**Exhibit 10.e**

 

**EMPLOYMENT AGREEMENT**

 

This EMPLOYMENT AGREEMENT ismade and entered into as of the 12th day of September, 2002 (the“Effective Date”), by and between Cinergy and Michael J. Cyrus (the“Executive”).  This Agreement replacesand supersedes any and all prior employment agreements between Cinergy and theExecutive.  The capitalized words andterms used throughout this Agreement are defined in Section 11.

# **Recitals**

 

A.            The Executive is currently serving as Executive VicePresident of the Company and Chief Executive Officer of the Energy MerchantBusiness Unit of Cinergy, and Cinergy desires to secure the continuedemployment of the Executive in accordance with this Agreement.

 

B.            The Executive is willing to continue to remain in theemploy of Cinergy on the terms and conditions set forth in this Agreement.

 

C.            The parties intend that this Agreement will replace andsupersede any and all prior employment agreements between Cinergy (or anycomponent company or business unit of Cinergy) and the Executive.

 

# **Agreement**

 

In consideration of themutual promises, covenants and agreements set forth below, the parties agree asfollows:

 

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

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### a.                                       Cinergy agreesto employ the Executive, and the Executive agrees to remain in the employ ofCinergy, in accordance with the terms and provisions of this Agreement, for theEmployment Period set forth in Section 1b. The parties agree that the Company will be responsible for carrying outall of the promises, covenants, and agreements of Cinergy set forth in thisAgreement.

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### b.                                      The EmploymentPeriod of this Agreement will commence as of the Effective Date and continueuntil December 31, 2004; provided that, commencing on December 31, 2002, and oneach subsequent December 31, the Employment Period will be extended for one (1)additional year unless either party gives the other party written notice not toextend this Agreement at least ninety (90) days before the extension wouldotherwise become effective.

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

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### a.                                       Position.  The Executive will serve Cinergy asExecutive Vice President of the Company and Chief Executive Officer of theEnergy Merchant Business Unit of Cinergy and he will have suchresponsibilities, duties, and authority as are customary for someone of thatposition and such additional duties, consistent with his position, as may beassigned to him from time to time during the Employment Period by the Board ofDirectors or the Chief Executive Officer. Executive shall devote substantially all of Executive’s business time,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.                                      Place ofPerformance.  Inconnection with the Executive’s employment, the Executive will be based at theprincipal executive offices of Cinergy, 221 East Fourth Street, Cincinnati,Ohio.  Except for required businesstravel to an extent substantially consistent with the present business travelobligations of Cinergy executives who have positions of authority comparable tothat of the Executive, the Executive will not be required to relocate to a newprincipal place of business that is more than thirty (30) miles from suchlocation.

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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 $575,004. 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)                                     During theEmployment Period, the Executive will be eligible, and Cinergy will take allnecessary action to cause the Executive to become eligible, to participate inshort-term and long-term incentive, stock option, restricted stock, performanceunit, savings, retirement and welfare plans, practices, policies and programsapplicable generally to other senior executives of Cinergy who are consideredTier II executives for compensation purposes, except with respect to any plan,practice, policy or program to which the Executive has waived his rights inwriting.

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#### (ii)                                  SupplementalRetirement Benefit.

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##### (1)                                  Amount, Form,Timing and Method of Payment.  If the Executive retires from Cinergy after reaching age 55, theExecutive will be entitled and fully vested in a supplemental retirementbenefit in an amount which, when expressed as an annual amount payable duringthe life of the Executive, shall equal the excess of (1) 60% of the Executive’sHighest Average Earnings over (2) his total aggregate annual benefit, payablein the form of a single life annuity to the Executive, under all ExecutiveRetirement Plans.  Except as describedbelow, the form (e.g., the 100% joint and survivor annuity form of benefit),timing, and method of payment of the supplemental retirement benefit payableunder this Paragraph will be the same as those elected by the Executive underthe Pension Plan, and the amount of such benefit shall be calculated after takinginto account the actuarial factors contained in the Pension Plan, provided,however, that such benefit shall not be actuarially reduced for earlycommencement.

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##### (2)                                  Death Benefit.  If the Executive dies after reaching age 55but prior to his retirement from Cinergy, and if his Spouse, on the date of hisdeath, is living on the date the first installment of the supplementalretirement benefit would be payable under this Paragraph, the Spouse will beentitled to receive the supplemental retirement benefit as a Spouse’sbenefit.  The form, timing, and methodof payment of any Spouse’s benefit under this Paragraph will be the same 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)                                  Special PaymentElection Effective Upon a Change in Control.  Notwithstanding the foregoing, the Executive may make a specialpayment election with respect to his supplemental retirement benefit (if any)in accordance with the following provisions:

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###### (A)                              The Executivemay elect, on a form provided by Cinergy, to receive a single lump sum cashpayment in an amount equal to the Actuarial Equivalent (as defined below) ofhis supplemental retirement benefit (or the Actuarial Equivalent of theremaining payments to be made in connection with his supplemental retirementbenefit in the event that payment of his supplemental retirement benefit hasalready commenced) payable no later than 30 days after the later of theoccurrence of a Change in Control or the date of his termination of employment.

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###### (B)                                Such specialpayment election shall become operative only upon the occurrence of a Change inControl and only if the Executive’s termination of employment occurs either (1)prior to the occurrence of a Change in Control or (2) during the 24-monthperiod commencing upon the occurrence of a Change in Control.  Once operative, such special paymentelection shall override any other payment election made by the Executive withrespect to his supplemental retirement benefit.

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###### (C)                                In order to beeffective, a special payment election (or withdrawal of that election) must bemade either prior to the occurrence of a Potential Change in Control or, withthe consent of Cinergy, during the 30-day period commencing upon the occurrenceof a Potential Change in Control.  Inthe event that a Potential Change in Control occurs and subsequently ceases toexist, other than as a result of a Change in Control, such Potential Change inControl shall be disregarded for purposes of this Section.

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###### (D)                               In the eventthat the Executive makes a special payment election and pursuant to thatelection he becomes entitled to receive a single lump sum cash payment pursuantto this Section payable prior to the commencement of his supplementalretirement benefit in another form of payment, the Actuarial Equivalent of hissupplemental retirement benefit shall be calculated based on the followingassumptions:

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(I)                                    The form ofpayment for each of the Executive’s retirement benefits under the ExecutiveRetirement Plans and the Executive’s supplemental retirement benefit shall be asingle life annuity;

 

(II)                                Thecommencement date for each of the Executive’s retirement benefits under theExecutive Retirement Plans and the Executive’s supplemental retirement benefitshall be the first day of the calendar month coincident with or next followinghis termination of employment;

 

(III)                            The term“Actuarial Equivalent” has the meaning given to that term in the Pension Planwith respect to lump sum payments; and

 

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(IV)                            The amount ofthe Executive’s supplemental retirement benefit shall not be actuariallyreduced for early commencement.

 

###### (E)                                 In the eventthat the Executive makes a special payment election and pursuant to thatelection he is entitled to receive a single lump sum cash payment payable afterthe commencement of his supplemental retirement benefit in another form ofpayment, his lump sum cash payment shall be equal to the Actuarial Equivalent(as that term is used in the Pension Plan with respect to lump sum payments) ofthe remaining payments to be made in connection with his supplementalretirement benefit.

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#### (iii)                               Upon hisretirement on or after having attained age 50, the Executive will be eligiblefor comprehensive medical and dental benefits which are not materiallydifferent from the benefits provided to retirees under the Cinergy Corp.Welfare Benefits Program or any similar program or successor to thatprogram.  For purposes of determiningthe amount of the monthly premiums due from the Executive, the Executive willreceive from Cinergy the maximum subsidy available as of the date of hisretirement to an active Cinergy employee with the same medical benefitsclassification/eligibility as the Executive’s medical benefitsclassification/eligibility on the date of his retirement.

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#### (iv)                              The Executivewill be a participant in the Annual Incentive Plan and will be paid pursuant tothe terms and conditions of that plan, subject to the following: (1) Themaximum annual bonus shall be not less than one hundred five percent (105%) ofthe Executive’s Annual Base Salary (the “Maximum Annual Bonus”); and (2) Thetarget 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)                                 The Executivewill be a participant in the Long-Term Incentive Plan (the “LTIP”), and theExecutive’s annualized target award opportunity under the LTIP will be equal tono less than ninety percent (90%) of his Annual Base Salary (the “Target LTIPBonus”).

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

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### c.                                       Fringe Benefitsand Perquisites.  During theEmployment Period, the Executive will be entitled to the following additionalfringe benefits in accordance with the terms and conditions of Cinergy’spolicies and practices for such fringe benefits:

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#### (i)                                     Cinergy willfurnish to the Executive an automobile appropriate for the Executive’s level ofposition, 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)                                  Cinergy willpay the initiation fee and the annual dues, assessments, and other membershipcharges of the Executive for membership in a country club selected by theExecutive.

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#### (iii)                               Cinergy willprovide paid vacation for four (4) weeks per year (or such longer period forwhich Executive is otherwise eligible under Cinergy’s policy).

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#### (iv)                              Cinergy willfurnish 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 to the Executive pursuant to this Section3c(iv) is subject to any federal, state, or local income or employment taxes,Cinergy shall provide to the Executive an additional payment in an amountnecessary such that after payment by the Executive of all such taxes(calculated after assuming that the Executive pays such taxes for the year inwhich 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)                                 Cinergy willprovide 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.  Followingtermination of the Executive’s employment for any reason (other than death),the Executive will be entitled to reimbursement from Cinergy for the reasonablecosts of relocating from the Cincinnati, Ohio, area to a new primary residencein a manner that is consistent with the terms of the Relocation Program.  Notwithstanding the foregoing, if theExecutive becomes employed by another employer and is eligible to receive relocationbenefits under another employer-provided plan, any benefits provided to theExecutive under this Section 3e will be secondary to those provided under theother employer-provided relocation plan. The Executive must report to Cinergy any such relocation benefits thathe actually receives under another employer-provided plan.

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### f.                                         Stock Optionsand Stock Appreciation Rights.  Notwithstanding Section 5d, upon the occurrence of a Change inControl, any stock options or stock appreciation rights then held by theExecutive pursuant to the LTIP or Cinergy Corp. Stock Option Plan shall, to theextent not otherwise provided in the applicable Stock

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### Related Documents, becomeimmediately exercisable.  If the Executiveterminates employment for any reason during the twenty-four (24) month periodcommencing upon the occurrence of a Change in Control, notwithstanding Section5d, 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 Related Documents, remainexercisable in accordance with their terms but in no event for a period lessthan the lesser of (i) three months following such termination of employment or(ii) the remaining term of such stock option or stock appreciation right (whichremaining term shall be determined without regard to such termination ofemployment).

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## **4.****                                     ****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.                                      By Cinergy forCause.  Cinergy may terminate theExecutive’s employment during the Employment Period for Cause.  For purposes of this Employment Agreement,“Cause” means the following:

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#### (i)                                     The willful andcontinued failure by the Executive to substantially perform the Executive’sduties with Cinergy (other than any such failure resulting from the Executive’sincapacity due to physical or mental illness) that, if curable, has not beencured within 30 days after the Board of Directors or the Chief ExecutiveOfficer has delivered to the Executive a written demand for substantialperformance, which demand specifically identifies the manner in which the Executivehas not substantially performed his duties. This event will constitute Cause even if the Executive issues a Noticeof Termination for Good Reason pursuant to Section 4d after the Board ofDirectors or Chief Executive Officer delivers a written demand for substantialperformance.

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

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#### (iii)                               The convictionof the Executive for the commission of a felony, including the entry of aguilty or nolo contendere plea, or any willful or grossly negligent action orinaction by the Executive that has a materially adverse effect on Cinergy.  For purposes of this definition of Cause, noact, or failure to act, on the Executive’s part will be deemed “willful” unlessit is done, or omitted to be done, by the Executive in bad faith and withoutreasonable belief that the Executive’s act, or failure to act, was in the bestinterest 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 adopted by theaffirmative vote of not less than a majority of the Board then in office at ameeting of the Board called and held for such purpose (after reasonable noticeto 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.                                       By CinergyWithout Cause.  Cinergymay, upon at least 30 days advance written notice to the Executive, terminatethe Executive’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.                                      By theExecutive for Good Reason.  TheExecutive may terminate his employment during the Employment Period for Good Reason.  For purposes of this Agreement, “GoodReason” means the following:

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#### (i)                                     (1) A reductionin the Executive’s Annual Base Salary, except for across-the-board salaryreductions 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) Thematerial 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)                               Any breach byCinergy of any other material provision of this Agreement (including but notlimited to the place of performance as specified in Section 2b).

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#### (iv)                              The Executive’sdisability due to physical or mental illness or injury that precludes theExecutive from performing any job for which he is qualified and able to performbased upon his education, training or experience.

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#### (v)                                 A failure bythe Company to require any successor entity to the Company specifically toassume in writing all of the Company’s obligations to the Executive under thisAgreement.

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For purposes of determiningwhether Good Reason exists with respect to a Qualifying Termination occurringon or within 24 months following a Change in Control, any claim by theExecutive that Good Reason exists shall be presumed to be correct unless theCompany establishes to the Board by clear and convincing evidence that GoodReason does not exist.

 

### e.                                       By theExecutive Without Good Reason.  The Executive may terminate his employment without Good Reasonupon prior written notice to the Company.

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### f.                                         Notice ofTermination.  Anytermination of the Executive’s employment by Cinergy or by the Executive duringthe Employment Period (other than a termination due to the Executive’s death)will be communicated by a written Notice of Termination to the other party tothis Agreement 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.                                      The Executiveacknowledges and agrees that he shall not sell or otherwise dispose of anyshares of Company stock acquired pursuant to the exercise of a stock option,other than shares sold in order to pay an option exercise price or the relatedtax withholding obligation, until 90 days after the Date of Termination.  Notwithstanding the foregoing, Cinergy, inits sole discretion, may waive the restrictions contained in the previoussentence.

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

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### a.                                       CertainTerminations.

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#### (i)                                     If a QualifyingTermination occurs during the Employment Period, Cinergy will pay to theExecutive a lump sum amount, in cash, equal to the sum of the following AccruedObligations:

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##### (1)                                  the pro-ratedportion of the Executive’s Annual Base Salary payable through the Date ofTermination, to the extent not previously paid.

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##### (2)                                  any amountpayable to the Executive under the Annual Incentive Plan in respect of the mostrecently completed fiscal year, to the extent not theretofore paid.

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##### (3)                                  an amount equalto the AIP Benefit for the fiscal year that includes the Date of Terminationmultiplied by a fraction, the numerator of which is the number of days from thebeginning of that fiscal year to and including the Date of Termination and thedenominator of which is three hundred and sixty-five (365).  The AIP Benefit component of the calculationwill be equal to the annual bonus that would have been earned by the Executivepursuant to any annual bonus or incentive plan maintained by Cinergy in respectof the fiscal year in which occurs the Date of Termination, determined byprojecting Cinergy’s performance and other applicable goals and objectives forthe entire fiscal year based on Cinergy’s performance during the period of suchfiscal year occurring prior to the Date of Termination, and based on such otherassumptions and rates as Cinergy deems reasonable.

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##### (4)                                  the AccruedObligations 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)                                  In the event ofa Qualifying Termination either prior to the occurrence of a Change in Control,or more than twenty-four (24) months following the occurrence of a Change inControl, Cinergy will pay the Accrued Obligations, and Cinergy will have thefollowing additional obligations described in this Section 5a(ii); provided,however, that each of the benefits described below in this Section5a(ii) shall only be provided to the Executive if, upon presentation to theExecutive following a Qualifying Termination, the Executive timely executes anddoes not timely revoke the Waiver and Release.

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##### (1)                                  Cinergy willpay to the Executive a lump sum amount, in cash, equal to three (3) times thesum of the Annual Base Salary and the Annual Bonus.  For this purpose, the Annual Base Salary will be at the rate ineffect at the time Notice of Termination is given (without giving effect to anyreduction in Annual Base Salary, if any, prior to the termination, other thanacross-the-board reductions), and shall include the amount of any NonelectiveEmployer Contributions made on behalf of the Executive under the 401(k) ExcessPlan during the fiscal year in which the Executive’s Qualifying Terminationoccurs, and the Annual Bonus will be the higher of (A) the annual bonus earnedby the Executive pursuant to any annual bonus or incentive plan maintained byCinergy in respect of the year ending immediately prior to the fiscal year inwhich occurs the Date of Termination, and (B) the annual bonus that would havebeen earned by the Executive pursuant to any annual bonus or incentive planmaintained by Cinergy in respect of the fiscal year in which occurs the Date ofTermination, calculated

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##### by projecting Cinergy’sperformance and other applicable goals and objectives for the entire fiscalyear based on Cinergy’s performance during the period of such fiscal yearoccurring prior to the Date of Termination, and based on such other assumptionsand rates as Cinergy deems reasonable; provided, however that forpurposes of this Section 5a(ii)(1)(B), the Annual Bonus shall not be less thanthe Target Annual Bonus, nor greater than the Maximum Annual Bonus for the yearin which the Date of Termination occurs. This lump sum will be paid within thirty (30) days after the expirationof the revocation period contained in the Waiver and Release.

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##### (2)                                  Subject toClauses (A), (B) and (C) below, Cinergy will provide, until the end of theEmployment Period, medical and dental benefits to the Executive and/or the Executive’sdependents at least equal to those that would have been provided if theExecutive’s employment had not been terminated (excluding benefits to which theExecutive has waived his rights in writing). The benefits described in the preceding sentence will be in accordancewith the medical and welfare benefit plans, practices, programs, or policies ofCinergy (the “M&W Plans”) as then currently in effect and applicablegenerally 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 that afterpayment by the Executive of all such taxes (calculated after assuming that theExecutive pays such taxes for the year in which the payment or benefit occursat the highest marginal tax rate applicable), including the taxes imposed onthe additional payment, the Executive retains an amount equal to the medical ordental benefits or payments provided pursuant to this Section 5a(ii)(2)(B).

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

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###### discretion, may elect to paythe Executive, in lieu of the M&W Plan benefits described under thisSection 5a(ii)(2), a lump sum cash payment equal to the total monthly premiums(or in the case of a self funded plan, the cost of COBRA continuation coverage)that would have been paid by Cinergy for the Executive under the M&W Plansfrom the Date of Termination through the end of the Employment Period.  Nothing in this Clause will affect theExecutive’s right to elect COBRA continuation coverage under a M&W Plan inaccordance with applicable law, and Cinergy will make the payment described inthis Clause whether or not the Executive elects COBRA continuation coverage,and whether or not the Executive receives health coverage from anotheremployer.

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###### (C)                                If theExecutive 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)                                  Cinergy willpay 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(ii)(3) 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(ii)(3).  Such paymentwill be transferred to the Executive within thirty (30) days of the expirationof the revocation period contained in the Waiver and Release.

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#### (iii)                               In the event ofa Qualifying Termination during the twenty-four (24) month period beginningupon 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 be provided tothe Executive if, upon presentation to the Executive following a QualifyingTermination, the Executive timely executes and does not timely revoke theWaiver and Release.

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##### (1)                                  Cinergy willpay 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 Base Salaryand Target Annual Bonus and (y) the sum of the Executive’s Annual Base Salaryin effect immediately prior to the Change in Control and the Change in ControlBonus.  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)                                  Cinergy willpay 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, assumingcommencement at age 50 or the Executive’s age as of the Date of Termination iflater, will be determined using the interest rate applicable to lump sumpayments in the Cinergy Corp. Non-Union Employees’ Pension Plan or anysuccessor to that plan for the plan

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##### year that includes the Dateof Termination. To the extent no such interest rate is provided therein, theannual interest rate applicable under Section 417(e)(3) of the Code, or anysuccessor provision thereto, for the second full calendar month preceding thefirst day of the calendar year that includes the Date of Termination will beused. This lump sum will be paid within thirty (30) days of the expiration ofthe revocation period contained in the Waiver and Release.

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##### (3)                                  The Executiveshall be fully vested in his accrued benefits as of the Date of Terminationunder the Executive Retirement Plans, and his aggregate accrued benefitsthereunder and under Section 3b(ii) of this Agreement will be calculated, andhe will be treated for all purposes, as if he was credited with three (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)                                  For athirty-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.

#####  

##### 15

##### 

#####  

##### Nothing in this Section5a(iii)(4) will affect the Executive’s right to elect COBRA continuationcoverage in accordance with applicable law, and Cinergy will provide thebenefits or make the payment described in this Clause whether or not theExecutive elects COBRA continuation coverage, and whether or not the Executivereceives health coverage from another employer.  In the event that any benefits or payments provided pursuant tothis Section 5a(iii)(4) are subject to federal, state, or local income oremployment taxes, Cinergy shall provide the Executive with an additionalpayment in the amount necessary such that after payment by the Executive of allsuch taxes (calculated after assuming that the Executive pays such taxes forthe year in which the payment or benefit occurs at the highest marginal taxrate applicable), including the taxes imposed on the additional payment, theExecutive retains an amount equal to the benefits or payments provided pursuantto this Section 5a(iii)(4).

#####  

##### (5)                                  In lieu of anyand all other rights with respect to the automobile assigned by Cinergy to theExecutive, Cinergy will provide the Executive with a lump sum payment in theamount of $50,000.  In the eventany  payment to the Executive pursuantto this Section 5a(iii)(5) 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(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)                                  Cinergy willpay 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

#####  

##### 16

##### 

#####  

##### of the expiration of therevocation period contained in the Waiver and Release.

#####  

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

#####  

##### (8)                                  Cinergy willprovide outplacement services suitable to the Executive’s position until the endof the Employment Period or, if earlier, until the first acceptance by theExecutive of an offer of employment.  Atthe Executive’s discretion, 15% of Annual Base Salary may be paid in lieu ofoutplacement services, which payment will be transferred to the Executivewithin thirty (30) days of the expiration of the revocation period contained inthe Waiver and Release.

#####  

For purposes of this Section5a(iii), the Executive will be deemed to have incurred a Qualifying Terminationupon a Change in Control if the Executive’s employment is terminated prior to aChange in Control, without Cause at the direction of a Person who has enteredinto an agreement with Cinergy, the consummation of which will constitute aChange in Control, or if the Executive terminates his employment for GoodReason prior to a Change in Control if the circumstances or event thatconstitutes Good Reason occurs at the direction of such a Person.

 

### b.                                      Termination byCinergy 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 unpaidcompensation, in each case to the extent not previously paid.

###  

### c.                                       Certain TaxConsequences.

###  

#### (i)                                     In the eventthat any benefits paid or payable to the Executive or for his benefit pursuantto the terms of this Agreement or any other plan or arrangement in connectionwith, or arising out of, his employment with Cinergy or a change in ownershipor effective control of Cinergy or of a substantial portion of its assets (a“Payment” or “Payments”) would be subject to any Excise Tax, then the Executivewill be entitled to receive an additional payment (a “Gross-Up Payment”) in anamount such that after payment by the Executive of all taxes (including anyinterest, penalties, additional tax, or similar items imposed with respectthereto and the Excise Tax), including any Excise Tax imposed upon the Gross-UpPayment, the Executive retains an amount of the Gross-Up Payment equal to theExcise Tax imposed upon or assessable against the Executive due to thePayments.

####  

#### 17

#### 

####  

#### (ii)                                  Subject to theprovisions of Section 5c, all determinations required to be made under thisSection 5c, including whether and when a Gross-Up Payment is required and theamount of such Gross-Up Payment and the assumptions to be utilized in arrivingat such determination, shall be made by the Accounting Firm, which shallprovide detailed supporting calculations both to the Company and the Executivewithin fifteen (15) business days of the receipt of notice from the Executivethat there has been a Payment, or such earlier time as is requested by theCompany.  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 afederal, state or local income or employment tax deduction) plus interest onthe amount of such repayment at the rate provided in Code Section1274(b)(2)(B).

####  

#### (iii)                               The value ofany non-cash benefits or any deferred payment or benefit paid or payable to theExecutive will be determined in accordance with the principles of Code Sections280G(d)(3) and (4).  For purposes ofdetermining the amount of the Gross-Up Payment, the Executive will be deemed topay federal income taxes at the highest marginal rate of federal incometaxation in the calendar year in which the Gross-Up Payment is to be made andapplicable state and local income taxes at the highest 

####  

#### 18

#### 

####  

#### marginal rate of taxation inthe state and locality of the Executive’s residence on the Date of Termination,net of the maximum reduction in federal income taxes that would be obtainedfrom 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.                                      Value CreationPlan 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.                                       Benefit Plansin 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.                                         Other Fees andExpenses.  Cinergywill also 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-Exclusivityof Rights****.**  Nothing in this Agreement will prevent or limit the Executive’scontinuing or future participation in any benefit, plan, program, policy, orpractice provided by Cinergy and for which the Executive may qualify, exceptwith respect to any benefit to which the Executive has waived his rights inwriting or any plan,

##  

## 19

## 

##  

## program, policy, or practicethat expressly excludes the Executive from participation.  In addition, nothing in this Agreement willlimit or otherwise affect the rights the Executive may have under any othercontract or agreement with Cinergy entered into after the Effective Date.  Amounts that are vested benefits or that theExecutive is otherwise entitled to receive under any benefit, plan, program,policy, or practice of, or any contract or agreement entered into after theEffective Date with Cinergy, at or subsequent to the Date of Termination, willbe payable in accordance with that benefit, plan, program, policy or practice,or that contract or agreement, except as explicitly modified by thisAgreement.  Notwithstanding the above,in the event that the Executive receives Severance Benefits under Section5a(ii) or 5a(iii), (a) the Executive shall not be entitled to any benefitsunder any severance plan of Cinergy, including but not limited to the SeveranceOpportunity Plan for Non-Union Employees of Cinergy Corp. and (b) if theExecutive receives such Severance Benefits as a result of his termination forGood Reason, as that term is defined in Section 4d(iv), Cinergy’s obligationsunder Sections 5a(ii) and 5a(iii) shall be reduced by the amount of anybenefits payable to the Executive under any short-term or long-term disabilityplan of Cinergy, the amount of which shall be determined by Cinergy in goodfaith.

##  

## **7.****                                     ****FullSettlement:  Mitigation****.**  Except as otherwise provided herein,Cinergy’s obligation to make the payments provided for in this Agreement andotherwise to perform its obligations under this Agreement will not be affectedby any set-off, counterclaim, recoupment, defense, or other claim, right, oraction that Cinergy may have against the Executive or others.  In no event will the Executive be obligatedto seek other employment or take any other action by way of mitigation of theamounts (including amounts for damages for breach) payable to the Executiveunder any of the provisions of this Agreement and, except as provided inSections 3e, 5a(ii)(2) and 5a(iii)(4), those amounts will not be reduced simplybecause the Executive obtains other employment.  If the Executive finally prevails on the substantial claimsbrought with respect to any dispute between Cinergy and the Executive as to theinterpretation, terms, validity, or enforceability of (including any disputeabout the amount of any payment pursuant to) this Agreement, Cinergy agrees topay all reasonable legal fees and expenses that the Executive may reasonably incuras a result 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

##  

## 20

## 

##  

## arbitrator(s), includingdetermination of the amount of any damages suffered, will be exclusive, final,and binding on all parties, their heirs, executors, administrators, successorsand assigns.  Each party will bear itsown expenses in the arbitration for arbitrators’ fees and attorneys’ fees, forits witnesses, and for other expenses of presenting its case.  Other arbitration costs, includingadministrative fees and fees for records or transcripts, will be borne equallyby the parties.  Notwithstandinganything in this Section to the contrary, if the Executive prevails withrespect to any dispute submitted to arbitration under this Section, Cinergywill reimburse or pay all legal fees and expenses that the Executive mayreasonably incur as a result of the dispute as required by Section 7.

##  

## **9.****                                     ****ConfidentialInformation****.**  The Executive will hold in a fiduciary capacity for the benefitof Cinergy, as well as all of Cinergy’s successors and assigns, all secret,confidential information, knowledge, or data relating to Cinergy, and itsaffiliated businesses, that the Executive obtains during the Executive’semployment by Cinergy or any of its affiliated companies, and that has not beenor subsequently becomes public knowledge (other than by acts by the Executiveor representatives of the Executive in violation of this Agreement).  During the Employment Period and thereafter,the Executive will not, without Cinergy’s prior written consent or as mayotherwise by required by law or legal process, communicate or divulge any suchinformation, knowledge, or data to anyone other than Cinergy and thosedesignated by it.  The Executiveunderstands that during the Employment Period, Cinergy may be required fromtime to time to make public disclosure of the terms or existence of theExecutive’s employment relationship to comply with various laws and legalrequirements.  In addition to all otherremedies available to Cinergy in law and equity, this Agreement is subject totermination by Cinergy for Cause under Section 4b in the event the Executiveviolates any provision of this Section.

##  

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

##  

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

###  

### b.                                      This Agreementwill inure to the benefit of and be binding upon Cinergy and its successors andassigns.

###  

### c.                                       Cinergy willrequire 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 to theeffective 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

###  

### 21

### 

###  

### terminate his employment forGood Reason upon a Change in Control, except that, for purposes of implementingthe foregoing, the date on which any such succession becomes effective will bedeemed the Date of Termination.

###  

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

##  

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

###  

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

###  

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

###  

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

###  

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

###  

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

###  

### g.                                      AnnualIncentive Plan.  “AnnualIncentive Plan” means the Cinergy Corp. Annual Incentive Plan or any similarplan or successor to the Annual Incentive Plan.

###  

### h.                                      Board ofDirectors 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.                                       Change inControl.  A “Change in Control” will bedeemed to have occurred if any of the following events occur, after theEffective Date:

###  

#### (i)                                     Any Person isor becomes the beneficial owner (as defined in Rule 13d-3 under the SecuritiesExchange Act of 1934, as amended (“1934 Act”)), directly or indirectly, ofsecurities of the Company (not including in the securities beneficially ownedby such Person any securities acquired directly from the Company or itsaffiliates) representing more than twenty percent (20%) of the combined votingpower of the Company’s then outstanding securities, excluding any Person whobecomes such a beneficial owner in connection with a transaction described inClause (1) of Paragraph (ii) below; or

####  

#### 22

#### 

####  

#### (ii)                                  There isconsummated 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)                               During anyperiod of two (2) consecutive years, individuals who at the beginning of thatperiod constitute the Board of Directors and any new director (other than adirector whose initial assumption of office is in connection with an actual orthreatened 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.                                          Change inControl Bonus.  “Change inControl Bonus” has the meaning set forth in Section 5a(iii)(1).

###  

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

###  

### 23

### 

###  

### 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.                                      Date ofTermination.  “Date ofTermination” means:

###  

#### (i)                                     if theExecutive’s employment is terminated by Cinergy for Cause, or by the Executivewith Good Reason, the date of receipt of the Notice of Termination or any laterdate specified in the notice, as the case may be;

####  

#### (ii)                                  if theExecutive’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)                               if theExecutive’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)                              if theExecutive’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.                                       Effective Date.  “Effective Date” has the meaning given tothat term in the first paragraph of this Agreement.

###  

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

###  

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

###  

### 24

### 

###  

### 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) ExcessPlan.  “401(k) Excess Plan” meansthe Cinergy Corp. 401(k) Excess Plan, or any similar plan or successor to thatplan.

###  

### z.                                        Good Reason.  “Good Reason” has the meaning set forth inSection 4d.

###  

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

###  

### bb.                               Highest AverageEarnings.  “HighestAverage Earnings” shall have the meaning given to such term in the CinergyCorp. 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-Term Incentive Plan” or “LTIP” means the long-term incentive planimplemented under the Cinergy Corp. 1996 Long-Term Incentive Compensation Planor any successor to that plan.

###  

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

###  

### ee.                                 Maximum AnnualBonus.  “Maximum Annual Bonus” hasthe meaning set forth in Section 3b.

###  

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

###  

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

###  

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

###  

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

###  

### jj.                                       Person.  “Person” has the meaning set forth 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)                                     Cinergy or anyof its subsidiaries or affiliates;

####  

#### (ii)                                  A trustee orother fiduciary holding securities under an employee benefit plan of Cinergy orits subsidiaries or affiliates;

####  

#### 25

#### 

####  

#### (iii)                               An underwritertemporarily holding securities pursuant to an offering of those securities; or

####  

#### (iv)                              A corporationowned, directly or indirectly, by the stockholders of the Company insubstantially the same proportions as their ownership of stock of the Company.

####  

### kk.                                 PotentialChange in Control.  A“Potential Change in Control” means any period during which any of thefollowing circumstances exist:

###  

#### (i)                                     The Companyenters 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)                                  The Company orany Person publicly announces an intention to take or to consider takingactions which, if consummated, would constitute a Change in Control; providedthat a Potential Change in Control shall cease to exist when the Company orsuch Person publicly announces that it no longer has such an intention; or

####  

#### (iii)                               Any Person whois or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934Act), directly or indirectly, of securities of the Company representing tenpercent (10%) or more of the combined voting power of the Company’s thenoutstanding securities, increases such Person’s beneficial ownership of suchsecurities by an amount equal to five percent (5%) or more of the combinedvoting power of the Company’s then outstanding securities; or

####  

#### (iv)                              The Board ofDirectors adopts a resolution to the effect that, for purposes hereof, aPotential Change in Control has occurred.

####  

Notwithstanding anythingherein to the contrary, a Potential Change in Control shall cease to exist notlater than the date that (i) the Board of Directors determines that thePotential Change in Control no longer exists, or (ii) a Change in Controloccurs.

 

### ll.                                       QualifyingTermination. “Qualifying Termination” means (i) the termination by Cinergy of theExecutive’s employment with Cinergy during the Employment Period other than atermination for Cause or (ii) the termination by the Executive of theExecutive’s employment with Cinergy during the Employment Period for GoodReason.

###  

### 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 ofemployment.

###  

### 26

### 

###  

### nn.                               SeveranceBenefits.  “SeveranceBenefits” means the payments and benefits payable to the Executive pursuant toSection 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.                               Stock RelatedDocuments.  “StockRelated Documents” means the LTIP, the Cinergy Corp. Stock Option Plan, and theValue Creation Plan and any applicable administrative guidelines and writtenagreements relating to those plans.

###  

### qq.                               Target AnnualBonus.  “Target Annual Bonus” has themeaning set forth in Section 3b.

###  

### rr.                                     Target LTIPBonus.  “Target LTIP Bonus” has themeaning set forth in Section 3b.

###  

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

###  

### tt.                                     Waiver andRelease.  “Waiver and Release” means awaiver and release, in substantially the form attached to this Agreement as ExhibitA.

###  

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

##  

### a.                                       This Agreementwill be governed by and construed in accordance with the laws of the State ofOhio, 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.                                      All notices andother communications under this Agreement will be in writing and will be givenby hand delivery to the other party or by Federal Express or other comparablenational or international overnight delivery service, addressed in the name ofsuch party at the following address, whichever is applicable:

###  

Ifto the Executive:Cinergy Corp.221 East Fourth StreetCincinnati, Ohio 45201-0960

 

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

 

or to such other address aseither party has furnished to the other in writing in accordance with thisAgreement.  All notices andcommunications will be effective when actually received by the addressee.

 

### c.                                       The invalidityor unenforceability of any provision of this Agreement will not affect thevalidity or enforceability of any other provision of this Agreement.

###  

### d.                                      Cinergy maywithhold from any amounts payable under this Agreement such federal, state, orlocal taxes as are required to be withheld pursuant to any applicable law orregulation.

###  

### e.                                       The Executive’sor Cinergy’s failure to insist upon strict compliance with any provision ofthis Agreement or the failure to assert any right the Executive or Cinergy mayhave under this Agreement, including without limitation the right of theExecutive to terminate employment for Good Reason pursuant to Section 4d or theright of Cinergy to terminate the Executive’s employment for Cause pursuant toSection 4b, will not be deemed to be a waiver of that provision or right or anyother provision or right of this Agreement.

###  

### f.                                         References inthis Agreement to the masculine include the feminine unless the context clearlyindicates otherwise.

###  

### g.                                      This instrumentcontains the entire agreement of the Executive and Cinergy with respect to thesubject matter of this Agreement; and subject to any agreements evidencingstock option or restricted stock grants described in Section 3b and the StockRelated Documents, all promises, representations, understandings, arrangements,and prior agreements are merged into this Agreement and accordingly superseded.

###  

### h.                                      This Agreementmay be executed in counterparts, each of which will be deemed to be an originalbut all of which together will constitute one and the same instrument.

###  

### i.                                          Cinergy and theExecutive agree that Cinergy Services, Inc. will be authorized to act forCinergy with respect to all aspects pertaining to the administration andinterpretation of this Agreement.

 

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IN WITNESS WHEREOF, theExecutive and the Company have caused this Agreement to be executed as of theEffective Date.

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

 

 

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**EXHIBIT A**

 

*********

 

**WAIVER AND RELEASE AGREEMENT**

 

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

 

**WHEREAS**, the Parties have entered into theEmployment Agreement dated __________________ (the “Employment Agreement”);

 

**WHEREAS**, the Executive’s employment has beenterminated in accordance with the terms of the Employment Agreement;

 

**WHEREAS**, the Executive is required to sign thisWaiver and Release in order to receive the payment of certain compensationunder the Employment Agreement following termination of employment; and

 

**WHEREAS**, Cinergy has agreed to sign this Waiver andRelease.

 

**NOW, THEREFORE**, in consideration of thepromises and agreements contained herein and other good and valuableconsideration, the sufficiency and receipt of which are hereby acknowledged,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.                                       Inconsideration of the payments to be made and the benefits to be received by theExecutive pursuant to Section 5 of the Employment Agreement (the “SeveranceBenefits”), which the Executive acknowledges are in addition to payment andbenefits to which the Executive would be entitled to but for the EmploymentAgreement, the Executive, on behalf of himself, his heirs, representatives,agents and assigns hereby COVENANTS NOT TO SUE OR OTHERWISE VOLUNTARILYPARTICIPATE IN ANY LAWSUIT AGAINST, FULLY RELEASES, INDEMNIFIES, HOLDSHARMLESS, and OTHERWISE FOREVER DISCHARGES (i) Cinergy, (ii) its subsidiary oraffiliated entities, (iii) all of their present or former directors, officers,employees, shareholders, and agents as well as (iv) all predecessors,successors and assigns thereof (the persons listed in clauses (i) through (iv)hereof shall be referred to collectively as the “Company”) from any and allactions, charges, claims, demands, damages or liabilities of any kind orcharacter whatsoever, known or unknown, which Executive now has or may have hadthrough the effective date of this Waiver and Release.  Executive acknowledges and understands thathe is not hereby prevented from filing a charge of discrimination with theEqual Employment Opportunity Commission or any state-equivalent agency orotherwise participate in any proceedings before such Commissions.  Executive also acknowledges and understandsthat in the event he does

 

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file such a charge, he shallbe entitled to no remuneration, damages, back pay, front pay, or compensationwhatsoever from the Company as a result of such charge.

 

3.                                       Withoutlimiting the 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 that employment;(iii) any claims alleged or which could have been alleged in any charge orcomplaint against the Company; (iv) any claims relating to the conduct of anyemployee, officer, director, agent or other representative of the Company; (v)any claims of discrimination or harassment on any basis; (vi) any claimsarising from any legal restrictions on an employer’s right to separate itsemployees; (vii) any claims for personal injury, compensatory or punitivedamages or other forms of relief; and (viii) all other causes of actionsounding in contract, tort or other common law basis, including: (a) the breachof 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 hascarefully read and fully understands all of the provisions of this Waiver andRelease and that he has entered into this Waiver and Release knowingly andvoluntarily after extensive negotiations and having consulted with his counsel;

 

(b)                                 The SeveranceBenefits offered in exchange for Executive’s release of claims exceed in kindand scope that to which he would have otherwise been legally entitled;

 

(c)                                  Prior tosigning this Waiver and Release, Executive had been advised in writing by thisWaiver and Release as well as other writings to seek counsel from, and has infact had an opportunity to consult with, an attorney of his choice concerningits terms and conditions; and

 

(d)                                 He has beenoffered at least twenty-one (21) days within which to review and consider thisWaiver and Release.

 

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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 into aconfidential Waiver and Release that prohibits him from further discussing thespecifics of his separation.  Nothingcontained herein shall be construed to prevent Executive from discussing orotherwise advising subsequent employers of the existence of any obligations asset 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 thepromises and obligations shall be binding upon and shall inure to the benefitof the heirs, executors, administrators, assigns and successors in interest ofeach of the Parties.

 

12.                                 The Partiesagree that each and every paragraph, sentence, clause, term and provision ofthis Waiver and Release is severable and that, if any portion of this Waiver andRelease should be deemed not enforceable for any reason, such portion shall bestricken and the remaining portion or portions thereof should continue to beenforced to the 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.                                 Executiverepresents and acknowledges that in signing this Waiver and Release he does notrely, and has not relied, upon any representation or statement made by Cinergyor by any of Cinergy’s employees, officers, agents, stockholders, directors orattorneys with regard to the subject matter, basis or effect of this Waiver andRelease other 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 the Executive agree that Cinergy Services, Inc. will be authorized to actfor Cinergy Corp. with respect to all aspects pertaining to the administrationand interpretation of this Waiver and Release.

 

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

 

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

 

**AND UNKNOWN CLAIMS.**

 

IN WITNESS WHEREOF, theParties have themselves signed, or caused a duly authorized agent thereof tosign, this Waiver and Release on their behalf and thereby acknowledge theirintent to be bound by its terms and conditions.

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

 

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