**TEMPLATE**

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**PHANTOMSTOCK AGREEMENT FOR**

**EMPLOYEESUNDER THE CINERGY CORP.**

### **1996LONG-TERM INCENTIVE COMPENSATION PLAN**

 

 

THIS PHANTOM STOCK 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 theEmployee satisfying certain vesting requirements, to receive a lump sum cashpayment, the amount of which shall be based on the value of a certain,predetermined number of 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 described in this Agreement, suchcontingent right sometimes referred to herein as “Phantom Stock Right.”

 

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

 

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

 

(a)                                  **Award of Phantom StockRight****. **In consideration of Employee’sservice for the Company, Cinergy Corp. hereby grants a Phantom Stock Right toEmployee and shall establish an account (the “Account”) in the name of Employeeon the books and records of Cinergy Corp. and credit the Account with _______Phantom Stock Right units.  Each PhantomStock Right unit shall correspond to one share of Common Stock.

 

(b)                                 **Vesting of Phantom StockRight****.** Subject to earlier forfeiture as describedbelow, the Phantom Stock Right shall become fully vested in its entirety if theEmployee is continuously employed by the Company from  the Date of Grant until the earliest to occurof the following dates (i) _______________, (ii) the date of the Employee’sdeath, (iii) the date on which the Company terminates the Employee’s employmentother than for Cause, (iv) the date on which the Employee voluntarily terminates

 

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                                                employment forGood Reason, or (v) the date of a Change in Control as defined in the Plan.(1)

 

(c)                                  **Forfeiture of PhantomStock Right****.**  The Employeeshall forfeit his or her Phantom Stock Right in its entirety if he or she ceasesto remain continuously employed by the Company until the date on which thePhantom Stock Right vests in accordance with Section 1(b) hereof.

 

(d)                                 **Definitions****.**  Where used herein, the term “Cause” shallmean ____________________, and the term “Good Reason” shall mean ____________________.

 

**2.****             **     **Payout Calculation and Form of Payment****.**

 

Except as otherwiseprovided herein, in the event that Phantom Stock Right  units become fully vested in accordance withSection 1(b), the Employee shall be entitled to receive a lump sum cash paymentequal to the sum of (a) the product of (i) the number of Phantom Stock Rightunits vesting, adjusted as provided in this Agreement, and (ii) the Fair MarketValue (as that term is defined in the Plan) of a share of Common Stock as ofthe date the Phantom Stock Right units vest, plus (b) the product of (i) thenumber of Phantom Stock Right units vesting and (ii) the aggregate amount ofcash dividends paid on a share of Common Stock from the Date of Grant throughthe date of payment.  Such payment shallbe made as soon as administratively practicable following the date on which thePhantom Stock Right units become vested. The Company shall have the right to deduct from all payments made to theEmployee pursuant to this Agreement such federal, state or local taxes as are,in the reasonable opinion of the Company, required to be withheld by theCompany with respect to such payment.

 

**3.****                                     ****Adjustments****.**

 

The Compensation Committee of Cinergy Corp.’s Board ofDirectors (the “Committee”) may make or provide for such adjustments in thenumber of Phantom Stock Right units covered by this Agreement as the Committee,in its sole discretion exercised in good faith, may determine is equitablyrequired in order to prevent dilution or enlargement of Employee’s rights thatotherwise would result from (i) any stock dividend, stock split, combination ofshares, recapitalization, or other change in the capital structure of CinergyCorp., (ii) any merger, consolidation, spin-off, split-off, spin-out, split-up,reorganization, partial or complete liquidation, or other distribution ofassets or issuance of rights or warrants to purchase securities, or (iii) anyother corporate transaction or event having an effect similar to any of theforegoing.  In the event of any such 

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(1) The vesting events for phantom stockgrants vary for each participant.  Somephantom stock grants incorporate cliff vesting schedules while others use agraded vesting schedule.  The phantomstock grants may incorporate some or all of the items set forth in Section1(b).

 

 

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transaction or event, the Committee, in its solediscretion exercised in good faith, may provide, in substitution for thePhantom Stock Right, such alternative consideration as it may determine to beequitable in the circumstances and may require in connection therewith thesurrender of the Phantom Stock Right.

 

**4.****                                     ****Transferability****.**

 

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

 

**5.****                                     ****Effect of Assignment orPledge****.**

 

If the Employee assigns or pledges contingent rightscovered by this Agreement or attempts to do so, or if there is a levy,attachment, execution or other legal or equitable process upon the contingentrights, Cinergy Corp. shall have the right to terminate this Agreement.

 

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

 

This Agreement is subject to all of the terms,provisions and conditions of the Plan, which is incorporated into thisAgreement by reference, and to such regulations as may from time to time beadopted by the Committee.  A copy of thePlan has been furnished to the Employee and an additional copy may be obtainedfrom Cinergy Corp.  In the event of anyconflict between the provisions of the Plan and the provisions of thisAgreement, the terms, conditions and provisions of the Plan shall control, andthis Agreement shall be deemed to be modified accordingly.  The Committee shall have final authority tointerpret and construe the Plan and this Agreement and to make any and alldeterminations thereunder, and its decision shall be binding and conclusiveupon the Employee and his or her legal representative in respect of anyquestions arising under the Plan, or this Agreement.

 

**7.****                                     ****No Right to ContinuedEmployment****.**

 

Solely for purposes ofthis Agreement, Employee shall be deemed to be employed by the Company duringall periods in which he or she is receiving benefits under any Cinergy-sponsoredshort-term or long-term disability plan or program; provided, however, that nothingin this Agreement shall restrict the right of the Company to terminate theEmployee’s employment at any time with or without Cause.

 

**8.****                                     ****Successors****.**

 

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

 

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**9.****                                     ****Invalid Provision****.**

 

The invalidity or 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.

 

**10.****                              ****Modifications****.**

 

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

 

**11.         ****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.

 

**12.          GoverningLaw.**

 

Except to the extentpre-empted by federal law, this Agreement and the Employee’s rights under itshall be construed and determined in accordance with the laws of the state ofDelaware.

 

**13.          EntireAgreement.**

 

This Agreement and the Plan contain the entireagreement and understanding of the parties with respect to the subject mattercontained in this Agreement, and supersede all prior communications,representations and negotiations in respect thereto.

 

**14.          Counterparts.**

 

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

 

**15.      Satisfactionof Legal Requirements.**

 

No payment will be made under this Agreement until theCompany has been advised by counsel that all applicable legal requirements havebeen met.

 

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**16.          Source of Payment.**

 

Any payments to Employeeunder this Agreement shall be paid from the Company’s general assets, andEmployee shall have the status of a general unsecured creditor with respect tothe Company’s obligations to make payments under this Agreement.  Employee acknowledges that the Company shallhave no obligation to set aside any assets to fund its obligations under thisAgreement.

 

**17.          Noticesand Electronic Delivery and Signature.**

 

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 theforegoing, the Employee hereby consents and agrees to electronic delivery ofany Plan documents, proxy materials, annual reports and other relateddocuments, including all materials required to be distributed pursuant toapplicable securities laws.  If theCompany establishes procedures for an electronic signature system for deliveryand acceptance of Plan documents (including documents relating to any programsadopted under the Plan), the Employee hereby consents to such procedures andagrees that his or her electronic signature is the same as, and shall have thesame force and effect as, his or her manual signature.  The Employee consents and agrees that anysuch procedures and delivery may be effected by a third party engaged by theCompany to provide administrative services related to the Plan, including anyprogram adopted under the Plan.  TheEmployee understands that, unless earlier revoked by the Employee, this consentshall be effective for the duration of the Agreement and that he or she shallhave the right at any time to request written copies of any and all materialsreferred to above.

 

 

IN WITNESS WHEREOF, thisAgreement has been executed by the parties effective as of the date set forthherein.

 

 
| EMPLOYEE                                                                                                                                                           | CINERGY CORP.                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
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Signature:  _________________________

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By:  ______________________________

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