**Exhibit 10.1**

 

**EMPLOYMENT AGREEMENT**

 

This EMPLOYMENT AGREEMENT is madeand entered into as of the 15th day of November, 2002 (the “Effective Date”),by and between Cinergy and Marc E. Manly (the “Executive”).  This Agreement replaces and supersedes anyand all prior employment agreements between Cinergy and the Executive.  The capitalized words and terms usedthroughout this Agreement are defined in Section 11.

# **Recitals**

 

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

 

B.            TheExecutive is willing to continue to remain in the employ of Cinergy on theterms and conditions set forth in this Agreement.

 

C.            Theparties intend that this Agreement will replace and supersede any and all prioremployment agreements between Cinergy (or any component company or businessunit of Cinergy) and the Executive.

 

# **Agreement**

 

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

 

## **1.****             Employment andTerm.**

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

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### b.             The Employment Period of this Agreementwill commence as of the Effective Date and continue until December 31,2005; provided that, commencing on December 31, 2003, and on eachsubsequent December 31, the Employment Period will be extended for one (1)additional year unless either party gives the other party written notice not toextend this Agreement at least ninety (90) days before the extension wouldotherwise become effective.

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## **2.****             Duties and Powersof Executive.**

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### a.             Position.  The Executive will serve Cinergy as Executive Vice President andChief Legal Officer of the Company and he will have such responsibilities,duties, and authority as are customary for someone of that position and suchadditional duties, consistent with his position, as may be assigned to him fromtime to time during the Employment Period by the Board of Directors or theChief Executive Officer.  Executiveshall devote substantially all of Executive’s business time, efforts andattention to the performance of Executive’s duties under this Agreement; provided,however, that this requirement shall not preclude Executive fromreasonable participation in civic, charitable or professional activities or themanagement of Executive’s passive investments, so long as such activities donot materially interfere with the performance of Executive’s duties under thisAgreement.

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

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## **3.****             Compensation.**  The Executive will receive the followingcompensation for his services under this Agreement.

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### a.             Salary.  The Executive’s Annual Base Salary, payable in pro ratainstallments not less often than semi-monthly, will be at the annual rate ofnot less than $475,008.  Any increase inthe Annual Base Salary will not serve to limit or reduce any other obligationof Cinergy under this Agreement.  TheAnnual Base Salary will not be reduced except for across-the-board salaryreductions similarly affecting all Cinergy management personnel.  If Annual Base Salary is increased orreduced during the Employment Period, then such adjusted salary will thereafterbe the Annual Base Salary for all purposes under this Agreement.

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### b.             Retirement, Incentive, Welfare BenefitPlans and Other Benefits.

 

### (i)            During the Employment Period, the Executivewill be eligible, and Cinergy will take all necessary action to cause theExecutive to become eligible, to participate in short-term and long-termincentive, stock option, restricted stock, performance unit, savings,retirement and welfare plans, practices, policies and programs applicable generallyto other senior executives of Cinergy who are considered Tier II executives forcompensation purposes, except with respect to any plan, practice, policy orprogram to which the Executive has waived his rights in writing. The Executivewill be a participant in the Senior Executive Supplement portion of the CinergyCorp. Supplemental Executive Retirement Plan (the “SERP”) and the Executivewill receive a supplemental retirement benefit hereunder in an amount equal tothe excess of the amount that he would be entitled to receive under the termsof the SERP if his “Total Pay Replacement Percentage” thereunder were equal tothe product of five percent (5%) and the number of his years of “SeniorExecutive Service” not in excess of 15 (in whole years) as of the applicabledate over the amount to which the Executive is actually entitled pursuant tothe terms of the SERP as

 

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#### of the applicable date.  The supplemental retirementbenefit described in the preceding sentence shall be payable inaccordance with the terms of the SERP (including any applicable vestingschedule)  and shall betreated hereunder (including for purposes of Section 5a(iii)(3)) asif it were payable under the SERP. Notwithstanding the foregoing, in no event shall the sum of thesupplemental retirement benefit described in this Section 3b(i) and theExecutive’s total aggregate annual benefit under the SERP exceed 60% of theExecutive’s Highest Average Earnings.

 

### (ii)           Supplemental Retirement Benefit.

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### (1)           Amount, Form, Timing and Method ofPayment.  If the Executive retiresfrom Cinergy after reaching age 62, the Executive will be entitled and fullyvested in a supplemental retirement benefit in an amount which, when expressedas an annual amount payable during the life of the Executive, shall equal theexcess of (1) 60% of the Executive’s Highest Average Earnings over (2) histotal aggregate annual benefit, payable in the form of a single life annuity tothe Executive, under Section 3b(i) hereof and under all ExecutiveRetirement Plans.  Except as describedbelow, the form (e.g., the 100% joint and survivor annuity form of benefit),timing, and method of payment of the supplemental retirement benefit payableunder this Paragraph will be the same as those elected by the Executive underthe Pension Plan, and the amount of such benefit shall be calculated aftertaking into account the actuarial factors contained in the Pension Plan, provided,however, that such benefit shall not be actuarially reduced for earlycommencement.

 

### (2)           Death Benefit.  If the Executive dies after reaching age 62but prior to his retirement from Cinergy, and if his Spouse, on the date of hisdeath, is living on the date the first installment of the supplementalretirement benefit would be payable under this Paragraph, the Spouse will beentitled to receive the supplemental retirement benefit as a Spouse’sbenefit.  The form, timing, and methodof payment of any Spouse’s benefit under this Paragraph will be the same as thoseapplicable to the Spouse under the Pension Plan, and the amount of such benefitshall be calculated after taking into account the actuarial factors containedin the Pension Plan, provided, however, that such benefit shallnot be actuarially reduced for early commencement.

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### (3)           Special Payment Election Effective Upon aChange in Control.  Notwithstandingthe foregoing, the Executive may make a special payment election with respectto his supplemental retirement benefit (if any) in accordance with the followingprovisions:

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

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### (B)           Such special payment election shall becomeoperative only upon the occurrence of a Change in Control and only if theExecutive’s termination of employment occurs either (1) prior to the occurrenceof a Change in Control or (2) during the 24-month period commencing upon the

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###### occurrence of a Change in Control. Once operative, such special payment election shall override any otherpayment election made by the Executive with respect to his supplementalretirement benefit.

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

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### (D)          In the event that the Executive makes aspecial payment election and pursuant to that election he becomes entitled toreceive a single lump sum cash payment pursuant to this Section payable priorto the commencement of his supplemental retirement benefit in another form ofpayment, the Actuarial Equivalent of his supplemental retirement benefit shallbe calculated based on the following assumptions:

 

### (I)            The form of payment for each of theExecutive’s retirement benefits under Section 3b(i) hereof and under theExecutive Retirement Plans and the Executive’s supplemental retirement benefitshall be a single life annuity;

 

### (II)           The commencement date for each of theExecutive’s retirement benefits under Section 3b(i) hereof and under theExecutive Retirement Plans and the Executive’s supplemental retirement benefitshall be the first day of the calendar month coincident with or next followinghis termination of employment;

 

### (III)         The term “Actuarial Equivalent” has themeaning given to that term in the Pension Plan with respect to lump sumpayments; and

 

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

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### (E)           In the event that the Executive makes aspecial payment election and pursuant to that election he is entitled toreceive a single lump sum cash payment payable after the commencement ofhis supplemental retirement benefit in another form of payment, his lump sumcash payment shall be equal to the Actuarial Equivalent (as that term is usedin the Pension Plan with respect to lump sum payments) of the remainingpayments to be made in connection with his supplemental retirement benefit.

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###### (4)           Except as provided inSection 3b(ii)(3), the supplemental retirement benefit shall not bepayable in the form of a single lump sum.

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### (iii)          Upon his retirement on or after having becomefully vested in his benefit under the Pension Plan, the Executive will beeligible for comprehensive medical and dental benefits which are not materiallydifferent 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

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#### determining the amount of the monthly premiums due from the Executive,the Executive will receive from Cinergy the maximum subsidy available as of thedate of his retirement to an active Cinergy employee with the same medical benefitsclassification/eligibility as the Executive’s medical benefitsclassification/eligibility on the date of his retirement.

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### (iv)          The Executive will be a participant in theAnnual Incentive Plan and will be paid pursuant to the terms and conditions ofthat plan, subject to the following: (1) The maximum annual bonus shall be notless 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 lessthan sixty percent (60%) of the Executive’s Annual Base Salary (the “TargetAnnual Bonus”).

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

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

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

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### (i)            Cinergy will furnish to the Executive anautomobile appropriate for the Executive’s level of position, or, at Cinergy’sdiscretion, 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 thecash allowance.  All benefits providedpursuant to this Section 3c(i) shall be provided in accordance with generallyapplicable procedures established from time to time by Cinergy in its solediscretion.

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### (ii)           Cinergy will pay the initiation fee and theannual dues, assessments, and other membership charges of the Executive formembership in a country club selected by the Executive.

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

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

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### (v)           Cinergy will pay to relocate the Executiveand his immediate family to the Cincinnati, Ohio area

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#### under the terms of the Relocation Program.

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### (v)           Cinergy will provide other fringe benefitsin accordance with Cinergy plans, practices, programs, and policies in effectfrom time to time, commensurate with his position and at least comparable tothose received by other Cinergy Tier II executives.

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

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### e.             Relocation Benefits.  Following termination of the Executive’semployment for any reason (other than death), the Executive will be entitled toreimbursement from Cinergy for the reasonable costs of relocating from theCincinnati, Ohio, area to a new primary residence in a manner that isconsistent with the terms of the Relocation Program.  Notwithstanding the foregoing, if the Executive becomes employedby another employer and is eligible to receive relocation benefits underanother employer-provided plan, any benefits provided to the Executive underthis Section 3e will be secondary to those provided under the otheremployer-provided relocation plan.  TheExecutive must report to Cinergy any such relocation benefits that he actuallyreceives under another employer-provided plan.

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### f.              Stock Options and Stock AppreciationRights.  NotwithstandingSection 5d, upon the occurrence of a Change in Control, any stock optionsor stock appreciation rights then held by the Executive pursuant to the LTIP orCinergy Corp. Stock Option Plan shall, to the extent not otherwise provided inthe applicable Stock Related Documents, become immediately exercisable.  If the Executive terminates employment forany reason during the twenty-four (24) month period commencing upon theoccurrence of a Change in Control, notwithstanding Section 5d, any stockoptions or stock appreciation rights then held by the Executive pursuant to theLTIP or Cinergy Corp. Stock Option Plan shall, to the extent not otherwiseprovided in the applicable Stock Related Documents, remain exercisable inaccordance with their terms but in no event for a period less than the lesserof (i) three months following such termination of employment or (ii) theremaining term of such stock option or stock appreciation right (whichremaining term shall be determined without regard to such termination ofemployment).

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### **4.****             Termination ofEmployment.**

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

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

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### (i)            The willful and continued failure by theExecutive to substantially perform the Executive’s duties with Cinergy (otherthan any such failure resulting from the Executive’s incapacity due to physicalor mental illness) that, if curable, has not been cured within 30 days afterthe Board of Directors or the Chief Executive Officer has delivered to theExecutive a written demand for substantial performance, which demandspecifically identifies the manner in which the Executive has not substantiallyperformed his duties.  This event willconstitute Cause even if the Executive issues a Notice of Termination for GoodReason pursuant to Section 4d after the Board of Directors or ChiefExecutive Officer delivers a written demand for substantial performance.

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

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

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### (iv)          Notwithstanding the foregoing, Cinergy shallbe deemed to have not terminated the employment of the Executive for Causeunless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than a majority ofthe Board then in office at a meeting of the Board called and held for suchpurpose (after reasonable notice to the Executive and an opportunity for theExecutive, 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 setforth above in this Section 4b and specifying the particulars thereof indetail.

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

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

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### (i)            (1) A reduction in the Executive’s AnnualBase Salary, except for across-the-board salary reductions similarly affectingall Cinergy management personnel, (2) a reduction in the amount of theExecutive’s Maximum Annual Bonus under the Annual Incentive Plan, except foracross-the-board Maximum Annual Bonus reductions similarly affecting allCinergy management personnel, or (3) a reduction in any other benefit orpayment described in Section 3 of this Agreement, except for changes tothe employee benefits programs generally affecting Cinergy managementpersonnel, provided that those changes, in the aggregate, will not result in amaterial adverse change with respect to the benefits to which the Executive wasentitled as of the Effective Date.

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

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

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

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

 

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

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

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### f.              Notice of Termination.  Any termination of the Executive’semployment by Cinergy or by the Executive during the Employment Period (otherthan a termination due to the Executive’s death) will be communicated by awritten Notice of Termination to the other party to this Agreement inaccordance with Section 12b.  Forpurposes of this Agreement, a “Notice of Termination” means a written noticethat specifies the particular provision of this Agreement relied upon and thatsets forth in reasonable detail the facts and circumstances claimed to providea basis for terminating the Executive’s employment under the specifiedprovision.  The failure by the Executiveor Cinergy to set forth in the Notice of Termination any fact or circumstancethat contributes to a showing of Good Reason or Cause will not waive any rightof the Executive or Cinergy under this Agreement or preclude the Executive orCinergy from asserting that fact or circumstance in enforcing rights under thisAgreement.

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### g.             Sale of Company Stock.  The Executive acknowledges and agrees thathe shall not sell or otherwise dispose of any shares of Company stock acquiredpursuant to the exercise of a stock option, other than shares sold in order topay an option exercise price or the related tax withholding obligation, until90 days after the Date of Termination. Notwithstanding the foregoing, Cinergy, in its sole discretion, maywaive the restrictions contained in the previous sentence.

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## **5.****             Obligations ofCinergy Upon Termination.**

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### a.             Certain Terminations.

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

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### (1)           the pro-rated portion of the Executive’sAnnual Base Salary payable through the Date of Termination, to the extent notpreviously paid.

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

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### (3)           an amount equal to the AIP Benefit for thefiscal year that includes the Date of Termination multiplied by a fraction, thenumerator of which is the number of days from the beginning of that fiscal yearto and including the Date of Termination and the denominator of which is threehundred and sixty-five (365).  The AIPBenefit component of the calculation will be equal to the annual bonus thatwould have been earned by the Executive pursuant to any annual bonus orincentive plan maintained by Cinergy in respect of the fiscal year in whichoccurs the Date of Termination, determined by projecting Cinergy’s performanceand other applicable goals and objectives for the entire fiscal year based onCinergy’s performance during the period of such fiscal year occurring prior tothe Date of Termination, and based on such other assumptions and rates asCinergy deems reasonable.

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### (4)           the Accrued Obligations described in thisSection 5a(i) will be paid within thirty (30) days after the Date ofTermination.  These Accrued Obligationsare payable to the Executive regardless of whether a Change in Control hasoccurred.

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### (ii)           In the event of a Qualifying Termination eitherprior 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 theAccrued Obligations, and Cinergy will have the following additional obligationsdescribed in this Section 5a(ii); provided, however, thateach of the benefits described below in this Section 5a(ii) shall only beprovided to the Executive if, upon presentation to the Executive following aQualifying Termination, the Executive timely executes and does not timelyrevoke the Waiver and Release.

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### (1)           Cinergy will pay to the Executive a lump sumamount, in cash, equal to three (3) times the sum of the Annual Base Salary andthe Annual Bonus.  For this purpose, theAnnual Base Salary will be at the rate in effect at the time Notice ofTermination is given (without giving effect to any reduction in Annual BaseSalary, if any, prior to the termination, other than across-the-boardreductions), and shall include the amount of any Nonelective EmployerContributions made on behalf of the Executive under the 401(k) Excess Planduring 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 theExecutive pursuant to any annual bonus or incentive plan maintained by Cinergyin respect of the year ending immediately prior to the fiscal year in whichoccurs the Date of Termination, and (B) the annual bonus that would have beenearned by the Executive pursuant to any annual bonus or incentive planmaintained by Cinergy in respect of the fiscal year in which occurs the Date ofTermination, calculated by projecting Cinergy’s performance and otherapplicable goals and objectives for the entire fiscal year based on Cinergy’sperformance during the period of such fiscal year occurring prior to the Dateof Termination, and based on such other assumptions and rates as Cinergy deemsreasonable; provided, however that for purposes of thisSection 5a(ii)(1)(B), the Annual Bonus shall not be less than the TargetAnnual Bonus, nor greater than the Maximum Annual Bonus for the year in whichthe Date of Termination occurs.  Thislump sum will be paid within thirty (30) days after the expiration of therevocation period contained in the Waiver and Release.

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### (2)           Subject to Clauses (A), (B) and (C) below,Cinergy will provide, until the end of the Employment Period, medical anddental benefits to the Executive and/or the Executive’s dependents at leastequal to those that would have been provided if the Executive’s employment hadnot been terminated (excluding benefits to which the Executive has waived hisrights in writing).  The benefitsdescribed in the preceding sentence will be in accordance with the medical and welfarebenefit plans, practices, programs, or policies of Cinergy (the “M&WPlans”) as then currently in effect and applicable generally to other Cinergysenior executives and their families. In the event that any medical or dental benefits or payments providedpursuant to this Section 5a(ii)(2)(B) are subject to federal, state, orlocal income or employment taxes, Cinergy shall provide the Executive with anadditional payment in the amount necessary such that after payment by theExecutive of all such taxes (calculated after assuming that the Executive payssuch taxes for the year in which the payment or benefit occurs at the highestmarginal tax rate applicable), including the taxes imposed on the additionalpayment, the Executive retains an amount equal to the medical or dentalbenefits or payments provided pursuant to this Section 5a(ii)(2)(B).

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### (A)          If, as of the Executive’s Date ofTermination, the Executive meets the eligibility requirements for Cinergy’sretiree medical and welfare benefit plans, the provision of those retireemedical and

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### welfare benefit plans to the Executive will satisfy Cinergy’sobligation under this Section 5a(ii)(2).

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### (B)           If, as of the Executive’s Date ofTermination, the provision to the Executive of the M&W Plan benefitsdescribed in this Section 5a(ii)(2) would either (1) violate the terms ofthe M&W Plans (or any related insurance policies) or (2) violate any of theCode’s nondiscrimination requirements applicable to the M&W Plans, thenCinergy, in its sole discretion, may elect to pay the Executive, in lieu of theM&W Plan benefits described under this Section 5a(ii)(2), a lump sumcash payment equal to the total monthly premiums (or in the case of a selffunded plan, the cost of COBRA continuation coverage) that would have been paidby Cinergy for the Executive under the M&W Plans from the Date ofTermination through the end of the Employment Period.  Nothing in this Clause will affect the Executive’s right to electCOBRA continuation coverage under a M&W Plan in accordance with applicablelaw, and Cinergy will make the payment described in this Clause whether or notthe Executive elects COBRA continuation coverage, and whether or not theExecutive receives health coverage from another employer.

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

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### (3)           Cinergy will pay the Executive a lump sumamount, in cash, equal to $15,000 in order to cover tax counseling servicesthrough an agency selected by the Executive. In the event any payment to the Executive pursuant to thisSection 5a(ii)(3) is subject to any federal, state, or local income oremployment taxes, Cinergy shall provide to the Executive an additional paymentin an amount necessary such that after payment by the Executive of all suchtaxes (calculated after assuming that the Executive pays such taxes for theyear in which his Date of Termination occurs at the highest marginal tax rateapplicable), including the taxes imposed on the additional payment, theExecutive retains an amount equal to the payment provided pursuant to thisSection 5a(ii)(3).  Such paymentwill be transferred to the Executive within thirty (30) days of the expirationof the revocation period contained in the Waiver and Release.

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### (iii)          In the event of a Qualifying Terminationduring the twenty-four (24) month period beginning upon the occurrence of aChange in Control, Cinergy will pay the Accrued Obligations listed in Sections5a(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 inwhich occurs such Change in Control) and Cinergy will have the followingadditional obligations described in this Section 5a(iii); provided,however, that each of the benefits described below in thisSection 5a(iii) shall only be provided to the Executive if, uponpresentation to the Executive following a Qualifying Termination, the Executivetimely executes and does not timely revoke the Waiver and Release.

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### (1)           Cinergy will pay to the Executive a lump sumseverance payment, in cash, equal to three (3) times the higher of (x) the sumof 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 tothe Change in Control and the Change in Control Bonus.  For purposes of the preceding sentence, theExecutive’s Annual Base Salary on any given date shall include the amount ofany

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##### Nonelective Employer Contributions made on behalf of the Executiveunder the 401(k) Excess Plan during the fiscal year in which such dateoccurs.  For purposes of this Agreement,the Change in Control Bonus shall mean the higher of (A) the annual bonusearned by the Executive pursuant to any annual bonus or incentive planmaintained by Cinergy in respect of the year ending immediately prior to thefiscal year in which occurs the Date of Termination or, if higher, immediatelyprior to the fiscal year in which occurs the Change in Control, and (B) theannual bonus that would have been earned by the Executive pursuant to anyannual bonus or incentive plan maintained by Cinergy in respect of the year inwhich occurs the Date of Termination, calculated by projecting Cinergy’sperformance and other applicable goals and objective for the entire fiscal yearbased on Cinergy’s performance during the period of such fiscal year occurringprior to the Date of Termination, and based on such other assumptions and ratesas Cinergy deems reasonable, provided, however, that  for purposes of thisSection 5a(iii)(1)(B), such Change in Control Bonus shall not be less thanthe 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 Waiverand Release.  Nothing in thisSection 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 IncentivePlan for the fiscal year that includes the Date of Termination.

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### (2)           Cinergy will pay to the Executive the lumpsum present value of any benefits under the Executive Supplemental Life Programunder the terms of the applicable plan or program as of the Date ofTermination, calculated as if the Executive was fully vested as of the Date ofTermination. The lump sum present value, assuming commencement at age 50 or theExecutive’s age as of the Date of Termination if later, will be determinedusing 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 planyear that includes the Date of Termination. To the extent no such interest rateis provided therein, the annual interest rate applicable underSection 417(e)(3) of the Code, or any successor provision thereto, for thesecond full calendar month preceding the first day of the calendar year thatincludes the Date of Termination will be used. This lump sum will be paid withinthirty (30) days of the expiration of the revocation period contained in theWaiver and Release.

#####  

### (3)           The Executive shall be fully vested in hisaccrued benefits as of the Date of Termination under the Executive RetirementPlans and the last three sentences of Section 3b(i) of this Agreement and,and his aggregate accrued benefits thereunder and under Section 3b(ii) ofthis Agreement will be calculated, and he will be treated for all purposes, asif he was credited with three (3) additional years of age and service as of theDate of Termination, provided, however, that to the extent acalculation is made regarding the actuarial equivalent amount of any alternateform of benefit, the Executive will not be credited with three additional yearsof age for purposes of such calculation. However, Cinergy will not commence payment of such benefits prior to thedate that the Executive has attained, or is treated (after taking into accountthe preceding sentence) as if he had attained, age 50.

#####  

### (4)           For a thirty-six (36) month period after theDate of Termination, Cinergy will arrange to provide to the Executive and/orthe Executive’s dependents life, disability, accident, and health insurancebenefits substantially similar to those that the Executive and/or the Executive’sdependents are

#####  

##### 12

##### 

#####  

### receiving immediately prior to the Notice of Termination at asubstantially similar cost to the Executive (without giving effect to anyreduction in those benefits subsequent to a Change in Control that constitutesGood Reason), except for any benefits that were waived by the Executive inwriting.  If Cinergy arranges to providethe Executive and/or the Executive’s dependents with life, disability,accident, and health insurance benefits, those benefits will be reduced to theextent comparable benefits are actually received by or made available to theExecutive and/or the Executive’s dependents during the thirty-six (36) monthperiod following the Executive’s Date of Termination.  The Executive must report to Cinergy any such benefits that he orhis dependents actually receives or that are made available to him or hisdependents.  In lieu of the benefitsdescribed in the preceding sentences, Cinergy, in its sole discretion, may electto pay to the Executive a lump sum cash payment equal to thirty-six (36) timesthe monthly premiums (or in the case of a self funded plan, the cost of COBRAcontinuation coverage) that would have been paid by Cinergy to provide thosebenefits to the Executive and/or the Executive’s dependents.  Nothing in this Section 5a(iii)(4) willaffect the Executive’s right to elect COBRA continuation coverage in accordancewith applicable law, and Cinergy will provide the benefits or make the paymentdescribed in this Clause whether or not the Executive elects COBRA continuationcoverage, and whether or not the Executive receives health coverage fromanother employer.  In the event that anybenefits or payments provided pursuant to this Section 5a(iii)(4) are subjectto federal, state, or local income or employment taxes, Cinergy shall providethe Executive with an additional payment in the amount necessary such thatafter payment by the Executive of all such taxes (calculated after assumingthat the Executive pays such taxes for the year in which the payment or benefitoccurs at the highest marginal tax rate applicable), including the taxesimposed on the additional payment, the Executive retains an amount equal to thebenefits or payments provided pursuant to this Section 5a(iii)(4).

#####  

### (5)           In lieu of any and all other rights withrespect to the automobile assigned by Cinergy to the Executive, Cinergy willprovide the Executive with a lump sum payment in the amount of $50,000.  In the event any payment to the Executivepursuant to this Section 5a(iii)(5) is subject to any federal, state, orlocal income or employment taxes, Cinergy shall provide to the Executive anadditional payment in an amount necessary such that after payment by theExecutive of all such taxes (calculated after assuming that the Executive payssuch taxes for the year in which his Date of Termination occurs at the highestmarginal tax rate applicable), including the taxes imposed on the additionalpayment, the Executive retains an amount equal to the payment provided pursuantto this Section 5a(iii)(5).  Suchpayment will be transferred to the Executive within thirty (30) days of theexpiration of the revocation period contained in the Waiver and Release.

#####  

### (6)           Cinergy will pay the Executive a lump sumamount, in cash, equal to $15,000 in order to cover tax counseling servicesthrough an agency selected by the Executive. In the event any payment to the Executive pursuant to thisSection 5a(iii)(6) is subject to any federal, state, or local income or employmenttaxes, Cinergy shall provide to the Executive an additional payment in anamount necessary such that after payment by the Executive of all such taxes(calculated after assuming that the Executive pays such taxes for the year inwhich his Date of Termination occurs at the highest marginal tax rateapplicable), including the taxes imposed on the additional payment, theExecutive retains an amount equal to the payment provided pursuant to thisSection 5a(iii)(6).  Such paymentwill be transferred to the Executive within thirty (30) days of the expirationof the

#####  

##### 13

##### 

#####  

##### revocation period contained in the Waiver and Release.

#####  

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

#####  

### (8)           Cinergy will provide outplacement servicessuitable 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 ofemployment.  At the Executive’sdiscretion, 15% of Annual Base Salary may be paid in lieu of outplacementservices, which payment will be transferred to the Executive within thirty (30)days of the expiration of the revocation period contained in the Waiver andRelease.

#####  

For purposes of this Section 5a(iii), the Executive willbe deemed to have incurred a Qualifying Termination upon a Change in Control ifthe Executive’s employment is terminated prior to a Change in Control, withoutCause at the direction of a Person who has entered into an agreement withCinergy, the consummation of which will constitute a Change in Control, or ifthe Executive terminates his employment for Good Reason prior to a Change inControl if the circumstances or event that constitutes Good Reason occurs atthe direction of such a Person.

 

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

###  

### c.             Certain Tax Consequences.

###  

#### (i)            In the event that any benefits paid orpayable to the Executive or for his benefit pursuant to the terms of thisAgreement or any other plan or arrangement in connection with, or arising outof, his employment with Cinergy or a change in ownership or effective control ofCinergy 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 toreceive an additional payment (a “Gross-Up Payment”) in an amount such thatafter payment by the Executive of all taxes (including any interest, penalties,additional tax, or similar items imposed with respect thereto and the ExciseTax), including any Excise Tax imposed upon the Gross-Up Payment, the Executiveretains an amount of the Gross-Up Payment equal to the Excise Tax imposed uponor assessable against the Executive due to the Payments.

####  

#### (ii)           Subject to the provisions ofSection 5c, all determinations required to be made under thisSection 5c, including whether and when a Gross-Up Payment is required andthe amount of such Gross-Up Payment and the assumptions to be utilized inarriving at such determination, shall be made by the Accounting Firm, whichshall provide detailed supporting calculations both to the Company and theExecutive within fifteen (15) business days of the receipt of notice from theExecutive that there has been a Payment, or such earlier time as is requestedby the Company.  If the Accounting Firmdetermines that no Excise Tax is payable by the Executive, it shall, at the

####  

#### 14

#### 

####  

#### same time as it makes such determination, furnish the Executive with anopinion that he has substantial authority not to report any Excise Tax on hisfederal income tax return.  All fees andexpenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuantto 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 Firmshall be binding upon Cinergy and the Executive.  As a result of the uncertainty in the application ofSection 4999 of the Code at the time of the initial determination by theAccounting Firm hereunder, it is possible that Gross-Up Payments which will nothave been made by Cinergy should have been made (“Underpayment”), consistentwith the calculations required to be made hereunder.  In the event of any Underpayment, the Accounting Firm shall determinethe amount of the Underpayment that has occurred and any such Underpaymentshall be promptly paid by Cinergy to or for the benefit of the Executive, andCinergy shall indemnify and hold harmless the Executive for any suchUnderpayment, on an after-tax basis, including interest and penalties withrespect thereto.  In the event that theExcise Tax is subsequently determined to be less than the amount taken intoaccount hereunder at the time of termination of the Executive’s employment, theExecutive shall repay to the Company, at the time that the amount of suchreduction in Excise Tax is finally determined, the portion of the Gross-UpPayment attributable to such reduction (plus that portion of the Gross-UpPayment attributable to the Excise Tax and federal, state and local income andemployment tax imposed on the Gross-Up Payment being repaid by the Executive tothe extent that such repayment results in a reduction in Excise Tax and/or afederal, state or local income or employment tax deduction) plus interest onthe amount of such repayment at the rate provided in CodeSection 1274(b)(2)(B).

####  

#### (iii)          The value of any non-cash benefits or anydeferred payment or benefit paid or payable to the Executive will be determinedin accordance with the principles of Code Sections 280G(d)(3) and (4).  For purposes of determining the amount ofthe Gross-Up Payment, the Executive will be deemed to pay federal income taxesat the highest marginal rate of federal income taxation in the calendar year inwhich the Gross-Up Payment is to be made and applicable state and local incometaxes at the highest marginal rate of taxation in the state and locality of theExecutive’s residence on the Date of Termination, net of the maximum reductionin federal income taxes that would be obtained from deduction of those stateand local taxes.

####  

#### (iv)          Notwithstanding anything contained in thisAgreement to the contrary, in the event that, according to the AccountingFirm’s determination, an Excise Tax will be imposed on any Payment or Payments,Cinergy will pay to the applicable government taxing authorities as Excise Taxwithholding, the amount of the Excise Tax that Cinergy has actually withheldfrom the Payment or Payments in accordance with law.

####  

### d.             Value Creation Plan and Stock Options.  Upon the Executive’s termination of employmentfor any reason, the Executive’s entitlement to restricted shares andperformance shares under the Value Creation Plan and any stock options grantedunder the Cinergy Corp. Stock Option Plan, the LTIP or any other stock optionplan will be determined under the terms of the appropriate plan and anyapplicable administrative guidelines and written agreements, provided, however,that following the occurrence of a Change in Control the terms of any suchplan, administrative guideline or written agreement shall not be amended in amanner that would adversely affect the

###  

### 15

### 

###  

### Executive with respect to awards granted to the Executive prior to theChange in Control.

###  

### e.             Benefit Plans in General.  Upon the Executive’s termination ofemployment for any reason, the Executive’s entitlements, if any, under allbenefit plans of Cinergy, including but not limited to the DeferredCompensation Plan, 401(k) Excess Plan, Cinergy Corp. Supplemental ExecutiveRetirement Plan, Cinergy Corp. Excess Profit Sharing Plan and any vacationpolicy, shall be determined under the terms of such plans, policies and anyapplicable administrative guidelines and written agreements, provided, however,that following the occurrence of a Change in Control the terms of such plansand policies and any applicable administrative guidelines and writtenagreements shall not be amended in a manner that would adversely affect theExecutive with respect to benefits earned by the Executive prior to the Changein Control.

###  

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

###  

## **6.****             Non-Exclusivity ofRights.**  Nothing in thisAgreement will prevent or limit the Executive’s continuing or futureparticipation in any benefit, plan, program, policy, or practice provided byCinergy and for which the Executive may qualify, except with respect to anybenefit to which the Executive has waived his rights in writing or any plan,program, policy, or practice that expressly excludes the Executive fromparticipation.  In addition, nothing inthis Agreement will limit or otherwise affect the rights the Executive may haveunder any other contract or agreement with Cinergy entered into after theEffective Date.  Amounts that are vestedbenefits or that the Executive is otherwise entitled to receive under anybenefit, plan, program, policy, or practice of, or any contract or agreemententered into after the Effective Date with Cinergy, at or subsequent to theDate of Termination, will be payable in accordance with that benefit, plan,program, policy or practice, or that contract or agreement, except asexplicitly modified by this Agreement. Notwithstanding the above, in the event that the Executive receivesSeverance Benefits under Section 5a(ii) or 5a(iii), (a) the Executiveshall not be entitled to any benefits under any severance plan of Cinergy,including but not limited to the Severance Opportunity Plan for Non-UnionEmployees of Cinergy Corp. and (b) if the Executive receives such SeveranceBenefits as a result of his termination for Good Reason, as that term isdefined in Section 4d(iv), Cinergy’s obligations under Sections 5a(ii) and5a(iii) shall be reduced by the amount of any benefits payable to the Executiveunder any short-term or long-term disability plan of Cinergy, the amount of whichshall be determined by Cinergy in good faith.

##  

## **7.****             FullSettlement:  Mitigation.**  Except as otherwise provided herein,Cinergy’s obligation to make the payments provided for in this Agreement andotherwise to perform its obligations under this Agreement will not be affectedby any set-off, counterclaim, recoupment, defense, or other claim, right, oraction that Cinergy may have against the Executive or others.  In no event will the Executive be obligatedto seek other employment or take any other action by way of mitigation of theamounts (including amounts for damages for breach) payable to the Executiveunder any of the provisions of this Agreement and, except as provided inSections 3e, 5a(ii)(2)

##  

## 16

## 

##  

## and 5a(iii)(4), those amounts will not be reduced simply because theExecutive obtains other employment.  Ifthe Executive finally prevails on the substantial claims brought with respectto any dispute between Cinergy and the Executive as to the interpretation,terms, validity, or enforceability of (including any dispute about the amountof any payment pursuant to) this Agreement, Cinergy agrees to pay allreasonable legal fees and expenses that the Executive may reasonably incur as aresult of that dispute.

##  

## **8.****             Arbitration.**  The parties agree that any dispute, claim,or controversy based on common law, equity, or any federal, state, or localstatute, 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 itstermination and any resulting termination of employment, including whether sucha dispute is arbitrable, shall be settled by arbitration.  This agreement to arbitrate includes but isnot limited to all claims for any form of illegal discrimination, improper orunfair treatment or dismissal, and all tort claims.  The Executive will still have a right to file a discriminationcharge with a federal or state agency, but the final resolution of anydiscrimination claim will be submitted to arbitration instead of a court orjury.  The arbitration proceeding willbe conducted under the employment dispute resolution arbitration rules of theAmerican Arbitration Association in effect at the time a demand for arbitrationunder the rules is made, and such proceeding will be adjudicated in the stateof Ohio in accordance with the laws of the state of Ohio.  The decision of the arbitrator(s), includingdetermination of the amount of any damages suffered, will be exclusive, final,and binding on all parties, their heirs, executors, administrators, successorsand assigns.  Each party will bear itsown expenses in the arbitration for arbitrators’ fees and attorneys’ fees, forits witnesses, and for other expenses of presenting its case.  Other arbitration costs, includingadministrative fees and fees for records or transcripts, will be borne equallyby the parties.  Notwithstandinganything in this Section to the contrary, if the Executive prevails withrespect to any dispute submitted to arbitration under this Section, Cinergywill reimburse or pay all legal fees and expenses that the Executive mayreasonably incur as a result of the dispute as required by Section 7.

##  

## **9.****             ConfidentialInformation.**  The Executive willhold in a fiduciary capacity for the benefit of Cinergy, as well as all ofCinergy’s successors and assigns, all secret, confidential information,knowledge, or data relating to Cinergy, and its affiliated businesses, that theExecutive obtains during the Executive’s employment by Cinergy or any of itsaffiliated companies, and that has not been or subsequently becomes publicknowledge (other than by acts by the Executive or representatives of the Executivein violation of this Agreement).  Duringthe Employment Period and thereafter, the Executive will not, without Cinergy’sprior written consent or as may otherwise be required by law or legal process,communicate or divulge any such information, knowledge, or data to anyone otherthan Cinergy and those designated by it. The Executive understands that during the Employment Period, Cinergy maybe required from time to time to make public disclosure of the terms or existenceof the Executive’s employment relationship to comply with various laws andlegal requirements.  In addition to allother remedies available to Cinergy in law and equity, this Agreement issubject to termination by Cinergy for Cause under Section 4b in the eventthe Executive violates any provision of this Section.

##  

## 17

## 

##  

## **10.****          Successors.**

 

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

###  

### b.             This Agreement will inure to the benefitof 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 assumeexpressly and agree to perform this Agreement in the same manner and to thesame extent that Cinergy would be required to perform it if no succession hadtaken place.  Cinergy’s failure toobtain such an assumption and agreement prior to the effective date of asuccession will be a breach of this Agreement and will entitle the Executive tocompensation from Cinergy in the same amount and on the same terms as if theExecutive were to terminate his employment for Good Reason upon a Change inControl, except that, for purposes of implementing the foregoing, the date onwhich any such succession becomes effective will be deemed the Date ofTermination.

##  

## 18

## 

##  

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

##  

### a.             Accounting Firm.  “Accounting Firm” means Cinergy’sindependent auditors.

###  

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

###  

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

###  

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

###  

### e.             Annual Base Salary.  “Annual Base Salary” means, except whereotherwise specified herein, the annual base salary payable to the Executivepursuant to Section 3a.

###  

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

###  

### g.             Annual Incentive Plan.  “Annual Incentive Plan” means the CinergyCorp. Annual Incentive Plan or any similar plan or successor to the AnnualIncentive Plan.

###  

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

###  

### i.              COBRA.  “COBRA” means the Consolidated Omnibus Budget Reconciliation Actof 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 haveoccurred if any of the following events occur, after the Effective Date:

###  

### (i)            Any Person is or becomes the beneficialowner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, asamended (“1934 Act”)), directly or indirectly, of securities of the Company(not including in the securities beneficially owned by such Person anysecurities acquired directly from the Company or its affiliates) representingmore than twenty percent (20%) of the combined voting power of the Company’sthen outstanding securities, excluding any Person who becomes such a beneficialowner in connection with a transaction described in Clause (1) of Paragraph(ii) below; or

####  

### (ii)           There is consummated a merger orconsolidation of the Company or any direct or indirect subsidiary of theCompany with any other corporation, partnership or other entity, other than (1)a merger or consolidation that would result in the voting securities of theCompany outstanding immediately prior to that merger or consolidationcontinuing to represent (either by remaining outstanding or by being convertedinto voting securities of the surviving entity or its parent) at least sixtypercent (60%) of the combined voting power of the securities of the Company orthe surviving entity or its parent outstanding immediately after the merger orconsolidation, or (2) a

####  

#### 19

#### 

####  

### merger or consolidation effected to implement a recapitalization of theCompany (or similar transaction) in which no Person is or becomes thebeneficial owner, directly or indirectly, of securities of the Company (notincluding in the securities beneficially owned by such a Person any securitiesacquired directly from the Company or its affiliates other than in connectionwith the acquisition by the Company or its affiliates of a business)representing twenty percent (20%) or more of the combined voting power of theCompany’s then outstanding securities; or

####  

### (iii)          During any period of two (2) consecutiveyears, individuals who at the beginning of that period constitute the Board ofDirectors and any new director (other than a director whose initial assumptionof office is in connection with an actual or threatened election contest,including but not limited to a consent solicitation, relating to the electionof directors of the Company) whose appointment or election by the Company’sstockholders 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 thebeginning of that period or whose appointment, election, or nomination forelection was previously so approved or recommended cease for any reason toconstitute a majority of the Board of Directors; or

####  

### (iv)          The stockholders of the Company approve aplan of complete liquidation or dissolution of the Company or there isconsummated a sale or disposition by the Company of all or substantially all ofthe Company’s assets, other than a sale or disposition by the Company of all orsubstantially 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 ownedby stockholders of the Company in substantially the same proportions as theirownership of the Company immediately prior to the sale.

####  

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

###  

### m.            Chief Executive Officer.  “Chief Executive Officer” means theindividual who, at any relevant time, is then serving as the chief executiveofficer of the Company.

###  

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

###  

### o.             Code.  “Code” means the Internal Revenue Code of1986, as amended, and interpretive rules and regulations.

###  

### p.             Company.  “Company” means Cinergy Corp.

###  

### q.             Dateof Termination.  “Date ofTermination” means:

###  

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

####  

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

####  

#### 20

#### 

####  

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

####  

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

####  

### r.              Deferred Compensation Plan.  “Deferred Compensation Plan” means theCinergy Corp. Non-Qualified Deferred Incentive Compensation Plan or any similarplan or successor to that plan.

###  

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

###  

### t.              Employment Period.  “Employment Period” has the meaning setforth in Section 1b.

###  

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

###  

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

###  

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

###  

### x.             Executive Supplemental Life Program.  “Executive Supplemental Life Program” meansthe Cinergy Corp. Executive Supplemental Life Insurance Program or any similarprogram 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 inSection 4d.

###  

### aa.           Gross-Up Payment.  “Gross-Up Payment” has the meaning set forthin Section 5c.

###  

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

###  

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

###  

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

###  

### ee.           Maximum Annual Bonus.  “Maximum Annual Bonus” has the meaning setforth in Section 3b.

###  

### 21

### 

###  

### 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 setforth in Section 4f.

###  

### hh.          Payment or Payments.  “Payment” or “Payments” has the meaning setforth 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 the1934 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 oraffiliates;

####  

### (ii)           A trustee or other fiduciary holdingsecurities under an employee benefit plan of Cinergy or its subsidiaries oraffiliates;

####  

### (iii)          An underwriter temporarily holding securitiespursuant 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 astheir ownership of stock of the Company.

####  

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

###  

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

####  

### (ii)           The Company or any Person publicly announcesan intention to take or to consider taking actions which, if consummated, wouldconstitute a Change in Control; provided that a Potential Change in Controlshall cease to exist when the Company or such Person publicly announces that itno longer has such an intention; or

####  

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

####  

### (iv)          The Board of Directors adopts a resolution tothe effect that, for purposes hereof, a Potential Change in Control hasoccurred.

####  

Notwithstanding anythingherein to the contrary, a Potential Change in Control shall cease to exist notlater than the date that (i) the Board of Directors

 

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determines that thePotential Change in Control no longer exists, or (ii) a Change in Controloccurs.

 

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

###  

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

###  

### nn.          Severance Benefits.  “Severance Benefits” means the payments andbenefits 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 asimilar arrangement will not be recognized unless otherwise required by federallaw.

###  

### pp.          Stock Related Documents.  “Stock Related Documents” means the LTIP,the Cinergy Corp. Stock Option Plan, and the Value Creation Plan and anyapplicable administrative guidelines and written agreements relating to thoseplans.

###  

### qq.          Target Annual Bonus.  “Target Annual Bonus” has the meaning setforth in Section 3b.

###  

### rr.            TargetLTIP Bonus.  “Target LTIP Bonus” hasthe meaning set forth in Section 3b.

###  

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

###  

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

###  

## **12.****          Miscellaneous.**

##  

### a.             This Agreement will be governed by andconstrued in accordance with the laws of the State of Ohio, without referenceto principles of conflict of laws.  Thecaptions of this Agreement are not part of its provisions and will have noforce or effect.  This Agreement may notbe amended, modified, repealed, waived, extended, or discharged except by anagreement in writing signed by the party against whom enforcement of theamendment, modification, repeal, waiver, extension, or discharge issought.  Only the Chief ExecutiveOfficer or his designee will have authority on behalf of Cinergy to agree toamend, modify, repeal, waive, extend, or discharge any provision of thisAgreement.

###  

### b.             All notices and other communications underthis Agreement will be in writing and will be given by hand delivery to theother party or by Federal Express or other comparable national or internationalovernight delivery service, addressed in the name of such party at thefollowing

###  

### 23

### 

###  

### address, whichever is applicable:

###  

### If to the Executive:

### Cinergy Corp.

### 221 East Fourth Street

### Cincinnati, Ohio 45201-0960

###  

### 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 inwriting in accordance with this Agreement. All notices and communications will be effective when actually receivedby the addressee.

###  

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

###  

### d.             Cinergy may withhold from any amountspayable under this Agreement such federal, state, or local taxes as arerequired to be withheld pursuant to any applicable law or regulation.

###  

### e.             The Executive’s or Cinergy’s failure toinsist upon strict compliance with any provision of this Agreement or thefailure to assert any right the Executive or Cinergy may have under thisAgreement, including without limitation the right of the Executive to terminateemployment for Good Reason pursuant to Section 4d or the right of Cinergyto 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 otherprovision or right of this Agreement.

###  

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

###  

### g.             This instrument contains the entireagreement of the Executive and Cinergy with respect to the subject matter ofthis Agreement; and subject to any agreements evidencing stock option orrestricted stock grants described in Section 3b and the Stock RelatedDocuments, all promises, representations, understandings, arrangements, andprior agreements are merged into this Agreement and accordingly superseded.

###  

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

###  

### i.              Cinergy and the Executive agree thatCinergy Services, Inc. will be authorized to act for Cinergy with respect toall aspects pertaining to the administration and interpretation of thisAgreement.

###  

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IN WITNESS WHEREOF, the Executiveand the Company have caused this Agreement to be executed as of the EffectiveDate.

 
|   |      | CINERGY SERVICES, INC. |
|--------|-----------|------------------------|
|   |      |                   |   |
|   |      |                   |   |
|   |      | By:                    |   | /s/ James E. Rogers |
|   |      |                   |   |
|   |      |                   | James E. Rogers |
|   |      |                   | Chairman and  Chief Executive Officer |
|   |      |                   |   |
|   |      |                   |   |
|   | EXECUTIVE |
|   |      |                   |   |
|   |      | /s/ Marc E. Manly      |
|   |      |                   |   |
|   |      | Marc E. Manly          |
|        |           |                        |  |  |

 

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**EXHIBIT A**

 

*****

 

**WAIVER AND RELEASE AGREEMENT**

 

**THIS WAIVER AND RELEASE AGREEMENT** (this “Waiver and Release”) is entered into by and betweenMarc E. Manly (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 ofthe Employment Agreement;

 

**WHEREAS**,the Executive is required to sign this Waiver and Release in order to receivethe payment of certain compensation under the Employment Agreement followingtermination of employment; and

 

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

 

**NOW, THEREFORE**, in consideration of the promises and agreements containedherein and other good and valuable consideration, the sufficiency and receiptof which are hereby acknowledged, and intending to be legally bound, theParties agree as follows:

 

1.             This Waiver andRelease is effective on the date hereof and will continue in effect as providedherein.

 

2.             In consideration ofthe payments to be made and the benefits to be received by the Executivepursuant to Section 5 of the Employment Agreement (the “SeveranceBenefits”), which the Executive acknowledges are in addition to payment andbenefits to which the Executive would be entitled to but for the EmploymentAgreement, the Executive, on behalf of himself, his heirs, representatives, agentsand assigns hereby COVENANTS NOT TO SUE OR OTHERWISE VOLUNTARILY PARTICIPATE INANY LAWSUIT AGAINST, FULLY RELEASES, INDEMNIFIES, HOLDS HARMLESS, and OTHERWISEFOREVER 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 andassigns thereof (the persons listed in clauses (i) through (iv) hereof shall bereferred 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 effectivedate of this Waiver and Release. Executive acknowledges and understands that he is not hereby preventedfrom filing a charge of discrimination with the Equal Employment OpportunityCommission or any state-equivalent agency or otherwise participate in anyproceedings before such Commissions. Executive also acknowledges and understands that in the event he doesfile such a charge, he shall be entitled to no remuneration,

 

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damages, back pay, front pay, or compensationwhatsoever from the Company as a result of such charge.

 

3.             Without limiting thegenerality of the foregoing release, it shall include:  (i) all claims or potential claims arisingunder any federal, state or local laws relating to the Parties’ employmentrelationship, including any claims Executive may have under the Civil RightsActs of 1866 and 1964, as amended, 42 U.S.C. §§ 1981 and 2000(e) etseq.; the Civil Rights Act of 1991; the Age Discrimination in EmploymentAct, as amended, 29 U.S.C. §§ 621 etseq.; the Americanswith Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12,101 etseq.;the Fair Labor Standards Act, 29 U.S.C. §§ 201 etseq.; theWorker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101, etseq.; the Ohio Civil Rights Act, Chapter 4112 etseq.; andany other federal, state or local law governing the Parties’ employmentrelationship; (ii) any claims on account of, arising out of or in any wayconnected with Executive’s employment with the Company or leaving of thatemployment; (iii) any claims alleged or which could have been alleged in anycharge or complaint against the Company; (iv) any claims relating to theconduct of any employee, officer, director, agent or other representative ofthe Company; (v) any claims of discrimination or harassment on any basis; (vi)any claims arising from any legal restrictions on an employer’s right toseparate its employees; (vii) any claims for personal injury, compensatory orpunitive damages or other forms of relief; and (viii) all other causes ofaction sounding in contract, tort or other common law basis, including: (a) thebreach of any alleged oral or written contract; (b) negligent or intentionalmisrepresentations; (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 Partiesacknowledge that it is their mutual and specific intent that the above waiverfully complies with the requirements of the Older Workers Benefit ProtectionAct (29 U.S.C. § 626) and any similar law governing release ofclaims.  Accordingly, Executive herebyacknowledges that:

 

(a)           He has carefully readand fully understands all of the provisions of this Waiver and Release and thathe has entered into this Waiver and Release knowingly and voluntarily afterextensive negotiations and having consulted with his counsel;

 

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

 

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

 

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

 

5.             The Parties agreethat this Waiver and Release shall not become effective and enforceable untilthe 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 Releasefor

 

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any reason by providing written notice ofsuch intent to Cinergy within seven (7) days after he has signed this Waiverand Release, thereby forfeiting Executive’s right to receive any SeveranceBenefits provided hereunder and rendering this Waiver and Release null and voidin its entirety.

 

6.             The Executive herebyaffirms and acknowledges his continued obligations to comply with thepost-termination covenants contained in his Employment Agreement, including butnot limited to, the Confidential Information provisions of Section 9 ofthe Employment Agreement.  Executiveacknowledges that the restrictions contained therein are valid and reasonablein every respect, are necessary to protect the Company’s legitimate businessinterests and hereby affirmatively waives any claim or defense to the contrary.

 

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

 

8.             In the event thatExecutive breaches or threatens to breach any provision of this Waiver andRelease, he agrees that Cinergy shall be entitled to seek any and all equitableand legal relief provided by law, specifically including immediate andpermanent injunctive relief.  Executivehereby waives any claim that Cinergy has an adequate remedy at law.  In addition, and to the extent notprohibited by law, Executive agrees that Cinergy shall be entitled to an awardof all costs and attorneys’ fees incurred by Cinergy in any successful effortto enforce the terms of this Waiver and Release.  Executive agrees that the foregoing relief shall not be construedto limit or otherwise restrict Cinergy’s ability to pursue any other remedyprovided by law, including the recovery of any actual, compensatory or punitivedamages.  Moreover, if Executive pursuesany claims against the Company subject to the foregoing Waiver and Release,Executive agrees to immediately reimburse the Company for the value of allbenefits received under this Waiver and Release to the fullest extent permittedby law.

 

9.             Cinergy herebyreleases the Executive, his heirs, representatives, agents and assigns from anyand all known claims, causes of action, grievances, damages and demands of anykind or nature based on acts or omissions committed by the Executive during andin the course of his employment with Cinergy provided such act or omission wascommitted in good faith and occurred within the scope of his normal duties andresponsibilities.

 

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10.           The Parties acknowledgethat this Waiver and Release is entered into solely for the purpose of endingtheir employment relationship on an amicable basis and shall not be construedas an admission of liability or wrongdoing by either Party and that bothCinergy and Executive have expressly denied any such liability or wrongdoing.

 

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

 

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

 

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

 

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

 

15.           This Waiver and Releaserepresents the entire agreement between the Parties concerning the subjectmatter hereof, shall supercede any and all prior agreements which may otherwiseexist between them concerning the subject matter hereof (specificallyexcluding, however, the post-termination obligations contained in any existingEmployment Agreement or other legally-binding document), and shall not bealtered, amended, modified or otherwise changed except by a writing executed byboth Parties.

 

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

 

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**PLEASE READ CAREFULLY.  WITH RESPECT TO THE EXECUTIVE, THIS**

 

**WAIVER AND RELEASE INCLUDES A COMPLETERELEASE OF ALL KNOWN**

 

**AND UNKNOWN CLAIMS.**

 

 

IN WITNESS WHEREOF, the Partieshave themselves signed, or caused a duly authorized agent thereof to sign, thisWaiver and Release on their behalf and thereby acknowledge their intent to bebound by its terms and conditions.

 
| EXECUTIVE              | CINERGY SERVICES, INC. |
|------------------------|------------------------|
|                   |                   |
|                   |                   |
| Signed:                |                   |   | By: |   |
|                   |                   |   |
| Printed: Marc E. Manly | Title:                 |   |
|                   |                   |   |
| Dated:                 |                   |   | Dated: |   |
|                        |                        |  |  |  |  |  |  |  |  |

 

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