<Page>

(NOTE:   THIS TABLE OF CONTENTS IS NOT PART OF THE CINERGY CORP. ANNUAL
         INCENTIVE PLAN; INSTEAD, THIS TABLE OF CONTENTS IS MERELY FOR
         CONVENIENCE OF REFERENCE.)

                            TABLE OF CONTENTS

<Table>
<Caption>
                                                          Page
                                                         Numbers
                                                         -------
<S>                                                               <C>
INTRODUCTION......................................................1

ARTICLE 1 DEFINITIONS.............................................1
  1.1  "Actual Incentive".........................................1
  1.2  "Annual Performance Award".................................2
  1.3  "Annual Program"...........................................2
  1.4  "Beneficiary"..............................................2
  1.5  "Chief Executive Officer"..................................2
  1.6  "Cinergy"..................................................2
  1.7  "Cinergy's Board of Directors".............................2
  1.8  "Cinergy's Committee"......................................2
  1.9  "Corporate Target Goal"....................................2
  1.10 "Covered Employee".........................................3
  1.11 "Earnings".................................................3
  1.12 "Effective Time of the Mergers"............................4
  1.13 "Employee".................................................4
  1.14 "Employer".................................................4
  1.15 "Employer's Board of Directors"............................4
  1.16 "Exempt Employee"..........................................4
  1.17 "FLSA".....................................................4
  1.18 "Incentive Factor".........................................4
  1.19 "Individual Goal"..........................................5
  1.20 "Maximum Incentive"........................................5
  1.21 "Minimum Incentive"........................................5
  1.22 "1934 Act".................................................5
  1.23 "Non-Exempt Employee"......................................5
  1.24 "Nonqualified Deferred Compensation Plan"..................6
  1.25 "Participant"..............................................6
  1.26 "Performance Period".......................................6
  1.27 "Plan".....................................................6
  1.28 "Total Disability".........................................6
  1.29 "Union Employee"...........................................6
ARTICLE 2 EFFECTIVE DATE OF PLAN..................................7
ARTICLE 3 PURPOSE OF PLAN.........................................7
ARTICLE 4 EMPLOYER'S ELECTION TO PARTICIPATE IN PLAN..............8
</Table>

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<Table>
<S>                                                              <C>
ARTICLE 5 EFFECT OF PLAN ON OTHER PLANS...........................8
ARTICLE 6 ELIGIBILITY.............................................9
ARTICLE 7 ANNUAL PERFORMANCE AWARD...............................10
ARTICLE 8 CORPORATE TARGET GOALS AND INDIVIDUAL GOALS............11
ARTICLE 9 DISTRIBUTION...........................................12
ARTICLE 10 CONDITIONS TO ANNUAL PERFORMANCE AWARDS...............12
 10.1  Government Regulations....................................12
 10.2  Continued Employment......................................12
ARTICLE 11 BENEFICIARY...........................................14
ARTICLE 12 NON-ALIENATION OF BENEFITS............................15
ARTICLE 13 FUNDING POLICY AND METHOD.............................15
ARTICLE 14 CHANGE IN CONTROL.....................................15
ARTICLE 15 ADMINISTRATION........................................19
ARTICLE 16 MISCELLANEOUS.........................................20
 16.1  No Enlargement of Employee Benefits.......................20
 16.2  Notice of Address.........................................20
 16.3  No Individual Liability...................................21
 16.4  Delegation of Administrative Duties.......................21
 16.5  Governing Laws............................................21
 16.6  Risk of Participation.....................................21
 16.7  Headings..................................................21
ARTICLE 17 CONTRIBUTIONS.........................................22
ARTICLE 18 AMENDMENT AND TERMINATION.............................22
ARTICLE 19 CONTINUANCE BY A SUCCESSOR............................22
ARTICLE 20 COVERED EMPLOYEES.....................................22
</Table>

                                      -ii-
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                                 CINERGY CORP.
                              ANNUAL INCENTIVE PLAN
           (AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 25, 2002)

                                  INTRODUCTION

       On October 18, 1994, Cinergy Corp. adopted a short-term incentive
compensation plan known as the "CINergy Corp. Annual Incentive Plan" (the
"Plan") for the exclusive benefit of eligible employees of Cinergy Corp. and its
subsidiaries (the "Employers"). Upon the "Effective Time of the Mergers" as
defined in this document, Cinergy Corp. became the holding company for PSI
Energy, Inc. and The Cincinnati Gas & Electric Company. The Plan allows the
Employers to implement annual incentive compensation programs in which certain
employees are granted awards payable in cash based upon the extent to which
certain predetermined goals are attained during the applicable calendar year.
The Plan was originally effective as of the Effective Time of the Mergers.
Effective as of January 25, 2002, the Plan is re-named the "Cinergy Corp. Annual
Incentive Plan" and is amended and restated in its entirety as set forth herein.

                                    ARTICLE 1

                                   DEFINITIONS

       Whenever used in this document, the following terms shall have the
respective meanings set forth below, unless a different meaning is plainly
required by the context:

       1.1 "Actual Incentive" means, with respect to each Participant, the
Minimum Incentive which, when adjusted in the manner set forth in Article 7
(Annual Performance Award), constitutes the percentage applied to a
Participant's Earnings as of the applicable date as determined by an Employer's
Board of Directors (or with respect to each Covered Employee, the

                                       -1-
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AIP Committee (as defined in Article 20 (Covered Employees)) which is the actual
amount of incentive compensation opportunity available for a particular
Performance Period. However, a Participant's Actual Incentive may not exceed his
Maximum Incentive.

       1.2 "Annual Performance Award" means, with respect to each Participant,
the short-term incentive compensation award to which a Participant becomes
entitled upon the attainment of certain Corporate Target Goals and Individual
Goals for a particular Performance Period, and which is calculated in the manner
set forth in Article 7 (Annual Performance Award).

       1.3  "Annual Program" means, with respect to each Employer, the annual
short-term incentive compensation program adopted by that Employer's Board of
Directors to implement the Plan as set forth in Article 4 (Employer's Election
to Participate in Plan).

       1.4  "Beneficiary" means, with respect to each Participant, the recipient
designated by the Participant who is, upon the Participant's death, entitled in
accordance with the Plan's terms to receive the benefits to be paid with respect
to the Participant.

       1.5  "Chief Executive Officer" means the Employee elected by an
Employer's  Board of Directors to serve as the chief  executive  officer of that
Employer.

       1.6  "Cinergy" means Cinergy Corp., a Delaware corporation, and any
corporation which shall succeed to its business as described in Article 19
(Continuance by a Successor).

       1.7  "Cinergy's Board of Directors" means the duly constituted board of
directors of Cinergy on the applicable date.

       1.8  "Cinergy's Committee" means the duly designated Compensation
Committee of Cinergy's Board of Directors.

       1.9  "Corporate Target Goal" means an objective performance criterion
pertaining to an Employer's performance, efficiency, or profitability measured
by specified levels or of growth in one or more performance criteria including,
but without limitation, stock price, total

                                       -2-
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shareholder return, market share, sales, earnings per share, costs, operating
income, net income, cash flow, fuel cost per million BTU, cost per
kilowatt-hour, retained earnings, return on equity, return on assets, return on
capital employed, return on invested capital, return on sales, completion of
acquisitions, and other objective financial ratios used in determining whether a
Participant is entitled to receive an Annual Performance Award at the end of a
Performance Period. A Corporate Target Goal is considered objective if a third
party having knowledge of the relevant facts could determine whether the goal is
met.

       1.10 "Covered Employee" shall have the meaning set forth in Paragraph
162(m)(3) of the Internal Revenue Code of 1986, as amended (the "Code").

       1.11 "Earnings" means (a) with respect to an Exempt Employee, the amount
of the Employee's total annual base salary (based on the Employee's monthly base
salary received as remuneration for services performed for the Performance
Period, exclusive of any allowances, premiums, bonuses, overtime, or other forms
or types of compensation) for the Performance Period; provided, however, that
with respect to each Covered Employee, Earnings means the Covered Employee's
monthly base salary (exclusive of any allowances, premiums, bonuses, overtime,
or other forms or types of compensation) determined as of the first day of the
applicable Performance Period multiplied by 12, and (b) with respect to either a
Non-Exempt Employee or a Union Employee, the amount of the Employee's total
annual base wage (based on the Employee's hourly base rate of pay received for
services performed for the Performance Period, exclusive of any allowances,
premiums, bonuses, overtime, or other forms or types of compensation) for the
Performance Period. Notwithstanding the preceding sentence, a Participant's
"Earnings" for a Performance Period shall be increased by the amount of any
nonelective contribution (other than a matching contribution) made on behalf of
such Participant under the Cinergy Corp. 401(k) Excess Plan (as amended from
time to time) for such

                                       -3-
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Performance Period but only to the extent that Cinergy's Committee (or any
committee to which it has delegated such authority) specifies that such
nonelective contribution will be included in "Earnings" under this Plan, which
specification must be made for any Covered Employee within the time necessary to
satisfy the requirements of Code Subsection 162(m).

       1.12 "Effective Time of the Mergers" means "Effective Time" as defined
in the Amended and Restated Agreement and Plan of Reorganization by and among
The Cincinnati Gas & Electric Company, PSI Resources, Inc., PSI Energy, Inc.,
CINergy, and CINergy Sub, Inc., dated as of December 11, 1992, as subsequently
amended and restated.

       1.13 "Employee" means any person who, at any time on or after the
Effective Time of the Mergers, is (a) in the employ of an Employer, (b) in the
employ of an Employer, but whose time is allocated 100 percent to another
Employer, or (c) in the employ of an Employer, but who is assigned full-time to
another Employer.

       1.14 "Employer" means Cinergy and all of its directly or indirectly held
majority or greater-owned subsidiaries.

       1.15 "Employer's Board of Directors" means the duly constituted board of
directors of an Employer on the applicable date, or its designee.

       1.16 "Exempt Employee" means an Employee who is regularly employed by his
Employer for 30 or more hours per week, whose pay is customarily computed on a
monthly basis, and whose employment is not subject to FLSA overtime and record
keeping provisions.

       1.17 "FLSA" means the Fair Labor Standards Act of 1938, as amended from
time to time, and interpretive rulings and regulations.

       1.18 "Incentive Factor" means the numerical variable assigned by an
Employer's Board of Directors which corresponds to the extent to which a
Corporate Target Goal or an Individual Goal has been met for a particular
Performance Period.

                                       -4-
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       1.19 "Individual Goal" means an objective or subjective performance
criterion pertaining to individual effort as to enhancement of either individual
performance or achievement or attainment of Corporate Target Goals or other
Individual Goals used in determining whether a Participant is entitled to
receive an Annual Performance Award at the end of a Performance Period. An
Individual Goal is considered objective if a third party having knowledge of the
relevant facts could determine whether the goal is met; otherwise an Individual
Goal is considered subjective.

       1.20 "Maximum Incentive" means, with respect to each Participant, the
percentage applied to a Participant's Earnings as of the applicable date
determined by an Employer's Board of Directors to be the appropriate maximum
incentive compensation opportunity for a particular Performance Period.

       1.21 "Minimum Incentive" means, with respect to each Participant, the
percentage applied to a Participant's Earnings as of the applicable date
determined by an Employer's Board of Directors to be the appropriate minimum
incentive compensation opportunity for a particular Performance Period.

       1.22 "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time, and interpretive rulings and regulations.

       1.23 "Non-Exempt Employee" means an Employee who is regularly employed by
his Employer for 30 or more hours per week, whose pay is customarily computed on
an hourly, weekly, or bi-weekly basis, whose employment is subject to FLSA
overtime and record keeping provisions, and who is not assigned to an employment
position covered by a collective bargaining agreement to which his Employer is a
party.

                                       -5-
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       1.24 "Nonqualified Deferred Compensation Plan" means the nonqualified
deferred compensation arrangement known as the "Cinergy Corp. Nonqualified
Deferred Incentive Compensation Plan," as amended from time to time, and any
successor plan thereto.

       1.25 "Participant" means any Exempt Employee, Non-Exempt Employee, or
Union Employee selected by an Employer's Board of Directors to participate in
the Employer's Annual Program pursuant to Article 6 (Eligibility).

       1.26 "Performance Period" means the period of time over which performance
with respect to a Corporate Target Goal or an Individual Goal is measured. Each
Performance Period shall consist of a one-year period beginning on January 1 of
each calendar year and ending on December 31 of the same calendar year. The term
"Performance Period" shall include any performance period in effect under the
"PSI Resources, Inc. Annual Incentive Plan," as amended from time to time, and
the "PSI Energy, Inc. Annual Incentive Plan," as amended from time to time, as
of the Effective Time of the Mergers.

       1.27 "Plan" means the short-term incentive compensation plan known as the
"Cinergy Corp. Annual Incentive Plan," as amended from time to time.

       1.28 "Total Disability" means, with respect to any Participant, a mental
or physical condition as result of an illness or injury which, in the judgment
of an Employer's Board of Directors, based upon medical reports and other
evidence satisfactory to the Employer's Board of Directors prevents the
Participant from engaging in any gainful occupation for which the Participant is
reasonably qualified by reason of education, training, or experience.

       1.29 "Union Employee" means an Employee who is regularly employed by his
Employer for 30 or more hours per week, whose pay is customarily computed on an
hourly, weekly, or bi-weekly basis, whose employment is subject to FLSA overtime
and record keeping

                                       -6-
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provisions, and who is assigned to an employment position covered by a
collective bargaining agreement to which his Employer is a party.

         The uses of singular and masculine words are for practical purposes
only and shall be deemed to include the plural and feminine, respectively,
unless the context plainly indicates a distinction. Certain other definitions,
as required, appear in the following Articles of the Plan.

                                    ARTICLE 2

                             EFFECTIVE DATE OF PLAN

       The Plan's provisions, as amended and restated as set forth in this
document, are effective as of January 25, 2002 and shall be applicable only to
Annual Programs adopted on or after such date for Performance Periods commencing
on or after January 1, 2002. The provisions of the Plan as in effect on January
24, 2002 shall be effective for all other Annual Programs.

                                    ARTICLE 3
                                 PURPOSE OF PLAN

       The Plan's purposes are to benefit Employers, shareholders, and
ratepayers by the accomplishment of specific challenging and demanding corporate
or personalized goals, enhancement of teamwork, motivation, high achievement,
and the attraction and retention of qualified Employees. Upon the accomplishment
of these corporate or personalized goals, the Plan provides a reward for
performance and maximum effort by Employees who contribute to an Employer's
success. The Plan is an annual incentive compensation plan in which an Exempt
Employee, a Non-Exempt Employee, or a Union Employee who is selected to
participate in an Employer's Annual Program under the Plan is granted an award
payable in cash, but only to the extent that certain predetermined goals are
attained during the applicable calendar year used to measure performance.

                                       -7-
<Page>

                                    ARTICLE 4

                   EMPLOYER'S ELECTION TO PARTICIPATE IN PLAN

       Each Employer, by action of the Employer's Board of Directors, may elect
to participate in the Plan by adopting an Annual Program. Each Employer's Annual
Program shall consist of Corporate Target Goals, Individual Goals, Actual
Incentives, Incentive Factors, Maximum Incentives, and Minimum Incentives which
will further the Employer's business objectives consistent with the Plan's
purposes. An Employer's Annual Program may be based solely on Corporate Target
Goals, Individual Goals, or a combination of both Corporate Target Goals and
Individual Goals. The determinations made by an Employer's Board of Directors
under this Article shall be subject to approval by Cinergy's Committee before
any Annual Performance Awards are made.

                                    ARTICLE 5

                          EFFECT OF PLAN ON OTHER PLANS

       At the Effective Time of the Mergers, the short-term incentive
compensation plans for PSI Energy, Inc. and PSI Resources, Inc. known
respectively as the "PSI Energy, Inc. Annual Incentive Plan" adopted effective
January 1, 1987, as amended from time to time, and the "PSI Resources, Inc.
Annual Incentive Plan" adopted effective as of January 1, 1991, were merged into
the Plan and entitlement to any awards shall be administered in accordance with
the Plan. In addition, employees of The Cincinnati Gas & Electric Company as of
the Effective Time of the Mergers were eligible to participate on a prorated
basis in the Performance Period in effect at the Effective Time of the Mergers;
provided, however, that any such employee satisfied the eligibility requirements
of Article 6 (Eligibility).

                                       -8-
<Page>

                                    ARTICLE 6

                                   ELIGIBILITY

       (a) The group of Employees eligible to participate in the Plan shall
consist of Exempt Employees, Non-Exempt Employees, and Union Employees who have
the potential to contribute to an Employer's future success.

       (b) From time to time, the Chief Executive Officer of an Employer may
recommend to the Employer's Board of Directors that any eligible Employee (other
than a Covered Employee) participate in an Annual Program under the Plan. After
reviewing the recommendations, and after considering the duties of each
recommended Employee, his present and potential contribution to the Employer's
success, his other compensation provided by his Employer, and any other factors
as it deems relevant, the Employer's Board of Directors shall select those
Employees who will participate in its Annual Program under the Plan.
Notwithstanding the foregoing, the AIP Committee (as defined in Article 20
(Covered Employees)) shall select those Covered Employees who will participate
in the Plan. When an eligible Employee becomes a Participant in an Employer's
Annual Program under the Plan at other than the beginning of a Performance
Period, the amount of any Annual Performance Award to which he may become
entitled shall be adjusted to reflect his actual time of service as a
Participant during the Performance Period.

       (c) The determinations made by an Employer's Board of Directors under
this Article shall be subject to approval by Cinergy's Committee before any
Annual Performance Awards are made.

                                       -9-
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                                    ARTICLE 7

                            ANNUAL PERFORMANCE AWARD

       The Annual Performance Award, with respect to each Participant, for each
Performance Period shall be calculated as follows:

       (a) The appropriate weight for achieving a particular Corporate Target
Goal shall be determined by multiplying the Incentive Factor attributable to the
extent to which the particular Corporate Target Goal has been met for the
Performance Period times the weight (expressed as a percentage) assigned to that
Corporate Target Goal. If there are two or more Corporate Target Goals for a
particular Performance Period, then the weight for achieving each Corporate
Target Goal shall be calculated in the manner set forth in the immediately
preceding sentence;

       (b) The appropriate weight for achieving a particular Individual Goal
shall be determined by multiplying the Incentive Factor attributable to the
extent to which the particular Individual Goal has been met for the Performance
Period times the weight (expressed as a percentage) assigned to that Individual
Goal. If there are two or more Individual Goals for a particular Performance
Period, then the weight for achieving each Individual Goal shall be calculated
in the manner set forth in the immediately preceding sentence;

       (c) After the weight for achieving each Corporate Target Goal and
Individual Goal for the particular Performance Period has been calculated in the
manner set forth in Paragraphs (a) and (b), the resulting percentages shall be
added and the total sum shall be multiplied by the Participant's Minimum
Incentive in order to determine the Participant's Actual Incentive; and

                                      -10-
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       (d) The Participant's Actual Incentive shall then be multiplied by the
Participant's Earnings for the applicable Performance Period. The resulting
number, expressed in terms of the nearest whole dollar, is the Participant's
Annual Performance Award.

       (e) An Employer's Board of Directors may enhance a Participant's Annual
Performance Award above the maximum level otherwise compensable in recognition
of exemplary performance or achievement as to subjective Individual Goals.
Except where such action would result in the loss of the otherwise available
exemption of the award under Code Subsection 162(m), if the Committee determines
that a change in the business operation, corporate structure or capital
structure of an Employer, or the manner in which it conducts its business, or
other events or circumstances render the Corporate Target Goals or Individual
Goals to be unsuitable, the Committee may modify such goals, in whole or in
part, as the Committee deems appropriate or equitable.

                                    ARTICLE 8

                   CORPORATE TARGET GOALS AND INDIVIDUAL GOALS

       (a) The Corporate Target Goal for each Employer's Performance Period,
which Corporate Target Goal shall be applicable to all Participants, shall be
determined by the Employer's Board of Directors. When there is more than one
Corporate Target Goal for a particular Performance Period, the Employer's Board
of Directors may, but is not required to, assign each goal equal weight and the
Employer's Board of Directors may, but is not required to, condition the
entitlement to an Annual Performance Award upon the attainment of one or more
Corporate Target Goals.

       (b) The Employer's Board of Directors may, but is not required to,
establish one or more Individual Goals for a Participant for each Performance
Period. When there is more than

                                      -11-
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one Individual Goal for a Participant for a particular Performance Period, the
Employer's Board of Directors may, but is not required to, assign each goal
equal weight.

       (c) The determinations made by an Employer's Board of Directors under
this Article shall be subject to approval by Cinergy's Committee before any
Annual Performance Awards are made.

                                    ARTICLE 9

                                  DISTRIBUTION

       After the determination and approval have been made under Article 7
(Annual Performance Award) as to the amount of Annual Performance Award to which
a Participant is entitled at the end of an Employer's Performance Period, the
resulting Annual Performance Award shall be paid to the Participant in cash in
one lump sum on or before the first business day of March following the end of
the Performance Period for which the Annual Performance Award was made unless
the Participant has previously elected in writing to defer the receipt of all or
a portion of the award in accordance with the provisions of the Cinergy
Nonqualified Deferred Compensation Plan.

                                   ARTICLE 10

                     CONDITIONS TO ANNUAL PERFORMANCE AWARDS

       10.1  GOVERNMENT REGULATIONS

             The Plan shall be subject to all applicable laws, rules, and
regulations and to all approvals by any governmental agencies as may be required
and is designed to comply with Code Subsection 162(m).

       10.2  CONTINUED EMPLOYMENT

             A Participant whose employment with his Employer terminates by
reason of a quit, resignation, or discharge prior to the end of the particular
Performance Period shall be

                                      -12-
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automatically divested of any interest in or to any Annual Performance Award for
that Performance Period. If a Participant who has quit, resigned, or who has
been discharged is re-employed by his Employer prior to the end of the
Performance Period in which the quit, resignation, or discharge occurred, the
Employee shall be reinstated as a Participant for that Performance Period, but
any Annual Performance Award shall be adjusted to reflect the actual time of
service of the re-employed Participant during the Performance Period.

       (a) A Participant whose employment with his Employer terminates by reason
of retirement or death prior to the end of the particular Performance Period
shall not necessarily be totally divested of his interest in or to any Annual
Performance Award for that Performance Period. Instead, a determination shall be
made by the Employer's Board of Directors with respect to the retired or
deceased Participant as to the amount of the Annual Performance Award to which
he would have been entitled had he been a Participant on the last day of the
applicable Performance Period as though the retirement or death had not
occurred. However, any determination shall be adjusted to reflect the actual
time of service of the retired or deceased Participant during the Performance
Period prior to the effective date of his retirement or the date of his death.

       (b) A Participant who during an applicable Performance Period has
incurred Total Disability shall not be totally divested of his interest in or to
any Annual Performance Award for that Performance Period. Instead, a
determination shall be made by the Employer's Board of Directors with respect to
the totally disabled Participant as to the amount of the Annual Performance
Award to which he would have been entitled had he not been totally disabled
during the applicable Performance Period. However, any determination shall be
adjusted to reflect the actual time of service of the totally disabled
Participant during the Performance Period.

                                      -13-
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       (c) If a Participant is demoted or his job responsibilities are changed
during a Performance Period, the Employer's Board of Directors may make
adjustments to any Annual Performance Award for that Performance Period that it,
in its sole discretion, deems appropriate.

       (d) The determinations made by an Employer's Board of Directors under
this Article shall be subject to approval by Cinergy's Committee before any
Annual Performance Award is made.

                                   ARTICLE 11

                                   BENEFICIARY

     If a Participant dies prior to the date on which an Annual Performance
Award, or any installment thereof, is distributed, the Annual Performance Award
shall be paid to the highest priority person or persons surviving at the time
distribution is actually paid or commences. Distribution priorities are as
follows:

     (a) The Participant's Beneficiary designated under the Participant's last
will and testament;

     (b) The Participant's Beneficiary designated under his Employer's group
term life insurance plan;

     (c) The Participant's surviving spouse;

     (d) The Participant's surviving children, including adopted children;

     (e) The Participant's surviving parents;

     (f) The Participant's surviving brothers and sisters; or

     (g) The Participant's estate.

Distribution of the Annual Performance Award to a Beneficiary shall be made on
the same date or dates as the Annual Performance Award would have been made to
the Participant as if then living.

                                      -14-
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                                   ARTICLE 12

                           NON-ALIENATION OF BENEFITS

       The Plan shall not in any manner be liable for, or subject to, the debts
or liabilities of any Participant or Beneficiary. No payee may assign any
payment due him under the Plan. No benefits at any time payable under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, attachment, garnishment, levy, execution, or other legal or
equitable process, or encumbrance of any kind.

                                   ARTICLE 13

                            FUNDING POLICY AND METHOD

       The Plan shall be totally unfunded so that Cinergy or any Employer is
under merely a contractual duty to make payments when due under the Plan. No
benefit or promise to pay shall be secured in any way.

                                   ARTICLE 14

                                CHANGE IN CONTROL

       Notwithstanding anything in the Plan to the contrary, if a Change in
Control of Cinergy occurs, each Corporate Target Goal and Individual Goal of
each Employer's Annual Program shall be deemed to have been fully satisfied at
the Maximum Incentive level and each Participant who is employed by an Employer
at the time of the Change in Control shall be entitled to receive an Annual
Performance Award in the same manner as though the Maximum Incentive level had
been obtained for the full Performance Period. In the event that a Change in
Control occurs prior to the time that an Employer has adopted an Annual Program
for such year, then each Participant who is employed by that Employer at the
time of the Change in Control shall be entitled to receive an Annual Performance
Award in the same manner as though the prior year's Annual Program were in
effect and the Maximum Incentive level had been obtained for the full

                                      -15-
<Page>

Performance Period. Any Annual Performance Award due to a Participant under this
Article shall be paid to the Participant in cash in one lump sum within thirty
(30) days following the Change in Control.

       A "Change in Control" of Cinergy shall be deemed to have occurred if any
of the following events occur:

          (1) Any Person is or becomes the beneficial owner (as defined in Rule
              13d-3 under the 1934 Act), directly or indirectly, of securities
              of Cinergy (not including in the securities beneficially owned by
              such Person any securities acquired directly from Cinergy or its
              affiliates) representing more than twenty percent (20%) of the
              combined voting power of Cinergy's then outstanding securities,
              excluding any Person who becomes such a beneficial owner in
              connection with a transaction described in clause (i) of paragraph
              (2) below; or

          (2) There is consummated a merger or consolidation of Cinergy or any
              direct or indirect subsidiary of Cinergy with any other
              corporation, partnership or other entity, other than (i) a merger
              or consolidation that would result in the voting securities of
              Cinergy 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 Cinergy or the
              surviving entity or its parent outstanding immediately after the
              merger or consolidation, or (ii) a merger or consolidation
              effected to implement a recapitalization of Cinergy (or similar
              transaction) in which no Person is or becomes the beneficial

                                      -16-
<Page>

              owner, directly or indirectly, of securities of Cinergy (not
              including in the securities beneficially owned by such a Person
              any securities acquired directly from Cinergy or its affiliates
              other than in connection with the acquisition by Cinergy or its
              affiliates of a business) representing twenty percent (20%) or
              more of the combined voting power of Cinergy's then outstanding
              securities; or

          (3) During any period of two (2) consecutive years, individuals who at
              the beginning of that period constitute Cinergy's Board of
              Directors and any new director (other than a director whose
              initial assumption of office is in connection with an actual or
              threatened election contest, including but not limited to a
              consent solicitation, relating to the election of directors of
              Cinergy) whose appointment or election by Cinergy's 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 Cinergy's Board
              of Directors; or

          (4) The stockholders of Cinergy approve a plan of complete liquidation
              or dissolution of Cinergy or there is consummated a sale or
              disposition by Cinergy of all or substantially all of Cinergy's
              assets, other than a sale or disposition by Cinergy of all or
              substantially all of Cinergy's assets to an entity, at least sixty
              percent (60%) of the combined voting power of the voting
              securities of which are owned by stockholders of Cinergy in

                                      -17-
<Page>

              substantially the same proportions as their ownership of Cinergy
              immediately prior to the sale.

       For purposes of this Article, "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: (1)
Cinergy or any of its subsidiaries or affiliates; (2) a trustee or other
fiduciary holding securities under an employee benefit plan of Cinergy or any of
its subsidiaries or affiliates; (3) an underwriter temporarily holding
securities pursuant to an offering of those securities; or (4) a corporation
owned, directly or indirectly, by the stockholders of Cinergy in substantially
the same proportions as their ownership of stock of Cinergy.

       Notwithstanding the provisions of Article 18 (Amendment and Termination),
the provisions of this Article may not be amended by an amendment to the Plan
effected within three years following a Change in Control.

                                      -18-
<Page>

                                   ARTICLE 15

                                 ADMINISTRATION

       (a) The Plan shall be administered by Cinergy's Committee which shall
consist of members of Cinergy's Board of Directors who are disinterested persons
under Rule 16b-3 promulgated under the 1934 Act and successor rules and, with
respect to Covered Employees, outside directors under Code Subsection 162(m).
Cinergy's Committee is authorized to establish all rules and regulations and to
appoint any agents as it deems appropriate for the Plan's proper administration
and to make any determinations under and to take any steps in connection with
the Plan for the benefits provided under the Plan as it deems necessary or
advisable. Cinergy's Committee may require an Employer to enter into agreements
with each Participant as it deems appropriate to reflect each Participant's
interests under the Plan.

       (b) Cinergy's Committee shall have exclusive discretionary authority and
right to approve eligibility for participation in the Plan and to interpret,
construe, and regulate the Plan. The decision of Cinergy's Committee with
respect to any questions arising as to the Employees selected to participate in
the Plan, the amount and time of payment of benefits under the Plan or any other
matters concerning the Plan, including its interpretation, construction, or
regulation, shall be final, conclusive and binding on the Employers, the
Employers' Boards of Directors, Employees, Participants, and Beneficiaries.

                                      -19-
<Page>

                                   ARTICLE 16

                                  MISCELLANEOUS

       16.1   NO ENLARGEMENT OF EMPLOYEE BENEFITS

              This Plan is strictly a voluntary undertaking on the part of the
Employers and shall not be deemed to constitute a contract between the Employers
and any Employee or to be consideration for, or an inducement to, or a condition
of, the employment of any Employee. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the service of any
Employer or to interfere with the right of any Employer to discharge any
Employee at any time. No Employee shall have any right to benefits except to the
extent provided in the Plan. Nothing contained in the Plan shall be deemed to
give any Employee a continued entitlement to receive an Annual Performance Award
for any Performance Period. Any award under this Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any
retirement plan of an Employer unless otherwise provided by that plan, and shall
not affect any benefits under any other Employer benefit plan of any kind
currently or subsequently in effect under which the availability or amount of
benefits is related to the level of compensation.

       16.2   NOTICE OF ADDRESS

              Each Participant and Beneficiary entitled to benefits under the
Plan must file with Cinergy's Committee, in writing, his post office address and
each change of post office address. Any communication, statement, or notice
addressed to a person at his latest post office address as filed with Cinergy's
Committee will, upon deposit in the United States mail with postage prepaid, be
binding upon that person for all purposes of the Plan.

                                      -20-
<Page>

       16.3   NO INDIVIDUAL LIABILITY

              It is the Plan's express purpose and intention that, except as
otherwise required by law, no individual liability whatever shall attach to, or
be incurred by, any Employer, its shareholders, officers, employees, or members
of the board of directors of any Employer, under or by reason of any of the
Plan's terms or conditions. Each Participant shall be legally bound by the
Plan's provisions.

       16.4   DELEGATION OF ADMINISTRATIVE DUTIES

              Administrative duties imposed by this Plan may be delegated by
Cinergy's Committee to an Employee of any Employer charged with those duties to
the extent not inconsistent with the provisions of Code Subsection 162(m).

       16.5   GOVERNING LAWS

              The Plan shall be construed and administered according to the laws
of the State of Delaware to the extent that those laws are not preempted by the
laws of the United States of America.

       16.6   RISK OF PARTICIPATION

              Nothing contained in the Plan shall be construed as an agreement
by the Plan or any Employer, its shareholders, officers, employees, or members
of the board of directors of any Employer, to indemnify anyone for any losses,
damages, costs and/or expenses resulting from participation in the Plan.

       16.7   HEADINGS

              The headings of articles, sections, subsections, paragraphs or
other parts of the Plan are for convenience of reference only and do not define,
limit, construe or otherwise affect the contents of the Plan.

                                      -21-
<Page>

                                   ARTICLE 17

                                  CONTRIBUTIONS

       No contributions to the Plan by Participants shall be required or
permitted under the Plan.

                                   ARTICLE 18

                            AMENDMENT AND TERMINATION

       Cinergy, by resolution duly adopted by Cinergy's Board of Directors,
shall have the right, authority, and power to alter, amend, modify, revoke, or
terminate the Plan at any time, and Cinergy, by resolution of Cinergy's Board of
Directors, shall also have the right, authority, and power to discontinue or
suspend the payment of benefits under the Plan.

                                   ARTICLE 19

                           CONTINUANCE BY A SUCCESSOR

       If Cinergy is reorganized by way of merger, consolidation, transfer of
assets or otherwise, so that another corporation, partnership or person shall
succeed to all or substantially all of Cinergy's business, the successor may be
substituted for Cinergy under the Plan by adopting the Plan.

                                   ARTICLE 20

                                COVERED EMPLOYEES

       Notwithstanding any provision of the Plan to the contrary, this Article
will govern the terms of the Annual Performance Awards granted to Covered
Employees. This Article is designed to comply with Code Subsection 162(m) to the
extent applicable. All provisions in this Article, and any other applicable
provision of the Plan shall be construed in a manner to so comply.

       (a) With respect to Covered Employees, the Plan shall be administered by
a committee (the "AIP Committee") consisting of two or more persons each of whom
is an

                                      -22-
<Page>

"outside director" for purposes of Code Subsection 162(m). The AIP Committee and
Cinergy's Committee may be the same Committee provided that the membership to
Cinergy's Committee satisfies the conditions set forth in the preceding
sentence.

       (b) With respect to Participants who are Covered Employees, the AIP
Committee shall establish the Corporate Target Goals and Individual Goals for
each Performance Period within the time necessary to satisfy the requirements of
Code Subsection 162(m). Corporate Target Goals shall be based on objective
performance criteria pertaining to an Employer's performance, efficiency, or
profitability measured by specified levels or of growth in one or more of the
following business criteria as the AIP Committee may determine: stock price,
total shareholder return, market share, sales, earnings per share, costs,
operating income, net income, cash flow, fuel cost per million BTU, costs per
kilowatt hour, retained earnings, return on equity, return on assets, return on
capital employed, return on invested capital, return on sales, and completion of
acquisitions; provided, that all such Corporate Target Goals shall satisfy the
requirements for "performance-based compensation" within the meaning of
Paragraph 162(m)(4) of the Code. Individual Goals shall be based on the
objective business criteria underlying the Corporate Target Goals and shall
pertain to a Covered Employee's individual effort as to achievement or
attainment of the Corporate Target Goals or shall relate to one or more of the
following business criteria: litigation, human resources, information services,
production, inventory, support services, site development, plant development,
building development, facility development, government relations, product market
share, or management (or, with respect to separate awards under the Plan not
intended to satisfy the requirements for "performance-based compensation" within
the meaning of Paragraph 162(m)(4) of the Code, subjective performance criteria
pertaining to a Covered Employee's individual effort as to enhancement of either
individual performance or achievement or attainment of an Employer's
performance, efficiency

                                      -23-
<Page>

or profitability). Except where such action would result in the loss of the
otherwise available exemption of the award under Code Subsection 162(m), when
establishing the Corporate Target Goals and Individual Goals, the AIP Committee
may include or exclude the impact of specified objective events, including, but
without limitation, weather conditions; effects of accounting changes; effects
of currency fluctuations; effects of financing activities (e.g., the effect on
earnings per share of issuing convertible debt securities); expenses for
restructuring or productivity initiatives; non-operating items; acquisition
expenses; effects of divestitures; and any other items of gain, loss or expense
that are determined to be extraordinary or unusual in nature or infrequent in
occurrence or related to the disposal of a segment of a business or related to a
change in accounting principle all as determined in accordance with generally
accepted accounting principles. No provision of this Article shall preclude the
AIP Committee from exercising negative discretion with respect to any Annual
Performance Award granted to a Covered Employee hereunder (i.e., to reduce or
eliminate the Annual Performance Award payable) within the meaning of Code
Subsection 162(m).

       (c) In the case of Participants who are Covered Employees as of the end
of the Performance Period, unless otherwise designated as separate awards based
on subjective performance criteria, payments shall be made only after
achievement of the applicable performance goals has been certified by the AIP
Committee. In no event shall payment in respect of Annual Performance Awards
based on Corporate Target Goals and objective Individual Goals granted for a
Performance Period be made to a Participant who is a Covered Employee as of the
end of a Performance Period in an amount that exceeds $5,000,000.

       (d) Notwithstanding any provision of this Plan to the contrary, payments
of any Annual Performance Awards under the Plan to Covered Employees for
Performance Periods commencing on or after January 1, 2002 shall be contingent
upon the affirmative vote of the

                                      -24-
<Page>

shareholders of at least a majority of the votes cast (including abstentions to
the extent abstentions are counted as voting under applicable state law) at the
annual meeting of shareholders held in 2002. Unless and until such shareholder
approval is obtained, no Annual Performance Awards for Performance Periods
commencing on or after January 1, 2002 shall be paid to any Covered Employee
pursuant to this Plan.

       IN WITNESS WHEREOF, Cinergy Corp. has caused this master plan document to
be executed and approved by its duly authorized officers effective as of January
25, 2002.

                                     CINERGY CORP.

                                     BY:
                                        ------------------------------------
                                        JAMES E . ROGERS
                                        Chairman, President and Chief Executive
                                        Officer

                                     And

                                     BY:
                                        ------------------------------------

                                      -25-