**TEMPLATE**

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**PERFORMANCESHARES AGREEMENT FOR**

**EMPLOYEESUNDER THE CINERGY CORP.**

**1996LONG-TERM INCENTIVE COMPENSATION PLAN**

 

 

THIS PERFORMANCE SHARES AGREEMENT (the “Agreement”),effective as of _______________ (the “Date of Grant”), is made by and betweenCinergy Corp., a Delaware corporation, and _______________ (the “Employee”), anemployee of Cinergy Corp. or one of its directly or indirectly held majority orgreater-owned subsidiaries (collectively referred to herein as the “Company”).

 

WHEREAS, Cinergy Corp. has adopted the Cinergy Corp.1996 Long-Term Incentive Compensation Plan, as amended from time to time (the “Plan”),pursuant to which the Employee has been granted the right, contingent upon theattainment of certain corporate performance measures within an established timeperiod, to receive shares of Cinergy Corp. common stock, with par value of$0.01 per share (“Common Stock”), on the terms set forth in this Agreement; and

 

                WHEREAS, theparties desire to enter into this Agreement to set forth their understandingswith respect to the contingent right to receive a certain number of shares ofCommon Stock as described in this Agreement, such contingent right sometimesreferred to herein as “performance shares.”

 

                NOW, THEREFORE, inconsideration of the recitals and the mutual agreements contained in thisAgreement, the parties agree as follows:

 

**1.****                                     ****Contingent Award****.**

 

Cinergy Corp. hereby grants to the Employee effectiveas of the Date of Grant, the right, contingent upon the attainment of certaincorporate performance measures during performance cycle ____ commencing onJanuary 1, _____ and ending on December 31, _____ (the “Performance Cycle”), toreceive shares of Common Stock on the terms and conditions set forth in thisAgreement.  For the Performance Cycle,the Employee’s contingent target award is __________ shares of Common Stock(the “Target Award”).  The number ofshares of Common Stock covered by the Target Award is subject to adjustment,including reductions in the event of a demotion or change to a lower levelposition, as provided in the Plan and in such procedures or guidelines that mayfrom time to time be adopted by the Compensation Committee of Cinergy Corp.’sBoard of Directors (the “Committee”), including the Administrative Guidelines adoptedon _______________ (the “Administrative Guidelines”).

 

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**2.****                                     ****Corporate PerformanceMeasure****.**

 

The corporate performance measure is based on acomparison of the total shareholder return (“TSR”) of a share of Common Stockto the TSR of the companies listed in the S&P Supercomposite Electric Indexas of the beginning of the Performance Cycle (the “Comparator Group”); forpurposes of this Agreement, TSRs shall be as calculated by reference to BloombergFinancial L.P. (including the reinvestment of dividends or otherdistributions); provided, however, that the TSR of theComparator Group shall be calculated without taking into account any companythat, during the Performance Cycle, either (i) becomes the subject of a voluntary or involuntarypetition in bankruptcy pursuant to Title 11 of the United States Code, (ii) undergoes a“change in control,” or (iii) becomes the subject of any public announcement of a proposal forsuch company to undergo a “change in control.” For this purpose, a “change in control” means (i) the sale of all or substantially allof the assets of the company on a consolidated basis to a person or entityother than to a subsidiary or affiliate of the company, (ii) a merger,reorganization or consolidation after which the holders of the company’soutstanding voting power immediately prior to such transaction, in theaggregate, do not own a majority of the outstanding voting power of thesurviving or resulting entity immediately upon completion of such transaction,(iii) the sale of all or substantially all of the outstanding common shares ofthe company to an unrelated person or entity or (iv) any other transactionwhere the owners of the company’s outstanding voting power prior to such transaction,in the aggregate, do not own at least a majority of the outstanding votingpower of the relevant entity after the transaction.

 

**3.****                                     ****Payout Calculation andForm of Payment****.**

 

The number of shares of Common Stock earned for thePerformance Cycle will be determined by comparing the TSR of a share of CommonStock during the Performance Cycle to the TSR of the Comparator Group duringthe Performance Cycle, as described in Subsection 3(a) and Subsection 3(b)below.

 

(a)                                  Thepercentage of the Target Award earned by the Employee, if any, will bedetermined in accordance with the following chart and the guidelines containedin Subsection 3(b).

 

| **Percentage  of Individual Target Payment** |
|----------------------------------------------|
| **Relative TSR**
**Performance  Percentile** | **Percentage  of**

**Target  Award Earned** |
| 85th or  above                               | 200% |
| 80th                                         | 185% |
| 70th                                    | 150% |
| 60th                                    | 115% |
| 55th                                    | 100% |
| 40th                                    |    40% |
| 30th or  below                               |      0% |

 

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(b)                                 The chart contained in Subsection 3(a)shall be applied in accordance with the following guidelines.

 

(i)                                     If the relative TSR of a share of CommonStock compared to the TSR of the Comparator Group is between any two levelslisted above, the Committee will calculate, by interpolation, the percentage ofthe Target Award that is earned by the Employee.

 

(ii)                                  If the relative TSR of a share of CommonStock *is equal to or less than the*30th percentile of the TSRof the Comparator Group, the Employee will not earn any performance sharesunder this Agreement.

 

(iii)                               The maximum number of shares of CommonStock that can be earned under this Agreement is 200% of the number of sharesof Common Stock covered by the Target Award.

 

(c)                                  Except as otherwise provided herein, thenumber of shares of Common Stock earned by the Employee shall be paid to or forthe benefit of the Employee no later than April 1 of the calendar yearfollowing the calendar year in which occurs the last day of the PerformanceCycle.  Notwithstanding the precedingsentence, in the event of the Employee’s death during the Performance Cycle,the number of shares of Common Stock earned by the Employee shall be paid onbehalf of the Employee as soon as administratively practicable following his orher death but no later than _________________.

 

(d)                                 Except as otherwise provided herein, theEmployee shall be entitled to receive, no later than April 1 of the calendaryear following the calendar year in which occurs the last day of thePerformance Cycle, the number of shares of Common Stock (if any) equal to (i)the cumulative amount of cash dividends that would have been paid to theExecutive if he or she had owned, during the entire Performance Cycle, thenumber of shares of Common Stock specified in Section 3(c) above, divided by(ii) the “Fair Market Value” (as that term is defined in the Plan) of a shareof Common Stock on the last day of the Performance Cycle.

 

(e)                                  Notwithstanding any other provision ofthis Agreement, the Committee in its sole discretion may determine whether topay all or any portion of any award earned pursuant to this Agreement in sharesof Common Stock or in an amount of cash equal to the Fair Market Value of suchshares of Common Stock.

 

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**4.****                                     ****Effect of Termination ofEmployment due to Reasons other than Retirement, Death or Disability****.**

 

If, prior to the last day of the Performance Cycle,the Employee ceases to be an employee of the Company for any reason other thanas a result of his or her termination of employment on or after attaining agefifty (50) with five years of “Service” under the Cinergy Corp. Non-UnionEmployees’ Pension Plan (“Retirement”), death or disability (as defined inSection 7), all contingent rights set forth in this Agreement will beimmediately forfeited on the effective date of the Employee’s termination.

 

**5.****                                     ****Effect of Termination ofEmployment Due to Retirement****.**

 

If, prior to the last dayof the Performance Cycle, the Employee’s employment with the Company isterminated as a result of his or her Retirement, the Employee will continue toparticipate in the Performance Cycle and will earn a pro rata award ofperformance shares, the amount of which shall be calculated by the Committeebased on (a) the number of full and partial months (out of the total months inthe Performance Cycle) that the Employee was an active employee during thePerformance Cycle and (b) the relative TSR of a share of Common Stock duringthe entire Performance Cycle compared to the TSR of the Comparator Group duringthe entire Performance Cycle.

 

**6.****                                     ****Effect of Termination ofEmployment Due to Death****.**

 

If, prior to the last dayof the Performance Cycle, the Employee dies while employed by the Company, theEmployee’s executor, administrator, legatees or estate beneficiaries willreceive a pro rata award of performance shares, the amount of which shall becalculated by the Committee based on (a) the number of full and partial months(out of the total months in the Performance Cycle) that the Employee was anactive employee during the Performance Cycle and (b) the relative TSR of ashare of Common Stock compared to the TSR of the Comparator Group during theperiod of time commencing on the Date of Grant and ending on the December 31nearest the date of the Employee’s death, but ending no earlier than _______________.

 

**7.****                                     ****Effect of Disability****.**

 

If, prior to the last day of the Performance Cycle,the Employee becomes “disabled” as that term is defined under the then existinglong-term disability plan of the Company in which the Employee participates (orif no such plan exists, as determined by the Committee), the Employee willcontinue to participate in the Performance Cycle and will earn a pro rata awardof performance shares, the amount of which shall be calculated by the Committeebased on (a) the number of full months (out of the total months in the PerformanceCycle) that the Employee was an active employee during the Performance Cycleand (b) the relative TSR of a share of Common Stock during the entirePerformance Cycle

 

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compared to the TSR of the Comparator Group during theentire Performance Cycle.

 

**8.****                                     ****Effect of Change inControl****.**

 

(a)                                  Notwithstanding the above, if a “Changein Control” (as defined in the Plan) of Cinergy Corp. occurs while the Employeeis employed by the Company and prior to the last day of the Performance Cycle,the following provisions shall apply and benefits shall not be paid to or onbehalf of the Employee under any other provision of this Agreement.

 

(i)                                     The Target Award shall be deemed fullyearned at the maximum level, and shall be payable, subject to Section 3(e), inshares of Common Stock within thirty (30) days after the occurrence of suchChange in Control.

 

(ii)                                  The Employee shall also be entitled toreceive, subject to Section 3(e), within thirty (30) days after the occurrenceof such Change in Control, the number of shares of Common Stock equal to (I)the cumulative amount of cash dividends that would have been paid to theExecutive if he or she had owned, during the period commencing on the Date ofGrant and ending on the date of the Change in Control, the number of shares ofCommon Stock specified in Section 8(a)(i) above, divided by (II) the FairMarket Value of a share of Common Stock immediately prior to the Change inControl.

 

(b)                                 Notwithstanding the foregoing, if a Changein Control of Cinergy Corp. occurs after the Employee’s Retirement but prior tothe last day of the Performance Cycle, the following provisions shall apply andbenefits shall not be paid to or on behalf of the Employee under any otherprovision of this Agreement.

 

(i)                                     The Employee shall be entitled toreceive, subject to Section 3(e), within thirty (30) days after the occurrenceof such Change in Control, a pro rata award of performance shares, the amountof which shall be calculated by the Committee based on (I) the number of fulland partial months (out of a total of 36 months) that he or she was an activeemployee during the Performance Cycle and (II) the fact that the Target Awardshall be deemed earned at the maximum level.

 

(ii)                                  The Employee shall also be entitled toreceive, subject to Section 3(e), within thirty (30) days after the occurrenceof such Change in Control, the number of shares of Common Stock equal to (I)the cumulative amount of cash dividends that would have been paid to the Executiveif he or she had owned, during the period commencing on the Date of Grant andending on the date of the 

 

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                                                Change in Control, the number of sharesof Common Stock specified in Section 8(b)(i) above, divided by (II) the FairMarket Value of a share of Common Stock immediately prior to the Change inControl.

 

(c)                                  Notwithstanding the foregoing, if aChange in Control of Cinergy Corp. occurs after the Employee’s death whileemployed by the Company,  but prior tothe later of (I) the December 31 nearest the date of the Employee’s death or(II) _______________, the following provisions shall apply and benefits shallnot be paid to or on behalf of the Employee under any other provision of thisAgreement.

 

(i)                                     The Employee’s executor, administrator,legatees or estate beneficiaries shall be entitled to receive, subject toSection 3(e), within thirty (30) days after the occurrence of such Change inControl, a pro rata award of performance shares, the amount of which shall becalculated by the Committee based on (I) the number of full and partial months(out of a total of 36 months) that he or she was an active employee during thePerformance Cycle and (II) the fact that the Target Award shall be deemedearned at the maximum level.

 

(ii)                                  The Employee’s executor, administrator,legatees or estate beneficiaries shall also be entitled to receive, subject toSection 3(e), within thirty (30) days after the occurrence of such Change inControl, the number of shares of Common Stock equal to (I) the cumulativeamount of cash dividends that would have been paid to the Executive if he orshe had owned, during the period commencing on the Date of Grant and ending onthe date of the Change in Control, the number of shares of Common Stockspecified in Section 8(c)(i) above, divided by (II) the Fair Market Value of ashare of Common Stock immediately prior to the Change in Control.

 

(d)                                 Notwithstanding the foregoing, if aChange in Control of Cinergy Corp. occurs after the Employee becomes disabledwhile employed by the Company but prior to the last day of the PerformanceCycle, the following provisions shall apply and benefits shall not be paid toor on behalf of the Employee under any other provision of this Agreement.

 

(i)                                     The Employee shall be entitled toreceive, subject to Section 3(e), within thirty (30) days after the occurrenceof such Change in Control, a pro rata award of performance shares, the amountof which shall be calculated by the Committee based on (I) the number of fullmonths (out of a total of 36 months) that he or she was an active employeeduring the Performance Cycle and (II) the fact that the Target Award shall bedeemed earned at the maximum level.

 

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(ii)                                  The Employee shall also be entitled toreceive, subject to Section 3(e), within thirty (30) days after the occurrenceof such Change in Control, the number of shares of Common Stock equal to (I)the cumulative amount of cash dividends that would have been paid to theExecutive if he or she had owned, during the period commencing on the Date ofGrant and ending on the date of the Change in Control, the number of shares ofCommon Stock specified in Section 8(d)(i) above, divided by (II) the FairMarket Value of a share of Common Stock immediately prior to the Change inControl.

 

**9.****                                     ****Transferability****.**

 

The contingent rights set forth in this Agreement arenot transferable otherwise than by will or the laws of descent anddistribution.

 

**10.****                              ****Effect of Assignment or Pledge****.**

 

If the Employee assigns or pledges contingent sharesof Common Stock covered by this Agreement or attempts to do so, or if there isa levy, attachment, execution or other legal or equitable process upon thecontingent shares, the Company has the right to terminate this Agreement.

 

**11.****                              ****Incorporation of the Plan’sTerms****.**

 

This Agreement is subject to all the terms, provisionsand conditions of the Plan, which is incorporated into this Agreement byreference, and to such regulations as may from time to time be adopted by theCommittee, including the Administrative Guidelines.  A copy of the Plan and a set ofAdministrative Guidelines have been furnished to the Employee and an additionalcopy of each may be obtained from the Company. In the event of any conflict between the provisions of the Plan or theAdministrative Guidelines (as the case may be) and the provisions of thisAgreement, the terms, conditions and provisions of the Plan and/orAdministrative Guidelines shall control, and this Agreement shall be deemed tobe modified accordingly.  The Committeeshall have final authority to interpret and construe the Plan and thisAgreement and to make any and all determinations thereunder, and its decisionshall be binding and conclusive upon the Employee and his or her legalrepresentative in respect of any questions arising under the Plan, or thisAgreement.

 

**12.****                              ****No Right to ContinuedEmployment****.**

 

Nothing in this Agreement shall restrict theright of the Company to terminate the Employee’s employment at any time with orwithout cause.

 

 

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**13.****                              ****Successors****.**

 

The terms of this Agreement shall be binding upon andinure to the benefit of the Company, its successors and assigns, and theEmployee and the Employee’s beneficiaries, executors, administrators, heirs andsuccessors.

 

**14.****                              ****Invalid Provision****.**

 

The invalidity of unenforceability of any particularprovision of this Agreement shall not affect the other provisions of thisAgreement, and this Agreement shall be construed in all respects as if suchinvalid or unenforceable provision has been omitted.

 

**15.****                              ****Modifications****.**

 

Nochange, modification or waiver of any provision of this Agreement shall bevalid unless the same be in writing and signed by the parties.

 

**16.          Headings.**

 

The headings of the Sections of this Agreement areprovided for convenience only and are not to serve as a basis forinterpretation or construction, and shall not constitute a part of thisAgreement.

 

**17.          GoverningLaw.**

 

Except to the extent pre-empted by federal law, thisAgreement and the Employee’s rights under it shall be construed and determinedin accordance with the laws of the state of Delaware.

 

**18.          EntireAgreement.**

 

This Agreement, the Plan and the AdministrativeGuidelines contain the entire agreement and understanding of the parties withrespect to the subject matter contained in this Agreement, and supersede allprior communications, representations and negotiations in respect thereto.

 

**19.          Counterparts.**

 

This Agreement may be executed in counterparts, eachof which shall be deemed an original, but all of which together shallconstitute one and the same instrument.

 

**20.          Satisfactionof Legal Requirements.**

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Nopayment will be made under this Agreement until the Company has been advised bycounsel that all applicable legal requirements have been met.

 

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**21.          Noticesand Electronic Delivery and Signature.**

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All notices to the Company shall be addressed toCinergy Corp., 139 East Fourth Street, Cincinnati, Ohio 45202, Attention:Manager, Compensation, or such other address or in accordance with such otherprocedure as the Company may, from time to time, specify.  Notwithstanding the foregoing, the Employeehereby consents and agrees to electronic delivery of any Plan documents, proxymaterials, annual reports and other related documents, including all materialsrequired to be distributed pursuant to applicable securities laws.  If the Company establishes procedures for anelectronic signature system for delivery and acceptance of Plan documents(including documents relating to any programs adopted under the Plan), theEmployee hereby consents to such procedures and agrees that his or herelectronic signature is the same as, and shall have the same force and effectas, his or her manual signature.  TheEmployee consents and agrees that any such procedures and delivery may beeffected by a third party engaged by the Company to provide administrativeservices related to the Plan, including any program adopted under thePlan.  The Employee understands that,unless earlier revoked by the Employee, this consent shall be effective for theduration of the Agreement and that he or she shall have the right at any time torequest written copies of any and all materials referred to above.

 

 

IN WITNESS WHEREOF, this Agreement has been executed by theparties  effective as of the _____ day of_______________, _____.

 

 
| EMPLOYEE                                                                                                                                                           | CINERGY CORP.                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
|  

 

Signature:  _________________________

                  |  

 

By:  ______________________________

         |

 

 

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