**Exhibit 10.c**

** **

**EMPLOYMENT AGREEMENT**

 

ThisEMPLOYMENT AGREEMENT is made and entered into as of the 11th day ofOctober, 2002 (the “Effective Date”), by and between Cinergy and William J.Grealis      (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 of the Company, andCinergy desires to secure the continued employment of the Executive inaccordance 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**

 

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

 

## **1.****                                      Employmentand Term.**

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

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

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## **2.****                                      Dutiesand Powers of Executive.**

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### a.                                       Position.  The Executive will serve Cinergy asExecutive Vice President 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 

 

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

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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, payablein pro rata installments not less often than semi-monthly, will be at theannual rate of not less than $550,008. Any increase in the Annual Base Salary will not serve to limit or reduceany other obligation of Cinergy under this Agreement.  The Annual Base Salary will not be reduced except foracross-the-board salary reductions similarly affecting all Cinergy managementpersonnel.  If Annual Base Salary isincreased or reduced during the Employment Period, then such adjusted salarywill thereafter be the Annual Base Salary for all purposes under thisAgreement.

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

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#### (i)                                     Duringthe Employment Period, the Executive will be eligible, and Cinergy will takeall necessary action to cause the Executive to become eligible, to participatein short-term and long-term incentive, stock option, restricted stock,performance unit, savings, retirement and welfare plans, practices, policiesand programs applicable generally to other senior executives of Cinergy who areconsidered Tier II executives for compensation purposes, except with respect toany plan, practice, policy or program to which the Executive has waived hisrights in writing.

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#### (ii)                                  SupplementalRetirement Benefit.

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

 

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

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##### (2)                                  DeathBenefit.  If the Executive diesprior 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 asthose applicable to the Spouse under the Pension Plan, and the amount of suchbenefit shall be calculated after taking into account the actuarial factorscontained in the Pension Plan, provided, however, that suchbenefit shall not be actuarially reduced for early commencement.

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##### (3)                                  SpecialPayment Election Effective Upon a Change in Control.  Notwithstanding the foregoing, the Executivemay make a special payment election with respect to his supplemental retirementbenefit (if any) in accordance with the following provisions:

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###### (A)                              TheExecutive may elect, on a form provided by Cinergy, to receive a single lumpsum cash payment in an amount equal to the Actuarial Equivalent (as definedbelow) of his supplemental retirement benefit (or the Actuarial Equivalent ofthe remaining payments to be made in connection with his supplementalretirement benefit in the event that payment of his supplemental retirementbenefit has already commenced) payable no later than 30 days after the later ofthe occurrence of a Change in Control or the date of his termination ofemployment.

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###### (B)                                Suchspecial payment election shall become operative only upon the occurrence of aChange in Control and only if the Executive’s termination of employment occurseither (1) prior to the occurrence of a Change in Control or (2) during the24-month period commencing upon the occurrence of a Change in Control.  Once operative, such special payment 

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###### election shalloverride any other payment election made by the Executive with respect to hissupplemental retirement benefit.

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###### (C)                                Inorder to be effective, a special payment election (or withdrawal of thatelection) must be made either prior to the occurrence of a Potential Change inControl or, with the consent of Cinergy, during the 30-day period commencingupon the occurrence of a Potential Change in Control.  In the event that a Potential Change in Control occurs andsubsequently ceases to exist, other than as a result of a Change in Control,such Potential Change in Control shall be disregarded for purposes of thisSection.

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

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(I)                                    The form of paymentfor each of the Executive’s retirement benefits under the Executive RetirementPlans and the Executive’s supplemental retirement benefit shall be a singlelife annuity;

 

(II)                                The commencement datefor each of the Executive’s retirement benefits under the Executive RetirementPlans and the Executive’s supplemental retirement benefit shall be the firstday of the calendar month coincident with or next following his termination ofemployment;

 

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

 

(IV)                            The amount of theExecutive’s supplemental retirement benefit shall not be actuarially reducedfor early commencement.

 

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

 

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###### another formof payment, his lump sum cash payment shall be equal to the ActuarialEquivalent (as that term is used in the Pension Plan with respect to lump sumpayments) of the remaining payments to be made in connection with hissupplemental retirement benefit.

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#### (iii)                               Uponhis retirement, the Executive will be eligible for comprehensive medical anddental benefits which are not materially different from the benefits providedto retirees under the Cinergy Corp. Welfare Benefits Program or any similarprogram or successor to that program. For purposes of determining the amount of the monthly premiums due fromthe Executive, the Executive will receive from Cinergy the maximum subsidyavailable as of the date of his retirement to an active Cinergy employee withthe same medical benefits classification/eligibility as the Executive’s medicalbenefits classification/eligibility on the date of his retirement.

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

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

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#### (vi)                              Forpurposes of Sections 3b(iv) and 3b(v), the Executive’s Annual Base Salary forany calendar year shall be increased by the amount of any Nonelective EmployerContributions made on behalf of the Executive during such calendar year underthe 401(k) Excess Plan.

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### c.                                       FringeBenefits and Perquisites.  Duringthe Employment Period, the Executive will be entitled to the followingadditional fringe benefits in accordance with the terms and conditions ofCinergy’s policies and practices for such fringe benefits:

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

 

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#### (ii)                                  Cinergywill pay the initiation fee and the annual dues, assessments, and othermembership charges of the Executive for membership in a country club selectedby the Executive.

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#### (iii)                               Cinergywill provide paid vacation for four (4) weeks per year (or such longer periodfor which Executive is otherwise eligible under Cinergy’s policy).

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#### (iv)                              Cinergywill furnish to the Executive annual financial planning and tax preparationservices, provided, however, that the cost to Cinergy of suchservices shall not exceed $15,000 during any thirty-six (36) consecutive monthperiod.  Notwithstanding the precedingsentence, in the event any  payment tothe Executive pursuant to this Section 3c(iv) 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 the benefit occurs at the highest marginal tax rate applicable),including the taxes imposed on the additional payment, the Executive retains anamount equal to the benefit provided pursuant to this Section 3c(iv).

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#### (v)                                 Cinergywill provide other fringe benefits in accordance with Cinergy plans, practices,programs, and policies in effect from time to time, commensurate with hisposition and at least comparable to those received by other Cinergy Tier IIexecutives.

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### d.                                      Expenses.  Cinergy agrees to reimburse the Executivefor all expenses, including those for travel and entertainment, properlyincurred by him in the performance of his duties under this Agreement inaccordance with the policies established from time to time by the Board ofDirectors.

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

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### f.                                         StockOptions and Stock Appreciation Rights. Notwithstanding Section 5d, upon the occurrence of a Change in Control,any stock options or stock appreciation rights then held by the Executivepursuant to the LTIP or Cinergy Corp. Stock Option Plan shall, to the extentnot otherwise provided in the applicable Stock 

 

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### RelatedDocuments, become immediately exercisable. If the Executive terminates employment for any reason during thetwenty-four (24) month period commencing upon the occurrence of a Change inControl, notwithstanding Section 5d, any stock options or stock appreciationrights then held by the Executive pursuant to the LTIP or Cinergy Corp. StockOption Plan shall, to the extent not otherwise provided in the applicable StockRelated Documents, remain exercisable in accordance with their terms but in noevent for a period less than the lesser of (i) three months following suchtermination of employment or (ii) the remaining term of such stock option orstock appreciation right (which remaining term shall be determined withoutregard to such termination of employment).

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## **4.****                                      Terminationof Employment.**

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

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### b.                                      ByCinergy for Cause.  Cinergy mayterminate the Executive’s employment during the Employment Period forCause.  For purposes of this EmploymentAgreement, “Cause” means the following:

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

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#### (ii)                                  Thebreach by the Executive of the confidentiality provisions set forth in Section9.

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#### (iii)                               Theconviction of the Executive for the commission of a felony, including the entryof a guilty or nolo contendere plea, or any willful or grossly negligent actionor inaction by the Executive that has a materially adverse effect onCinergy.  For purposes of thisdefinition of Cause, no act, or failure to act, on the Executive’s part will bedeemed “willful” unless it is done, or omitted to be done, by the Executive inbad faith and without reasonable belief that the Executive’s act, or failure toact, was in the best interest of Cinergy.

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

 

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#### duly adoptedby the affirmative vote of not less than a majority of the Board then in officeat a meeting of the Board called and held for such purpose (after reasonablenotice to the Executive and an opportunity for the Executive, together with hiscounsel, to be heard by the Board), finding that, in the good faith opinion ofthe Board, the Executive had committed an act set forth above in this Section4b and specifying the particulars thereof in detail.

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

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

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

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

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#### (iii)                               Anybreach by Cinergy of any other material provision of this Agreement (includingbut not limited to the place of performance as specified in Section 2b).

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#### (iv)                              TheExecutive’s disability due to physical or mental illness or injury thatprecludes the Executive from performing any job for which he is qualified andable to perform based upon his education, training or experience.

 

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#### (v)                                 Afailure by the Company to require any successor entity to the Companyspecifically to assume in writing all of the Company’s obligations to theExecutive under this Agreement.

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                For purposes of determining whether GoodReason exists with respect to a Qualifying Termination occurring on or within24 months following a Change in Control, any claim by the Executive that GoodReason exists shall be presumed to be correct unless the Company establishes tothe Board by clear and convincing evidence that Good Reason does not exist.

 

### e.                                       Bythe Executive Without Good Reason. The Executive may terminate his employment without Good Reason uponprior written notice to the Company.

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### f.                                         Noticeof Termination.  Any termination ofthe Executive’s employment by Cinergy or by the Executive during the EmploymentPeriod (other than a termination due to the Executive’s death) will becommunicated by a written Notice of Termination to the other party to thisAgreement in accordance with Section 12b. For purposes of this Agreement, a “Notice of Termination” means awritten notice that specifies the particular provision of this Agreement reliedupon and that sets forth in reasonable detail the facts and circumstancesclaimed to provide a basis for terminating the Executive’s employment under thespecified provision.  The failure by theExecutive or Cinergy to set forth in the Notice of Termination any fact orcircumstance that contributes to a showing of Good Reason or Cause will notwaive any right of the Executive or Cinergy under this Agreement or precludethe Executive or Cinergy from asserting that fact or circumstance in enforcingrights under this Agreement.

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### g.                                      TheExecutive acknowledges and agrees that he shall not sell or otherwise disposeof any shares of Company stock acquired pursuant to the exercise of a stockoption, other than shares sold in order to pay an option exercise price or therelated tax withholding obligation, until 90 days after the Date ofTermination.  Notwithstanding theforegoing, Cinergy, in its sole discretion, may waive the restrictionscontained in the previous sentence.

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## **5.****                                      Obligationsof Cinergy Upon Termination.**

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### a.                                       CertainTerminations.

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#### (i)                                     Ifa Qualifying Termination occurs during the Employment Period, Cinergy will payto the Executive a lump sum amount, in cash, equal to the sum of the followingAccrued Obligations:

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

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

 

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

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

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

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

 

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

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##### (2)                                  Subjectto Clauses (A), (B) and (C) below, Cinergy will provide, until the end of theEmployment Period, medical and dental benefits to the Executive and/or theExecutive’s dependents at least equal to those that would have been provided ifthe Executive’s employment had not been terminated (excluding benefits to whichthe Executive has waived his rights in writing).  The benefits described in the preceding sentence will be inaccordance with the medical and welfare benefit plans, practices, programs, orpolicies of Cinergy (the “M&W Plans”) as then currently in effect andapplicable generally to other Cinergy senior executives and their families.  In the event that any medical or dentalbenefits or payments provided pursuant to this Section 5a(ii)(2)(B) 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 taxes imposedon the additional payment, the Executive retains an amount equal to the medicalor dental benefits or payments provided pursuant to this Section 5a(ii)(2)(B).

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

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

 

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

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###### (C)                                Ifthe Executive becomes employed by another employer and is eligible to receivemedical or other welfare benefits under another employer-provided plan, anybenefits provided to the Executive under the M&W Plans will be secondary tothose provided under the other employer-provided plan during the Executive’sapplicable period of eligibility.

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##### (3)                                  Cinergywill pay the Executive a lump sum amount, in cash, equal to $15,000 in order tocover tax counseling services through an agency selected by the Executive.  In the eventany  payment to the Executive pursuantto this Section 5a(ii)(3) 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 his Date ofTermination occurs at the highest marginal tax rate applicable), including thetaxes imposed on the additional payment, the Executive retains an amount equalto the payment provided pursuant to this Section 5a(ii)(3).  Such payment will be transferred to the Executivewithin thirty (30) days of the expiration of the revocation period contained inthe Waiver and Release.

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#### (iii)                               Inthe event of a Qualifying Termination during the twenty-four (24) month periodbeginning upon the occurrence of a Change in Control, Cinergy will pay the AccruedObligations listed in Sections 5a(i)(1) and (2), Cinergy will pay the AccruedObligations listed in Section 5a(i)(3) (but only if such Qualifying Terminationoccurs after the calendar year in which occurs such Change in Control) andCinergy will have the following additional obligations described in thisSection 5a(iii); provided, however, that each of the benefitsdescribed below in this Section 5a(iii) 

 

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#### 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)                                  Cinergywill pay to the Executive a lump sum severance payment, in cash, equal to three(3) times the higher of (x) the sum of the Executive’s current Annual BaseSalary and Target Annual Bonus and (y) the sum of the Executive’s Annual BaseSalary in effect immediately prior to the Change in Control and the Change inControl Bonus.  For purposes of the precedingsentence, the Executive’s Annual Base Salary on any given date shall includethe amount of any Nonelective Employer Contributions made on behalf of theExecutive under the 401(k) Excess Plan during the fiscal year in which suchdate occurs.  For purposes of thisAgreement, the Change in Control Bonus shall mean the higher of (A) the annualbonus earned 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 this Section 5a(iii)(1)(B),such Change in Control Bonus shall not be less than the Target Annual Bonus,nor greater than the Maximum Annual Bonus. This lump sum will be paid within thirty (30) days of the expiration ofthe revocation period contained in the Waiver and Release.  Nothing in this Section 5a(iii)(1) shallpreclude the Executive from receiving the amount, if any, to which he isentitled in accordance with the terms of the Annual Incentive Plan for thefiscal year that includes the Date of Termination.

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##### (2)                                  Cinergywill pay to the Executive the lump sum present value of any benefits under theExecutive Supplemental Life Program under the terms of the applicable plan orprogram as of the Date of Termination, calculated as if the Executive was fullyvested as of the Date of Termination. The lump sum present value, assuming commencementat age 50 or the Executive’s age as of the Date of Termination if later, willbe determined using the interest rate applicable to lump sum payments in theCinergy Corp. Non-Union Employees’ Pension Plan or any successor to that planfor the plan 

 

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

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

#####  

##### (4)                                  Fora thirty-six (36) month period after the Date of Termination, Cinergy willarrange to provide to the Executive and/or the Executive’s dependents life,disability, accident, and health insurance benefits substantially similar tothose that the Executive and/or the Executive’s dependents are receivingimmediately prior to the Notice of Termination at a substantially similar costto the Executive (without giving effect to any reduction in those benefitssubsequent to a Change in Control that constitutes Good Reason), except for anybenefits that were waived by the Executive in writing.  If Cinergy arranges to provide the Executiveand/or the Executive’s dependents with life, disability, accident, and healthinsurance benefits, those benefits will be reduced to the extent comparablebenefits are actually received by or made available to the Executive and/or theExecutive’s dependents during the thirty-six (36) month period following theExecutive’s Date of Termination.  TheExecutive must report to Cinergy any such benefits that he or his dependentsactually receives or that are made available to him or his dependents.  In lieu of the benefits described in thepreceding sentences, Cinergy, in its sole discretion, may elect to pay to theExecutive a lump sum cash payment equal to thirty-six (36) times the monthlypremiums (or in the case of a self funded plan, the cost of COBRA continuationcoverage) that would have been paid by Cinergy to provide those benefits to theExecutive and/or the Executive’s dependents. 

 

14

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##### Nothing inthis Section 5a(iii)(4) will affect the Executive’s right to elect COBRAcontinuation coverage in accordance with applicable law, and Cinergy willprovide the benefits or make the payment described in this Clause whether ornot the Executive elects COBRA continuation coverage, and whether or not theExecutive receives health coverage from another employer.  In the event that any benefits or paymentsprovided pursuant to this Section 5a(iii)(4) 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 additional payment,the Executive retains an amount equal to the benefits or payments providedpursuant to this Section 5a(iii)(4).

#####  

##### (5)                                  Inlieu of any and all other rights with respect to the automobile assigned byCinergy to the Executive, Cinergy will provide the Executive with a lump sumpayment in the amount of $50,000.  Inthe event any  payment to the Executivepursuant to this Section 5a(iii)(5) is subject to any  federal, state, or local income or employment taxes, Cinergyshall provide to the Executive an additional payment in an amount necessarysuch that after payment by the Executive of all such taxes (calculated afterassuming that the Executive pays such taxes for the year in which his Date ofTermination occurs at the highest marginal tax rate applicable), including thetaxes imposed on the additional payment, the Executive retains an amount equalto the payment provided pursuant to this Section 5a(iii)(5).  Such payment will be transferred to theExecutive within thirty (30) days of the expiration of the revocation periodcontained in the Waiver and Release.

#####  

##### (6)                                  Cinergywill pay the Executive a lump sum amount, in cash, equal to $15,000 in order tocover tax counseling services through an agency selected by the Executive.  In the event any  payment to the Executive pursuant to this Section 5a(iii)(6) issubject to any  federal, state, or localincome 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)(6).  Suchpayment will be transferred to the Executive within thirty (30) days 

 

15

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

#####  

##### (7)                                  Cinergywill provide annual dues and assessments of the Executive for membership in acountry club selected by the Executive until the end of the Employment Period.

#####  

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

#####  

                For purposes of this Section 5a(iii), theExecutive will be deemed to have incurred a Qualifying Termination upon aChange in Control if the Executive’s employment is terminated prior to a Changein Control, without Cause at the direction of a Person who has entered into anagreement with Cinergy, the consummation of which will constitute a Change inControl, or if the Executive terminates his employment for Good Reason prior toa Change in Control if the circumstances or event that constitutes Good Reasonoccurs at the direction of such a Person.

 

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

###  

### c.                                       CertainTax Consequences.

###  

#### (i)                                     Inthe event that any benefits paid or payable to the Executive or for his benefitpursuant to the terms of this Agreement or any other plan or arrangement inconnection with, or arising out of, his employment with Cinergy or a change inownership or effective control of Cinergy or of a substantial portion of itsassets (a “Payment” or “Payments”) would be subject to any Excise Tax, then theExecutive will be entitled to receive an additional payment (a “Gross-UpPayment”) in an amount such that after payment by the Executive of all taxes(including any interest, penalties, additional tax, or similar items imposedwith respect thereto and the Excise Tax), including any Excise Tax imposed uponthe Gross-Up Payment, the Executive retains an amount of the Gross-Up Paymentequal to the Excise Tax imposed upon or assessable against the Executive due tothe Payments.

 

16

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#### (ii)                                  Subjectto the provisions of Section 5c, all determinations required to be made underthis Section 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 thesame time as it makes such determination, furnish the Executive with an opinionthat he has substantial authority not to report any Excise Tax on his federalincome 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 of Section 4999of the Code at the time of the initial determination by the Accounting Firmhereunder, it is possible that Gross-Up Payments which will not have been madeby Cinergy should have been made (“Underpayment”), consistent with thecalculations 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 a federal,state or local income or employment tax deduction) plus interest on the amountof such repayment at the rate provided in Code Section 1274(b)(2)(B).

####  

#### (iii)                               Thevalue of any non-cash benefits or any deferred payment or benefit paid orpayable to the Executive will be determined in accordance with the principlesof Code Sections 280G(d)(3) and (4). For purposes of determining the amount of the Gross-Up Payment, theExecutive will be deemed to pay federal income taxes at the highest marginalrate of federal income taxation in the calendar year in which the Gross-UpPayment is to be made and applicable state and local income taxes at thehighest 

 

17

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#### marginal rateof taxation in the state and locality of the Executive’s residence on the Dateof Termination, net of the maximum reduction in federal income taxes that wouldbe obtained from deduction of those state and local taxes.

####  

#### (iv)                              Notwithstandinganything contained in this Agreement to the contrary, in the event that,according to the Accounting Firm’s determination, an Excise Tax will be imposedon any Payment or Payments, Cinergy will pay to the applicable governmenttaxing authorities as Excise Tax withholding, the amount of the Excise Tax thatCinergy has actually withheld from the Payment or Payments in accordance withlaw.

####  

### d.                                      ValueCreation Plan and Stock Options. Upon the Executive’s termination of employment for any reason, theExecutive’s entitlement to restricted shares and performance shares under theValue Creation Plan and any stock options granted under the Cinergy Corp. StockOption Plan, the LTIP or any other stock option plan will be determined underthe terms of the appropriate plan and any applicable administrative guidelinesand written agreements, provided, however, that following theoccurrence of a Change in Control the terms of any such plan, administrativeguideline or written agreement shall not be amended in a manner that wouldadversely affect the Executive with respect to awards granted to the Executiveprior to the Change in Control.

###  

### e.                                       BenefitPlans in General.  Upon theExecutive’s termination of employment for any reason, the Executive’sentitlements, if any, under all benefit plans of Cinergy, including but notlimited to the Deferred Compensation Plan, 401(k) Excess Plan, Cinergy Corp.Supplemental Executive Retirement Plan and any vacation policy, shall bedetermined under the terms of such plans, policies and any applicableadministrative 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.                                         OtherFees and Expenses.  Cinergy willalso reimburse the Executive for all reasonable legal fees and expensesincurred by the Executive (i) in successfully disputing a QualifyingTermination that entitles the Executive to Severance Benefits or (ii) inreasonably disputing whether or not Cinergy has terminated his employment forCause.  Payment will be made within five(5) business days after delivery of the Executive’s written request for paymentaccompanied by such evidence of fees and expenses incurred as Cinergyreasonably may require.

###  

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

##  

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## 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 Executive shall notbe entitled to any benefits under any severance plan of Cinergy, including butnot limited to the Severance Opportunity Plan for Non-Union Employees ofCinergy Corp. and (b) if the Executive receives such Severance Benefits as aresult of his termination for Good Reason, as that term is defined in Section4d(iv), Cinergy’s obligations under Sections 5a(ii) and 5a(iii) shall bereduced by the amount of any benefits payable to the Executive under anyshort-term or long-term disability plan of Cinergy, the amount of which shallbe determined by Cinergy in good faith.

##  

## **7.****                                     ****Full Settlement: Mitigation.** Except as otherwise provided herein, Cinergy’s obligation to make thepayments provided for in this Agreement and otherwise to perform itsobligations under this Agreement will not be affected by any set-off,counterclaim, recoupment, defense, or other claim, right, or action thatCinergy may have against the Executive or others.  In no event will the Executive be obligated to seek otheremployment or take any other action by way of mitigation of the amounts(including amounts for damages for breach) payable to the Executive under anyof the provisions of this Agreement and, except as provided in Sections 3e,5a(ii)(2) and 5a(iii)(4), those amounts will not be reduced simply because 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 

##  

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## arbitrator(s),including determination of the amount of any damages suffered, will beexclusive, final, and binding on all parties, their heirs, executors,administrators, successors and assigns. Each party will bear its own expenses in the arbitration forarbitrators’ fees and attorneys’ fees, for its witnesses, and for otherexpenses of presenting its case.  Otherarbitration costs, including administrative fees and fees for records ortranscripts, will be borne equally by the parties.  Notwithstanding anything in this Section to the contrary, if theExecutive prevails with respect to any dispute submitted to arbitration underthis Section, Cinergy will reimburse or pay all legal fees and expenses thatthe Executive may reasonably incur as a result of the dispute as required bySection 7.

##  

## **9.****                                     ****Confidential Information.**  The Executive will hold in a fiduciarycapacity for the benefit of Cinergy, as well as all of Cinergy’s successors andassigns, all secret, confidential information, knowledge, or data relating toCinergy, and its affiliated businesses, that the Executive obtains during theExecutive’s employment by Cinergy or any of its affiliated companies, and thathas not been or subsequently becomes public knowledge (other than by acts bythe Executive or representatives of the Executive in violation of thisAgreement).  During the EmploymentPeriod and thereafter, the Executive will not, without Cinergy’s prior writtenconsent or as may otherwise by required by law or legal process, communicate ordivulge any such information, knowledge, or data to anyone other than Cinergyand those designated by it.  TheExecutive understands that during the Employment Period, Cinergy may berequired 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 event theExecutive violates any provision of this Section.

##  

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

##  

### a.                                       ThisAgreement is personal to the Executive and, without Cinergy’s prior writtenconsent, cannot be assigned by the Executive other than Executive’s designationof a beneficiary of any amounts payable hereunder after the Executive’sdeath.  This Agreement will inure to thebenefit of and be enforceable by the Executive’s legal representatives.

###  

### b.                                      ThisAgreement will inure to the benefit of and be binding upon Cinergy and itssuccessors and assigns.

###  

### c.                                       Cinergywill require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of Cinergy to assume expressly and agree to perform this Agreement inthe same manner and to the same extent that Cinergy would be required toperform it if no succession had taken place. Cinergy’s failure to obtain such an assumption and agreement prior tothe effective date of a succession will be a breach of this Agreement and willentitle the Executive to compensation from Cinergy in the same amount and onthe same terms as if the Executive were to 

 

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### terminate hisemployment for Good Reason upon a Change in Control, except that, for purposesof implementing the foregoing, the date on which any such succession becomeseffective will be deemed the Date of Termination.

###  

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

##  

### a.                                       AccountingFirm.  “Accounting Firm” meansCinergy’s independent auditors.

###  

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

###  

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

###  

### d.                                      AIPBenefit.  “AIP Benefit” means theAnnual Incentive Plan benefit described in Section 5a(i).

###  

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

###  

### f.                                         AnnualBonus.  “Annual Bonus” has themeaning set forth in Section 5a(ii)(1).

###  

### g.                                      AnnualIncentive Plan.  “Annual IncentivePlan” means the Cinergy Corp. Annual Incentive Plan or any similar plan orsuccessor to the Annual Incentive Plan.

###  

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

###  

### i.                                          COBRA.  “COBRA” means the Consolidated OmnibusBudget Reconciliation Act of 1985, as amended.

###  

### j.                                          Cause.  “Cause” has the meaning set forth in Section4b.

###  

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

###  

#### (i)                                     AnyPerson is or becomes the beneficial owner (as defined in Rule 13d-3 under theSecurities Exchange Act of 1934, as amended (“1934 Act”)), directly orindirectly, of securities of the Company (not including in the securitiesbeneficially owned by such Person any securities acquired directly from theCompany or its affiliates) representing more than twenty percent (20%) of thecombined voting power of the Company’s then outstanding securities, excludingany Person who becomes such a beneficial owner in connection with a transactiondescribed in Clause (1) of Paragraph (ii) below; or

 

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#### (ii)                                  Thereis consummated a merger or consolidation of the Company or any direct or indirectsubsidiary of the Company with any other corporation, partnership or otherentity, other than (1) a merger or consolidation that would result in thevoting securities of the Company outstanding immediately prior to that mergeror consolidation continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity or its parent)at least sixty percent (60%) of the combined voting power of the securities ofthe Company or the surviving entity or its parent outstanding immediately afterthe merger or consolidation, or (2) a merger or consolidation effected toimplement a recapitalization of the Company (or similar transaction) in whichno Person is or becomes the beneficial owner, directly or indirectly, ofsecurities of the Company (not including in the securities beneficially ownedby such a Person any securities acquired directly from the Company or itsaffiliates other than in connection with the acquisition by the Company or itsaffiliates of a business) representing twenty percent (20%) or more of thecombined voting power of the Company’s then outstanding securities; or

####  

#### (iii)                               Duringany period of two (2) consecutive years, individuals who at the beginning ofthat period constitute the Board of Directors and any new director (other thana director whose initial assumption of office is in connection with an actualor threatened election contest, including but not limited to a consentsolicitation, relating to the election of directors of the Company) whoseappointment or election by the Company’s stockholders was approved orrecommended by a vote of at least two-thirds (2/3) of the directors then stillin office who either were directors at the beginning of that period or whoseappointment, election, or nomination for election was previously so approved orrecommended cease for any reason to constitute a majority of the Board ofDirectors; or

####  

#### (iv)                              Thestockholders of the Company approve a plan of complete liquidation ordissolution of the Company or there is consummated a sale or disposition by theCompany of all or substantially all of the Company’s assets, other than a saleor disposition by the Company of all or substantially all of the Company’sassets to an entity, at least sixty percent (60%) of the combined voting powerof the voting securities of which are owned by stockholders of the Company insubstantially the same proportions as their ownership of the Companyimmediately prior to the sale.

####  

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

###  

### m.                                    ChiefExecutive Officer.  “Chief ExecutiveOfficer” means the individual who, at any relevant time, is then serving as thechief executive officer of the Company.

 

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### n.                                      Cinergy.  “Cinergy” means the Company, itssubsidiaries, and/or its affiliates, 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)                                     ifthe Executive’s employment is terminated by Cinergy for Cause, or by theExecutive with Good Reason, the date of receipt of the Notice of Termination orany later date specified in the notice, as the case may be;

####  

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

####  

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

####  

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

####  

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

###  

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

###  

### t.                                         EmploymentPeriod.  “Employment Period” has themeaning set forth in Section 1b.

###  

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

###  

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

###  

### w.                                    ExecutiveRetirement Plans.  “ExecutiveRetirement Plans” means the Pension Plan, the Cinergy Corp. SupplementalExecutive Retirement Plan and the Cinergy Corp. Excess Pension Plan or anysimilar plans or successors to those plans.

 

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### x.                                        ExecutiveSupplemental Life Program. “Executive Supplemental Life Program” means the Cinergy Corp. ExecutiveSupplemental Life Insurance Program or any similar program or successor to theExecutive 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 tothat plan.

###  

### z.                                        GoodReason.  “Good Reason” has themeaning set forth in Section 4d.

###  

### aa.                                 Gross-UpPayment.  “Gross-Up Payment” has themeaning set forth in Section 5c.

###  

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

###  

### cc.                                 Long-TermIncentive Plan or LTIP.  “Long-TermIncentive Plan” or “LTIP” means the long-term incentive plan implemented underthe Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any successorto that plan.

###  

### dd.                               M&WPlans.  “M&W Plans” has themeaning set forth in Section 5a(ii)(2).

###  

### ee.                                 MaximumAnnual Bonus.  “Maximum AnnualBonus” has the meaning set forth in Section 3b.

###  

### ff.                                     NonelectiveEmployer Contribution. “Nonelective Employer Contribution” has the meaningset forth in the 401(k) Excess Plan.

###  

### gg.                               Noticeof Termination.  “Notice ofTermination” has the meaning set forth in Section 4f.

###  

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

###  

### ii.                                       PensionPlan.  “Pension Plan” means theCinergy Corp. Non-Union Employees’ Pension Plan or any successor to that plan.

###  

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

###  

#### (i)                                     Cinergyor any of its subsidiaries or affiliates;

####  

#### (ii)                                  Atrustee or other fiduciary holding securities under an employee benefit plan ofCinergy or its subsidiaries or affiliates;

 

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#### (iii)                               Anunderwriter temporarily holding securities pursuant to an offering of thosesecurities; or

####  

#### (iv)                              Acorporation owned, directly or indirectly, by the stockholders of the Companyin substantially the same proportions as their ownership of stock of theCompany.

####  

### kk.                                 PotentialChange in Control.  A “PotentialChange in Control” means any period during which any of the followingcircumstances exist:

###  

#### (i)                                     TheCompany enters into an agreement, the consummation of which would result in theoccurrence of a Change in Control; provided that a Potential Change in Controlshall cease to exist upon the expiration or other termination of suchagreement; or

####  

#### (ii)                                  TheCompany or any Person publicly announces an intention to take or to considertaking actions which, if consummated, would constitute a Change in Control;provided that a Potential Change in Control shall cease to exist when theCompany or such Person publicly announces that it no longer has such anintention; or

####  

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

####  

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

####  

Notwithstandinganything herein to the contrary, a Potential Change in Control shall cease toexist not later than the date that (i) the Board of Directors determines thatthe Potential Change in Control no longer exists, or (ii) a Change in Controloccurs.

 

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

###  

### mm.                           RelocationProgram.  “Relocation Program” meansthe Cinergy Corp. Relocation Program, or any similar program or successor tothat program, as in effect on the date of the Executive’s termination of employment.

 

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

###  

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

###  

### pp.                               StockRelated Documents.  “Stock RelatedDocuments” means the LTIP, the Cinergy Corp. Stock Option Plan, and the ValueCreation Plan and any applicable administrative guidelines and writtenagreements relating to those plans.

###  

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

###  

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

###  

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

###  

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

###  

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

##  

### a.                                       ThisAgreement will be governed by and construed in accordance with the laws of theState of Ohio, without reference to principles of conflict of laws.  The captions of this Agreement are not partof its provisions and will have no force or effect.  This Agreement may not be amended, modified, repealed, waived,extended, or discharged except by an agreement in writing signed by the partyagainst whom enforcement of the amendment, modification, repeal, waiver,extension, or discharge is sought.  Onlythe Chief Executive Officer or his designee will have authority on behalf ofCinergy to agree to amend, modify, repeal, waive, extend, or discharge anyprovision of this Agreement.

###  

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

###  

### If to theExecutive:Cinergy Corp.221 East Fourth StreetCincinnati, Ohio 45201-0960

 

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### If to Cinergy:Cinergy Corp.221 East Fourth StreetCincinnati, Ohio 45201-0960Attn: Chief Executive Officer

###  

### or to suchother address as either party has furnished to the other in writing inaccordance with this Agreement.  Allnotices and communications will be effective when actually received by theaddressee.

###  

### c.                                       Theinvalidity or unenforceability of any provision of this Agreement will notaffect the validity or enforceability of any other provision of this Agreement.

###  

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

###  

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

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### f.                                         Referencesin this Agreement to the masculine include the feminine unless the contextclearly indicates otherwise.

###  

### g.                                      Thisinstrument contains the entire agreement of the Executive and Cinergy withrespect to the subject matter of this Agreement; and subject to any agreementsevidencing stock option or restricted stock grants described in Section 3b andthe Stock Related Documents, all promises, representations, understandings,arrangements, and prior agreements are merged into this Agreement andaccordingly superseded.

###  

### h.                                      ThisAgreement may be executed in counterparts, each of which will be deemed to bean original but all of which together will constitute one and the sameinstrument.

###  

### i.                                          Cinergyand the Executive agree that Cinergy Services, Inc. will be authorized to actfor Cinergy with respect to all aspects pertaining to the administration andinterpretation of this Agreement.

 

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IN WITNESSWHEREOF, the Executive and the Company have caused this Agreement to beexecuted as of the Effective Date.

 

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

 

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**EXHIBIT A**

 

*********

 

**WAIVER AND RELEASE AGREEMENT**

 

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

 

**WHEREAS**, the Partieshave entered into the Employment Agreement dated                              (the “Employment Agreement”);

 

**WHEREAS**, theExecutive’s employment has been terminated in accordance with the terms of theEmployment Agreement;

 

**WHEREAS**, theExecutive is required to sign this Waiver and Release in order to receive thepayment of certain compensation under the Employment Agreement followingtermination of employment; and

 

**WHEREAS**, Cinergy hasagreed to sign this Waiver and Release.

 

**NOW, THEREFORE**, inconsideration of the promises and agreements contained herein and other goodand valuable consideration, the sufficiency and receipt of which are herebyacknowledged, and intending to be legally bound, the Parties agree as follows:

 

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

 

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

 

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

 

3.                                       Without limitingthe generality 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 Employment Act, asamended, 29 U.S.C. §§ 621 etseq.; the Americans withDisabilities 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 of claims.  Accordingly, Executive hereby acknowledgesthat:

 

(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.

 

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

 

6.                                       The Executivehereby affirms 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 of theEmployment 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 eventthat Executive 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.

 

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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.

 

10.                                 The Partiesacknowledge that this Waiver and Release is entered into solely for the purposeof ending their employment relationship on an amicable basis and shall not beconstrued as an admission of liability or wrongdoing by either Party and thatboth Cinergy and Executive have expressly denied any such liability orwrongdoing.

 

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 andRelease shall be governed by and interpreted in accordance with the laws of theState of Ohio without regard to any applicable state’s choice of lawprovisions.

 

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 andRelease represents the entire agreement between the Parties concerning thesubject matter hereof, shall supercede any and all prior agreements which mayotherwise exist 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 WITNESSWHEREOF, the Parties have themselves signed, or caused a duly authorized agentthereof to sign, this Waiver and Release on their behalf and therebyacknowledge their intent to be bound by its terms and conditions.

 
| EXECUTIVE | CINERGY  SERVICES, INC. |
|-----------|-------------------------|
|      |                    |
|      |                    |
| Signed:   | /s/ William  J. Grealis |   | By: | /s/ James E.  Rogers |   |
| Printed:  | William J.  Grealis     |   | Title: | Chairman and  Chief Executive Officer |   |
| Dated:    |                    |   | Dated: |   |   |
|           |                         |  |  |  |  |  |  |  |  |

 

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