any set-off,
counterclaim, recoupment, defense, or other claim, right, or action that
Cinergy may have against the Executive or others.  In no event will the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any
of the provisions of this Agreement and, except as provided in Sections 3e,
5a(ii)(2) and 5a(iii)(4), those amounts will not be reduced simply because the
Executive obtains other employment.  If
the Executive finally prevails on the substantial claims brought with respect
to any dispute between Cinergy and the Executive as to the interpretation,
terms, validity, or enforceability of (including any dispute about the amount
of any payment pursuant to) this Agreement, Cinergy agrees to pay all
reasonable legal fees and expenses that the Executive may reasonably incur as a
result of that 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
a 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 will still have a right to file a discrimination
charge with a federal or state agency, but the final resolution of any
discrimination claim will be submitted to arbitration instead of a court or
jury.  The arbitration proceeding will
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, and such proceeding will be adjudicated in the state
of Ohio in accordance with the laws of the state of Ohio.  The decision of the 


 


19

















 


arbitrator(s),
including determination of the amount of any damages suffered, will be
exclusive, final, and binding on all parties, their heirs, executors,
administrators, successors and assigns. 
Each party will 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, will be borne equally by the parties.  Notwithstanding anything in this Section to the contrary, if the
Executive prevails with respect to any dispute submitted to arbitration under
this Section, Cinergy will reimburse or pay all legal fees and expenses that
the Executive may reasonably incur as a result of the dispute as required by
Section 7.


 


9.                                      Confidential Information.  The Executive will hold in a fiduciary
capacity for the benefit of Cinergy, as well as all of Cinergy’s successors and
assigns, all secret, confidential information, knowledge, or data relating to
Cinergy, and its affiliated businesses, that the Executive obtains during the
Executive’s employment by Cinergy or any of its affiliated companies, and that
has not been or subsequently becomes 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 will not, without Cinergy’s prior written
consent or as may otherwise by required by law or legal process, communicate or
divulge any such information, knowledge, or data to anyone other than Cinergy
and those designated by it.  The
Executive understands that during the Employment Period, Cinergy may be
required from time to time to make public disclosure of the terms or existence
of the Executive’s employment relationship to comply with various laws and
legal requirements.  In addition to all
other remedies available to Cinergy in law and equity, this Agreement is
subject to termination by Cinergy for Cause under Section 4b in the event the
Executive violates any provision of this Section.


 


10.                               Successors.


 


a.                                       This
Agreement is personal to the Executive and, without Cinergy’s prior written
consent, cannot be assigned by the Executive other than Executive’s designation
of a beneficiary of any amounts payable hereunder after the Executive’s
death.  This Agreement will inure to the
benefit of and be enforceable by the Executive’s legal representatives.


 


b.                                      This
Agreement will inure to the benefit of and be binding upon Cinergy and its
successors and assigns.


 


c.                                       Cinergy
will 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 Cinergy to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that Cinergy would be required to
perform it if no succession had taken place. 
Cinergy’s failure to obtain such an assumption and agreement prior to
the effective date of a succession will be a breach of this Agreement and will
entitle the Executive to compensation from Cinergy in the same amount and on
the same terms as if the Executive were to 


 


20

















 


terminate his
employment for Good Reason upon a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective will be deemed the Date of Termination.


 


11.                               Definitions.  As used in this Agreement, the following
terms, when capitalized, will have the following meanings:


 


a.                                       Accounting
Firm.  “Accounting Firm” means
Cinergy’s independent auditors.


 


b.                                      Accrued
Obligations.  “Accrued Obligations”
means the accrued obligations described in Section 5a(i).


 


c.                                       Agreement.  “Agreement” means this Employment Agreement
between Cinergy and the Executive.


 


d.                                      AIP
Benefit.  “AIP Benefit” means the
Annual Incentive Plan benefit described in Section 5a(i).


 


e.                                       Annual
Base Salary.  “Annual Base Salary”
means, except where otherwise specified herein, the annual base salary payable
to the Executive pursuant to Section 3a.


 


f.                                         Annual
Bonus.  “Annual Bonus” has the
meaning set forth in Section 5a(ii)(1).


 


g.                                      Annual
Incentive Plan.  “Annual Incentive
Plan” means the Cinergy Corp. Annual Incentive Plan or any similar plan or
successor to the Annual Incentive Plan.


 


h.                                      Board
of Directors or Board.  “Board of
Directors” or “Board” means the board of directors of the Company.


 


i.                                          COBRA.  “COBRA” means the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.


 


j.                                          Cause.  “Cause” has the meaning set forth in Section
4b.


 


k.                                       Change
in Control.  A “Change in Control”
will be deemed to have occurred if any of the following events occur, after the
Effective Date:


 


(i)                                     Any
Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (“1934 Act”)), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates) representing more than twenty percent (20%) of the
combined voting power of the Company’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


 


21

















 


(ii)                                  There
is consummated a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, partnership or other
entity, other than (1) a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior to that merger
or consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent)
at least sixty percent (60%) of the combined voting power of the securities of
the Company or the surviving entity or its parent outstanding immediately after
the merger or consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no Person is or becomes the beneficial owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by such a Person any securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by the Company or its
affiliates of a business) representing twenty percent (20%) or more of the
combined voting power of the Company’s then outstanding securities; or


 


(iii)                               During
any period of two (2) consecutive years, individuals who at the beginning of
that period constitute the 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 the Company) whose
appointment or election by the Company’s stockholders 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 the Board of
Directors; or


 


(iv)                              The
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated a sale or disposition by the
Company of all or substantially all of the Company’s assets, other than a sale
or disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least sixty percent (60%) of the combined voting power
of the voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to the sale.


 


l.                                          Change
in Control Bonus.  “Change in
Control Bonus” has the meaning set forth in Section 5a(iii)(1).


 


m.                                    Chief
Executive Officer.  “Chief Executive
Officer” means the individual who, at any relevant time, is then serving as the
chief executive officer of the Company.


 


22

















 


n.                                      Cinergy.  “Cinergy” means the Company, its
subsidiaries, and/or its affiliates, and any successors to the foregoing.


 


o.                                      Code.  “Code” means the Internal Revenue Code of
1986, as amended, and interpretive rules and regulations.


 


p.                                      Company.  “Company” means Cinergy Corp.


 


q.                                      Date
of Termination.  “Date of
Termination” means:


 


(i)                                     if
the Executive’s employment is terminated by Cinergy for Cause, or by the
Executive with Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the notice, as the case may be;


 


(ii)                                  if
the Executive’s employment is terminated by the Executive without Good Reason,
thirty (30) days after the date on which the Executive notifies Cinergy of the
termination;


 


(iii)                               if
the Executive’s employment is terminated by Cinergy other than for Cause,
thirty (30) days after the date on which Cinergy notifies the Executive of the
termination; and


 


(iv)                              if
the Executive’s employment is terminated by reason of death, the date of death.


 


r.                                         Deferred
Compensation Plan.  “Deferred
Compensation Plan” means the Cinergy Corp. Non-Qualified Deferred Incentive
Compensation Plan or any similar plan or successor to that plan.


 


s.                                       Effective
Date.  “Effective Date” has the
meaning given to that term in the first paragraph of this Agreement.


 


t.                                         Employment
Period.  “Employment Period” has the
meaning set forth in Section 1b.


 


u.                                      Excise
Tax.  “Excise Tax” means any excise
tax imposed by Code section 4999, together with any interest, penalties,
additional tax or similar items that are incurred by the Executive with respect
to the excise tax imposed by Code section 4999.


 


v.                                      Executive.  “Executive” has the meaning given to that
term in the first paragraph of this Agreement.


 


w.                                    Executive
Retirement Plans.  “Executive
Retirement Plans” means the Pension Plan, the Cinergy Corp. Supplemental
Executive Retirement Plan and the Cinergy Corp. Excess Pension Plan or any
similar plans or successors to those plans.


 


23

















 


x.                                        Executive
Supplemental Life Program. 
“Executive Supplemental Life Program” means the Cinergy Corp. Executive
Supplemental Life Insurance Program or any similar program or successor to the
Executive Supplemental Life Program.


 


y.                                      401(k)
Excess Plan.  “401(k) Excess Plan”
means the Cinergy Corp. 401(k) Excess Plan, or any similar plan or successor to
that plan.


 


z.                                        Good
Reason.  “Good Reason” has the
meaning set forth in Section 4d.


 


aa.                                 Gross-Up
Payment.  “Gross-Up Payment” has the
meaning set forth in Section 5c.


 


bb.                               Highest
Average Earnings.  “Highest Average
Earnings” shall have the meaning given to such term in the Cinergy Corp.
Supplemental Executive Retirement Plan. 
For purposes of clarity, the parties hereto acknowledge and agree that
the Executive’s Highest Average Earnings for any year shall not include any
benefits received by the Executive pursuant to Section 5 of this Agreement,
other than pursuant to Section 5a(i) of this Agreement.


 


cc.                                 Long-Term
Incentive Plan or LTIP.  “Long-Term
Incentive Plan” or “LTIP” means the long-term incentive plan implemented under
the Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any successor
to that plan.


 


dd.                               M&W
Plans.  “M&W Plans” has the
meaning set forth in Section 5a(ii)(2).


 


ee.                                 Maximum
Annual Bonus.  “Maximum Annual
Bonus” has the meaning set forth in Section 3b.


 


ff.                                     Nonelective
Employer Contribution. “Nonelective Employer Contribution” has the meaning
set forth in the 401(k) Excess Plan.


 


gg.                               Notice
of Termination.  “Notice of
Termination” has the meaning set forth in Section 4f.


 


hh.                               Payment
or Payments.  “Payment” or
“Payments” has the meaning set forth in Section 5c.


 


ii.                                       Pension
Plan.  “Pension Plan” means the
Cinergy Corp. Non-Union Employees’ Pension Plan or any successor to that plan.


 


jj.                                       Person.  “Person” has the meaning set forth in
paragraph 3(a)(9) of the 1934 Act, as modified and used in subsections 13(d)
and 14(d) of the 1934 Act; however, a Person will not include the following:


 


(i)                                     Cinergy
or any of its subsidiaries or affiliates;


 


(ii)                                  A
trustee or other fiduciary holding securities under an employee benefit plan of
Cinergy or its subsidiaries or affiliates;


 


24

















 


(iii)                               An
underwriter temporarily holding securities pursuant to an offering of those
securities; or


 


(iv)                              A
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company.


 


kk.                                 Potential
Change in Control.  A “Potential
Change in Control” means any period during which any of the following
circumstances exist:


 


(i)                                     The
Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control; provided that a Potential Change in Control
shall cease to exist upon the expiration or other termination of such
agreement; or


 


(ii)                                  The
Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
provided that a Potential Change in Control shall cease to exist when the
Company or such Person publicly announces that it no longer has such an
intention; or


 


(iii)                               Any
Person who is or becomes the beneficial owner (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of securities of the Company
representing ten percent (10%) or more of the combined voting power of the
Company’s then outstanding securities, increases such Person’s beneficial
ownership of such securities by an amount equal to five percent (5%) or more of
the combined voting power of the Company’s then outstanding securities; or


 


(iv)                              The
Board of Directors adopts a resolution to the effect that, for purposes hereof,
a Potential Change in Control has occurred.


 


Notwithstanding
anything herein to the contrary, a Potential Change in Control shall cease to
exist not later than the date that (i) the Board of Directors determines that
the Potential Change in Control no longer exists, or (ii) a Change in Control
occurs.


 


ll.                                       Qualifying
Termination.  “Qualifying
Termination” means (i) the termination by Cinergy of the Executive’s employment
with Cinergy during the Employment Period other than a termination for Cause or
(ii) the termination by the Executive of the Executive’s employment with Cinergy
during the Employment Period for Good Reason.


 


mm.                           Relocation
Program.  “Relocation Program” means
the Cinergy Corp. Relocation Program, or any similar program or successor to
that program, as in effect on the date of the Executive’s termination of employment.


 


25

















 


nn.                               Severance
Benefits.  “Severance Benefits”
means the payments and benefits payable to the Executive pursuant to Section 5.


 


oo.                               Spouse.  “Spouse” means the Executive’s lawfully
married spouse.  For this purpose,
common law marriage or a similar arrangement will not be recognized unless
otherwise required by federal law.


 


pp.                               Stock
Related Documents.  “Stock Related
Documents” means the LTIP, the Cinergy Corp. Stock Option Plan, and the Value
Creation Plan and any applicable administrative guidelines and written
agreements relating to those plans.


 


qq.                               Target
Annual Bonus.  “Target Annual Bonus”
has the meaning set forth in Section 3b.


 


rr.                                     Target
LTIP Bonus.  “Target LTIP Bonus” has
the meaning set forth in Section 3b.


 


ss.                                 Value
Creation Plan.  “Value Creation
Plan” means the Value Creation Plan or any similar plan, or successor plan of
the LTIP.


 


tt.                                     Waiver
and Release.  “Waiver and Release”
means a waiver and release, in substantially the form attached to this
Agreement as Exhibit A.


 


12.                               Miscellaneous.


 


a.                                       This
Agreement will 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 its provisions and will 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 the amendment, modification, repeal, waiver,
extension, or discharge is sought.  Only
the Chief Executive Officer or his designee will have authority on behalf of
Cinergy to agree to amend, modify, repeal, waive, extend, or discharge any
provision of this Agreement.


 


b.                                      All
notices and other communications under this Agreement will be in writing and
will be given by hand delivery to the other party or by Federal Express or
other comparable national or international overnight delivery service,
addressed in the name of such party at the following address, whichever is
applicable:


 


If to the
Executive:

Cinergy Corp.

221 East Fourth Street

Cincinnati, Ohio 45201-0960


 


26

















 


If to Cinergy:

Cinergy Corp.

221 East Fourth Street

Cincinnati, Ohio 45201-0960

Attn: Chief Executive Officer


 


or to such
other address as either party has furnished to the other in writing in
accordance with this Agreement.  All
notices and communications will be effective when actually received by the
addressee.


 


c.                                       The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement.


 


d.                                      Cinergy
may withhold from any amounts payable under this Agreement such federal, state,
or local taxes as are required to be withheld pursuant to any applicable law or
regulation.


 


e.                                       The
Executive’s or Cinergy’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or
Cinergy may have under this Agreement, including without limitation the right
of the Executive to terminate employment for Good Reason pursuant to Section 4d
or the right of Cinergy to terminate the Executive’s employment for Cause
pursuant to Section 4b, will not be deemed to be a waiver of that provision or
right or any other provision or right of this Agreement.


 


f.                                         References
in this Agreement to the masculine include the feminine unless the context
clearly indicates otherwise.


 


g.                                      This
instrument contains the entire agreement of the Executive and Cinergy with
respect to the subject matter of this Agreement; and subject to any agreements
evidencing stock option or restricted stock grants described in Section 3b and
the Stock Related Documents, all promises, representations, understandings,
arrangements, and prior agreements are merged into this Agreement and
accordingly superseded.


 


h.                                      This
Agreement may be executed in counterparts, each of which will be deemed to be
an original but all of which together will constitute one and the same
instrument.


 


i.                                          Cinergy
and the Executive agree that Cinergy Services, Inc. will be authorized to act
for Cinergy with respect to all aspects pertaining to the administration and
interpretation of this Agreement.


 


27

















 


IN WITNESS
WHEREOF, the Executive and the Company have caused this Agreement to be
executed as of the Effective Date.


 


 


	
   

  	
  CINERGY
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E.
  Rogers

  	
   

  
	
   

  	
   

  	
  James E.
  Rogers

  
	
   

  	
   

  	
  Chairman and

  
	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/ William
  J. Grealis

  	
   

  
	
   

  	
  William J.
  Grealis

  



 


28

















 


EXHIBIT A


 


*****


 


WAIVER AND RELEASE AGREEMENT


 


THIS WAIVER AND RELEASE AGREEMENT
(this “Waiver and Release”) is entered into by and between William J. Grealis
(the “Executive”) and Cinergy Corp. 
(“Cinergy”) (collectively, the “Parties”).


 


WHEREAS, the Parties
have entered into the Employment Agreement dated
                              
(the “Employment Agreement”);


 


WHEREAS, the
Executive’s employment has been terminated in accordance with the terms of the
Employment Agreement;


 


WHEREAS, the
Executive is required to sign this Waiver and Release in order to receive the
payment of certain compensation under the Employment Agreement following
termination of employment; and


 


WHEREAS, Cinergy has
agreed to sign this Waiver and Release.


 


NOW, THEREFORE, in
consideration of the promises and agreements contained herein and other good
and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, and intending to be legally bound, the Parties agree as follows:


 


1.                                       This Waiver and
Release is effective on the date hereof and will continue in effect as provided
herein.


 


2.                                       In consideration
of the payments to be made and the benefits to be received by the Executive
pursuant to Section 5 of the Employment Agreement (the “Severance Benefits”),
which the Executive acknowledges are in addition to payment and benefits to
which the Executive would be entitled to but for the Employment Agreement, the
Executive, on behalf of himself, his heirs, representatives, agents and assigns
hereby COVENANTS NOT TO SUE OR OTHERWISE VOLUNTARILY PARTICIPATE IN ANY LAWSUIT
AGAINST, FULLY RELEASES, INDEMNIFIES, HOLDS HARMLESS, and OTHERWISE FOREVER
DISCHARGES (i) Cinergy, (ii) its subsidiary or affiliated entities, (iii) all
of their present or former directors, officers, employees, shareholders, and
agents as well as (iv) all predecessors, successors and assigns thereof (the
persons listed in clauses (i) through (iv) hereof shall be referred to
collectively as the “Company”) from any and all actions, charges, claims,
demands, damages or liabilities of any kind or character whatsoever, known or
unknown, which Executive now has or may have had through the effective date of
this Waiver and Release.  Executive
acknowledges and understands that he is not hereby prevented from filing a
charge of discrimination with the Equal Employment Opportunity Commission or
any state-equivalent agency or otherwise participate in any proceedings before
such Commissions.  Executive also
acknowledges and understands that in the event he does 


 


29

















 


file such a charge, he shall be entitled to no remuneration, damages,
back pay, front pay, or compensation whatsoever from the Company as a result of
such charge.


 


3.                                       Without limiting
the generality of the foregoing release, it shall include:  (i) all claims or potential claims arising
under any federal, state or local laws relating to the Parties’ employment
relationship, including any claims Executive may have under the Civil Rights
Acts of 1866 and 1964, as amended, 42 U.S.C. §§ 1981 and 2000(e) et  seq.;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as
amended, 29 U.S.C. §§ 621 et  seq.; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12,101 et  seq.;
the Fair Labor Standards Act, 29 U.S.C. §§ 201 et  seq.; the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101, et
seq.; the Ohio Civil Rights Act, Chapter 4112 et  seq.; and
any other federal, state or local law governing the Parties’ employment
relationship; (ii) any claims on account of, arising out of or in any way
connected with Executive’s employment with the Company or leaving of that
employment; (iii) any claims alleged or which could have been alleged in any
charge or complaint against the Company; (iv) any claims relating to the
conduct of any employee, officer, director, agent or other representative of
the Company; (v) any claims of discrimination or harassment on any basis; (vi)
any claims arising from any legal restrictions on an employer’s right to
separate its employees; (vii) any claims for personal injury, compensatory or
punitive damages or other forms of relief; and (viii) all other causes of
action sounding in contract, tort or other common law basis, including: (a) the
breach of any alleged oral or written contract; (b) negligent or intentional
misrepresentations; (c) wrongful discharge; (d) just cause dismissal; (e)
defamation; (f) interference with contract or business relationship; or (g)
negligent or intentional infliction of emotional distress.


 


4.                                       The Parties
acknowledge that it is their mutual and specific intent that the above waiver
fully complies with the requirements of the Older Workers Benefit Protection
Act (29 U.S.C. § 626) and any similar law governing release of claims.  Accordingly, Executive hereby acknowledges
that:


 


(a)                                  He has carefully read
and fully understands all of the provisions of this Waiver and Release and that
he has entered into this Waiver and Release knowingly and voluntarily after
extensive negotiations and having consulted with his counsel;


 


(b)                                 The Severance Benefits
offered in exchange for Executive’s release of claims exceed in kind and scope
that to which he would have otherwise been legally entitled;


 


(c)                                  Prior to signing this
Waiver and Release, Executive had been advised in writing by this Waiver and
Release as well as other writings to seek counsel from, and has in fact had an
opportunity to consult with, an attorney of his choice concerning its terms and
conditions; and


 


(d)                                 He has been offered at
least twenty-one (21) days within which to review and consider this Waiver and
Release.


 


30

















 


5.                                       The Parties
agree that this Waiver and Release shall not become effective and enforceable
until the date this Waiver and Release is signed by both Parties or seven (7)
calendar days after its execution by Executive, whichever is later.  Executive may revoke this Waiver and Release
for any reason by providing written notice of such intent to Cinergy within
seven (7) days after he has signed this Waiver and Release, thereby forfeiting
Executive’s right to receive any Severance Benefits provided hereunder and
rendering this Waiver and Release null and void in its entirety.


 


6.                                       The Executive
hereby affirms and acknowledges his continued obligations to comply with the
post-termination covenants contained in his Employment Agreement, including but
not limited to, the Confidential Information provisions of Section 9 of the
Employment Agreement.  Executive
acknowledges that the restrictions contained therein are valid and reasonable
in every respect, are necessary to protect the Company’s legitimate business
interests and hereby affirmatively waives any claim or defense to the contrary.


 


7.                                       Executive
specifically agrees and understands that the existence and terms of this Waiver
and Release are strictly CONFIDENTIAL and that such confidentiality is a
material term of this Waiver and Release. 
Accordingly, except as required by law or unless authorized to do so by
Cinergy in writing, Executive agrees that he shall not communicate, display or
otherwise reveal any of the contents of this Waiver and Release to anyone other
than his spouse, primary legal counsel or financial advisor, provided, however,
that they are first advised of the confidential nature of this Waiver and
Release and Executive obtains their agreement to be bound by the same.  Cinergy agrees that Executive may respond to
legitimate inquiries regarding his employment with Cinergy by stating that he
voluntarily resigned to pursue other opportunities, that the Parties terminated
their relationship on an amicable basis and that the Parties have entered into
a confidential Waiver and Release that prohibits him from further discussing
the specifics of his separation. 
Nothing contained herein shall be construed to prevent Executive from
discussing or otherwise advising subsequent employers of the existence of any
obligations as set forth in his Employment Agreement.  Further, nothing contained herein shall be construed to limit or
otherwise restrict the Company’s ability to disclose the terms and conditions
of this Waiver and Release as may be required by business necessity.


 


8.                                       In the event
that Executive breaches or threatens to breach any provision of this Waiver and
Release, he agrees that Cinergy shall be entitled to seek any and all equitable
and legal relief provided by law, specifically including immediate and
permanent injunctive relief.  Executive
hereby waives any claim that Cinergy has an adequate remedy at law.  In addition, and to the extent not
prohibited by law, Executive agrees that Cinergy shall be entitled to an award
of all costs and attorneys’ fees incurred by Cinergy in any successful effort
to enforce the terms of this Waiver and Release.  Executive agrees that the foregoing relief shall not be construed
to limit or otherwise restrict Cinergy’s ability to pursue any other remedy
provided by law, including the recovery of any actual, compensatory or punitive
damages.  Moreover, if Executive pursues
any claims against the Company subject to the foregoing Waiver and Release,
Executive agrees to immediately reimburse the Company for the value of all
benefits received under this Waiver and Release to the fullest extent permitted
by law.


 


31

















 


9.                                       Cinergy hereby
releases the Executive, his heirs, representatives, agents and assigns from any
and all known claims, causes of action, grievances, damages and demands of any
kind or nature based on acts or omissions committed by the Executive during and
in the course of his employment with Cinergy provided such act or omission was
committed in good faith and occurred within the scope of his normal duties and
responsibilities.


 


10.                                 The Parties
acknowledge that this Waiver and Release is entered into solely for the purpose
of ending their employment relationship on an amicable basis and shall not be
construed as an admission of liability or wrongdoing by either Party and that
both Cinergy and Executive have expressly denied any such liability or
wrongdoing.


 


11.                                 Each of the promises
and obligations shall be binding upon and shall inure to the benefit of the
heirs, executors, administrators, assigns and successors in interest of each of
the Parties.


 


12.                                 The Parties agree that
each and every paragraph, sentence, clause, term and provision of this Waiver
and Release is severable and that, if any portion of this Waiver and Release
should be deemed not enforceable for any reason, such portion shall be stricken
and the remaining portion or portions thereof should continue to be enforced to
the fullest extent permitted by applicable law.


 


13.                                 This Waiver and
Release shall be governed by and interpreted in accordance with the laws of the
State of Ohio without regard to any applicable state’s choice of law
provisions.


 


14.                                 Executive represents
and acknowledges that in signing this Waiver and Release he does not rely, and
has not relied, upon any representation or statement made by Cinergy or by any
of Cinergy’s employees, officers, agents, stockholders, directors or attorneys
with regard to the subject matter, basis or effect of this Waiver and Release
other than those specifically contained herein.


 


15.                                 This Waiver and
Release represents the entire agreement between the Parties concerning the
subject matter hereof, shall supercede any and all prior agreements which may
otherwise exist between them concerning the subject matter hereof (specifically
excluding, however, the post-termination obligations contained in any existing
Employment Agreement or other legally-binding document), and shall not be
altered, amended, modified or otherwise changed except by a writing executed by
both Parties.


 


16.                                 Cinergy Corp. and the
Executive agree that Cinergy Services, Inc. will be authorized to act for
Cinergy Corp. with respect to all aspects pertaining to the administration and
interpretation of this Waiver and Release.


 


32

















 


PLEASE READ CAREFULLY.  WITH RESPECT TO THE EXECUTIVE, THIS


 


WAIVER AND RELEASE INCLUDES A COMPLETE
RELEASE OF ALL KNOWN


 


AND UNKNOWN CLAIMS.


 


 


IN WITNESS
WHEREOF, the Parties have themselves signed, or caused a duly authorized agent
thereof to sign, this Waiver and Release on their behalf and thereby
acknowledge their intent to be bound by its terms and conditions.


 


	
  EXECUTIVE

  	
  CINERGY
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signed: 

  	
  /s/ William
  J. Grealis

  	
   

  	
  By: 

  	
  /s/ James E.
  Rogers

  	
   

  
	
  Printed: 

  	
  William J.
  Grealis

  	
   

  	
  Title: 

  	
  Chairman and
  Chief Executive Officer

  	
   

  
	
  Dated: 

  	
   

  	
   

  	
  Dated: 

  	
   

  	
   

  
										



 


33