EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT made and entered into as of the 1st day of June, 1996, by and among Cinergy Corp., a Delaware Corporation ("Cinergy"), Cinergy Services, Inc., a Delaware Corporation ("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio Corporation ("CG&E"), PSI Energy, Inc., an Indiana Corporation ("PSI"), and Elizabeth K. Lanier (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI will sometimes be referred to in this Employment Agreement collectively as the "Corporation".

WHEREAS, the Corporation desires that the Executive become an employee in accordance with this Employment Agreement;

WHEREAS, the Executive is willing to commit herself to the employ of the Corporation and any successor thereto, on the terms and conditions set forth in this Employment Agreement and thus to forego opportunities elsewhere; and

WHEREAS, the parties desire to enter into this Employment Agreement as of the date first set forth above setting forth the terms and conditions for the employment relationship of the Executive;

NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and agreements set forth below, it is hereby agreed as follows:

1. Employment and Term.

a. The Corporation agrees to employ the Executive, and the Executive agrees to be employed, in accordance with the terms and provisions of this Employment Agreement for the period set forth below (the "Employment Period").

b. The Employment Period of the Executive as provided in Section 1(a) will commence on June 1, 1996 (the "Effective Date") and shall continue until May 31, 2001, which term may be renewed for an additional period upon the mutual written agreement of the parties.

2. Duties and Powers of Executive.

a. Position. The Executive shall serve the Corporation in such responsible executive capacity or capacities as the Board of Directors of Cinergy or Cinergy Services (the Board of Directors of Cinergy or Cinergy Services, as the case may be, may be referred to sometimes as the "Board") or the Chief Executive Officer of Cinergy may from time to time determine and shall have such capacities, responsibilities, duties and authority as may be assigned to her from time to time during the Employment Period by the Board or the Chief Executive Officer of Cinergy or the Chief Operating Officer of Cinergy that are consistent with such capacities, responsibilities, duties and authority. Upon the Effective Date of this Employment Agreement, the Executive shall initially serve as Vice President and Chief of Staff for the Corporation, but consistent with the foregoing provisions of this Section 2(a), may be assigned to any other position or positions by either the Board or the Chief Executive Officer of Cinergy during the Employment Period.

b. Place of Performance. In connection with the Executive's employment, the Executive shall be based at the principal executive offices of the Corporation, 221 East Fourth Street, Cincinnati, Ohio, and, except for required business travel to an extent substantially consistent with the present business travel obligations of executives of the Corporation who have positions of authority comparable to that of the Executive, the Executive shall not be required to relocate to a new principal place of business which is more that thirty
(30) miles from the current principal place of business of the Corporation.

3. Compensation. The Executive shall receive the following compensation for her services under this Employment Agreement.

a. Salary. The Executive's annual base salary (the "Annual Base Salary"), payable not less often than semi-monthly, shall be at the annual rate of not less than $220,000. The Board may, from time to time, direct such upward adjustments in the Annual Base Salary as the Board deems to be necessary or desirable, including without limitation adjustments in order to reflect increases in the cost of living. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation of the Corporation under this Employment Agreement. The Annual Base Salary shall not be reduced after any increase thereof except for across-the-board salary reductions similarly affecting all executive management personnel of Cinergy, Cinergy Services, PSI and CG&E.

b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits. During the Employment Period and so long as the Executive is employed by the Corporation, the Executive shall be eligible, and the Corporation shall take such actions as may be necessary or required to cause the Executive to become eligible, to participate in all short-term and long-term incentive, stock option, restricted stock, performance unit, savings, retirement and welfare plans, practices, policies and programs applicable generally to employees and/or other senior executives of the Corporation, including but not limited to Cinergy's Annual Incentive Plan, Cinergy's Performance Shares Plan, Cinergy's 1996 Long-Term Incentive Compensation Plan, Cinergy's Executive Supplemental Life Insurance Program, Cinergy's Stock Option Plan, PSI's Employees' 401(k) Savings Plan, PSI's Pension Plan, PSI's Supplemental Retirement Plan and PSI's Excess Benefit Plan, or any successors thereto, except with respect to any plan, practice, policy or program to which the Executive has waived her rights in writing.

c. Fringe Benefits and Perquisites. During the Employment Period and so long as the Executive is employed by the Corporation, the Executive shall be entitled to the following additional fringe benefits:

(i) The Corporation shall furnish to the Executive an automobile and shall pay all of the related expenses for gasoline, insurance, maintenance and repairs,

(ii) The Corporation shall reimburse the initiation fee and shall pay the annual dues, assessments and other membership charges of the Executive for membership charges of the Executive for membership in a country club selected by the Executive,

(iii) The Corporation shall provide paid vacation for four (4) weeks per year (or longer if permitted by the Corporation's policy), and

(iv) The Corporation shall furnish to the Executive annual financial planning and tax preparation services. In addition, the Executive shall be entitled to receive such other fringe benefits in accordance with the plans, practices, programs and policies of the Corporation from time to time in effect, commensurate with her position and at least comparable to those received by other senior executives of the Corporation.

d. Expenses. The Corporation agrees to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by her in the performance of her duties under this Employment Agreement in accordance with the policies established from time to time by the Board.

4. Termination of Employment.

a. Death. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period.

b. By the Corporation for Cause. The Corporation may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Employment Agreement, "Cause" shall mean:

(i) The willful and continued failure by the Executive to substantially perform the Executive's duties with the Corporation (other than any such failure resulting from Executive's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 4(c)) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, and the Executive fails to substantially perform the Executive's duties to the satisfaction of the Board within sixty (60) days of receipt of the Board's written demand for substantial performance; or

(ii) The breach by the Executive of the confidentiality provisions set forth in Section 8 of this Employment Agreement, or

(iii) The conviction of the Executive for the commission of a felony, including the entry of a guilty or nolo contendere plea, or any willful or grossly negligent action or inaction by the Executive that has a materially adverse effect on the Corporation.

For purposes of this definition of "Cause", no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Corporation. Notwithstanding the above definition of "Cause", the Corporation may terminate the Executive's employment during the Employment Period for a reason other than Cause, but the obligations placed upon the Corporation in Section 5 shall apply.

c. By the Executive for Good Reason. The Executive may terminate her employment during the Employment Period for Good Reason. For purposes of this Employment Agreement, "Good Reason" shall mean:

(i) The reduction in the Executive's Annual Base Salary as specified in Section 3(a) of this Employment Agreement, or any other benefit or payment described in Section 3 of this Employment Agreement, except for across-the-board salary reductions similarly affecting all management personnel of Cinergy, Cinergy Services, CG&E, and PSI, and changes to the employee benefits programs affecting all management personnel of those Corporations, provided that such changes (either individually or in the aggregate) will not result in a material adverse change with respect to the benefits which the Executive was entitled to receive as of the Effective Date;

(ii) The material reduction without her consent of the Executive's title, authority, duties or responsibilities from those in effect immediately prior to the reduction;

(iii) Any breach by the Corporation of any other material provision (including but not limited to the place of performance as specified in Section 2(b);

(iv) The Executive's disability due to physical or mental illness or injury which precludes the Executive from performing any job for which she is qualified and able to perform based upon her education, training or experience; or

(v) Any event which constitutes a "Change in Control" as defined in Section 4(f) of this Employment Agreement.

d. Notice of Termination. Any termination by the Corporation for cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party to this Employment Agreement given in accordance with Section 10(b) of this Employment Agreement. For purposes of this Employment Agreement, a "Notice of Termination" means a written notice which:

(i) Indicates the specific termination provision in this Employment Agreement relied upon,

(ii) To the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and

(iii) If the Date of Termination (as defined in
Section 4(e)) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Corporation to set forth in the Notice of Termination any fact or circumstances which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Corporation under this Employment Agreement or preclude the Executive or the Corporation from asserting such fact or circumstances in enforcing the Executive's or the Corporation's rights under this Employment Agreement.

e. Date of Termination. "Date of Termination" means:

(i) If the Executive's employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be,

(ii) If the Executive's employment is terminated by the Corporation other than for Cause, the date on which the Corporation notifies the Executive of such termination, and

(iii) If the Executive's employment is terminated by reason of death, the date of death.

f. Change in Control. A "Change in Control" shall be deemed to have occurred if any of the following events occur after the Effective Date:

(i) Any corporation, person, other entity or group becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more than fifty percent (50%) of the then outstanding voting stock of Cinergy otherwise than through a transaction arranged by, or consummated with, the prior approval of the Board;

(ii) The shareholders of Cinergy approve a definite agreement to merge or consolidate with or into another corporation in a transaction in which neither Cinergy nor any of its subsidiaries or affiliates will be the surviving corporation, or to sell or otherwise dispose of all or substantially all of Cinergy's assets to any person or group other than Cinergy or any of its subsidiaries or affiliates, other than a merger or a sale which will result in the voting securities of Cinergy outstanding prior to the merger or sale continuing to represent at least fifty percent (50%) of the combined voting power of the voting securities of the corporation surviving the merger or purchasing the assets;

(iii) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Cinergy (and any new director whose election by the Board of Directors of Cinergy or whose nomination for election by Cinergy's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of Cinergy's Board of Directors; or

(iv) James E. Rogers ceases to be Cinergy's Chief Executive Officer.

g. Person. "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include:

(i) The Corporation or any of its subsidiaries,

(ii) A trustee or other fiduciary holding securities under an employee benefit plan of Cinergy or any of its subsidiaries,

(iii) An underwriter temporarily holding securities pursuant to an offering of such securities, or

(iv) A corporation owned, directly or indirectly, by the stockholders of Cinergy in substantially the same proportions as their ownership of stock of the Corporation.

5. Obligations of the Corporation Upon Termination.

a. Certain Terminations. During the Employment Period, if the Corporation shall terminate the Executive's employment (other than in the case of a termination for Cause), the Executive shall terminate her employment for Good Reason or the Executive's employment shall terminate by reason of death (termination in any such case referred to as "Termination"):

(i) The Corporation shall pay to the Executive a lump sum amount, in cash, equal to the sum of:

(1) the Executive's Annual Base Salary through the Date of Termination to the extent not previously paid,

(2) an amount equal to the Cinergy Annual Incentive Plan target percentage benefit for the fiscal year that includes the Date of Termination multiplied by a fraction the numerator of which shall be the number of days from the beginning of such fiscal year to and including the Date of Termination and the denominator of which shall be three hundred and sixty-five (365),

(3) an amount equal to her vested accrued benefit under the Cinergy Performance Shares Plan, and

(4) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not previously paid.

(The amounts specified in clauses (1), (2),
(3) and (4) shall be referred to in this Employment Agreement as the "Accrued Obligations".) The amounts specified in this
Section 5(a)(i) shall be paid within thirty
(30) days after the Date of Termination. The Accrued Obligations described in this Section are payable to the Executive regardless of whether a Change in Control has occurred.

(ii) Prior to the occurrence of a Change in Control, and in the event of Termination other than by reason of the Executive's death, then:

(1) the Corporation shall pay to the Executive a lump sum amount, in cash, equal to the present value discounted using an interest rate equal to the prime rate promulgated by CitiBank, N.A. and in effect as of the Date of Termination (the "Prime Rate") of the Annual Base Salary, and the Cinergy Annual Incentive Plan target percentage payable through the end of the Employment Period, each at the rate, and using the same goals and factors, in effect at the time Notice of Termination is given, and paid within thirty (30) days of the Date of Termination;

(2) the Corporation shall pay to the Executive the present value (discounted at the Prime Rate) of all amounts to which the Executive would have been entitled had she remained in employment with the Corporation until the end of the Employment Period, each, where applicable, at the rate of the Annual Base Salary, and using the same goals and factors, in effect at the time Notice of Termination is given, under the Cinergy Performance Shares Plan and the Cinergy Executive Supplemental Life Insurance Program minus the present value (discounted at the Prime Rate) of the benefits to which she is actually entitled under the above mentioned plans and programs;

(3) the Corporation shall pay the value of all deferred compensation amounts and all executive life insurance benefits whether or not then vested or payable; and

(4) the Corporation shall continue, until the end of the Employment Period, medical and welfare benefits to the Executive and/or the Executive's family at least equal to those which would have been provided if the Executive's employment had not been terminated (excluding benefits to which the Executive has waived her rights in writing), such benefits to be in accordance with the most favorable medical and welfare benefit plans, practices, programs or policies (the "M&W Plans") of the Corporation as in effect and applicable generally to other senior executives of the Corporation and their families during the ninety (90) day period immediately preceding the Date of Termination; provided, however, that if the Executive becomes employed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the benefits under the M&W Plans shall be secondary to those provided under such other plan during such applicable period of eligibility.

(iii) From and after the occurrence of a Change in Control and in the event of Termination other than by reason of the Executive's death, then in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any other benefits payable pursuant to Section 5(a)(ii) of this Employment Agreement:

(1) The Corporation shall pay to the Executive a lump sum severance payment, in cash, equal to the greater of:

(A) the present value of all amounts and benefits that would have been due under
Sections 5(a)(ii) of this Employment
Agreement, excluding Section
5(a)(ii)(4), and

(B) three (3) times the sum of (x) the
higher of the Executive's Annual Base
Salary in effect immediately prior to
the occurrence of the event or
circumstance upon which the Notice of
Termination is based or in effect
immediately prior to the Change in
Control, and (y) the higher of the
amount paid to the Executive pursuant to all incentive compensation or bonus
plans or programs maintained by the
Corporation, in the year preceding that
in which the Date of Termination occurs
or in the year preceding that in which
the Change in Control occurs; and

(2) For a thirty-six (36) month period after the Date of Termination, the Corporation shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving immediately prior to the Notice of Termination (without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason), except for any benefits that were waived by the Executive in writing. Benefits otherwise receivable by the Executive pursuant to this Section 5(a)(iii)(2) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits actually received by the Executive shall be reported to the Corporation by the Executive).

The Executive's employment shall be deemed to have been terminated following a Change in Control of Cinergy without Cause or by the Executive for Good Reason if, in addition to all other applicable Terminations, the
Executive's employment is terminated prior to a Change in Control without Cause at the direction of a Person who has entered into an agreement with Cinergy or any of its
subsidiaries or affiliates, the consummation of which will constitute a Change in Control or if the Executive terminates her employment for Good Reason prior to a Change in Control if the circumstances or event which
constitutes Good Reason occurs at the
direction of such Person.

b. Termination by the Corporation for Cause or by the Executive Other Than for Good Reason. Subject to the provisions of Section 7 of this Employment Agreement, if the Executive's employment shall be terminated for Cause during the Employment Period, or if the Executive terminates employment during the Employment Period other than a termination for Good Reason, the Corporation shall have no further obligations to the Executive under this Employment Agreement other than the obligation to pay to the Executive the Accrued Obligations and the amounts determined under Section
5(c), plus any other earned but unpaid compensation, in each case to the extent not previously paid.

c. Retirement Benefits on Termination. In addition to retirement benefits under PSI's Pension Plan, PSI's Supplemental Retirement Plan, and PSI's Excess Benefit Plan, or any successor thereto, the Executive shall be eligible to participate in any supplemental executive retirement plan (commonly referred to as a "SERP") sponsored by the Corporation.

d. Survival of Section 5(c). The provisions of Section 5(c) shall survive the expiration or termination of this Employment Agreement for any reason.

e. Certain Tax Consequences. In the event that the Executive becomes entitled to the payments and benefits described in this Section 5 (the "Severance Benefits"), if any of the Severance Benefits will be subject to any excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Corporation shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of an Excise Tax on the Severance Benefits and any federal, state and local income and employment tax and Excise Tax upon the payment provided for by this Section 5, shall be equal to the Severance Benefits. For purposes of determining whether any of the Severance Benefits will be subject to the Excise Tax and the amount of such Excise Tax,

(i) any other payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Employment Agreement or any other plan, arrangement or agreement with the Corporation, any Person whose actions result in a Change in Control or any Person affiliated with the Corporation or such Person) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and reasonably acceptable to the Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount as defined in Section 280G(b)(3) of the Code allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax,

(ii) the amount of the Severance Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of

(1) the total amount of the Severance Benefits, or

(2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i), above), and

(iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Corporation's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination, net of the maximum reduction in federal income taxes which would be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Corporation, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment tax imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in Excise Tax and/or a federal, state or local income or employment tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) at the time that the amount of such excess is finally determined. The Executive and the Corporation shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Severance Benefits.

f. Other Fees and Expenses. The Corporation also shall pay to the Executive all legal fees and expenses incurred by the Executive as a result of a termination which entitles the Executive to the Severance Benefits (including all such fees and expenses, if any, incurred in disputing any such termination or in seeking in good faith to obtain or enforce any benefit or right provided by this Employment Agreement). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Corporation reasonably may require.

6. Non-exclusivity of Rights. Nothing in this Employment Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, plan, program, policy or practice provided by the Corporation and for which the Executive may qualify (except with respect to any benefit to which the Executive has waived her rights in writing), nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement entered into after the date hereof with the Corporation. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any benefit, plan, program, policy or practice of, or any contract or agreement entered into after the date hereof with, the Corporation at or subsequent to the Date of Termination, shall be payable in accordance with such benefit, plan, program, policy or practice, or contract or agreement, except as explicitly modified by this Employment Agreement.

7. Full Settlement: Mitigation. Except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this Employment Agreement, the Corporation's obligation to make the payments provided for in this Employment Agreement and otherwise to perform its obligations under this Employment Agreement shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts (including amounts for damages for breach) payable to the Executive under any of the provisions of this Employment Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. If the Executive finally prevails with respect to any dispute between the Corporation, the Executive or others as to the interpretation, terms, validity or enforceability of (including any dispute about the amount of any payment pursuant to) this Employment Agreement, the Corporation agrees to pay all legal fees and expenses which the Executive may reasonably incur as a result of any such dispute.

8. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of Cinergy, all of its subsidiary companies and affiliates, as well as all successors and assigns thereof (the "Cinergy Companies"), all secret, confidential information, knowledge or data relating to the Cinergy Companies, and their respective businesses, that shall have been obtained by the Executive during the Executive's employment by the Corporation and that shall not have been or now or subsequently have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Employment Agreement). During the Employment Period and thereafter, the Executive shall not, without the prior written consent of the Corporation or as may otherwise by required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by it. The Executive understands that during the Employment Period, the Cinergy Companies may be required from time to time to make public disclosure of the terms or existence of the Executive's employment relationship in order to comply with various laws and legal requirements. In addition to all other remedies available to the Corporation in law and equity, this Employment Agreement is subject to termination by the Corporation for Cause under Section 4(b) in the event the Executive violates any provision of this Section 8.

9. Successors.

a. This Employment Agreement is personal to the Executive and, without the prior written consent of the Corporation, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Employment Agreement shall insure to the benefits of and be enforceable by the Executive's legal representatives.

b. This Employment Agreement shall inure to the benefit of and be binding upon the Corporation, and its successors and assigns.
c. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Employment Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place.

10. Miscellaneous.

a. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Employment Agreement are not part of the provisions hereof and shall have no force or effect. This Employment Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought. No person, other than pursuant to a resolution of the Board or a committee thereof, shall have authority on behalf of the Corporation to agree to amend, modify, repeal, waive, extend or discharge any provision of this Employment Agreement or anything in reference thereto.

b. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Elizabeth K. Lanier
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer

or to such other address as either party shall have furnished to the other in writing in accordance with this Employment Agreement. All notices and communications shall be effective when actually received by the addressee.

c. The invalidity or unenforceability of any provision of this Employment Agreement shall not affect the validity or enforceability of any other provision of this Employment Agreement.

d. The Corporation may withhold from any amounts payable under this Employment Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

e. The Executive's or the Corporation's failure to insist upon strict compliance with any provision of this Employment Agreement or the failure to assert any right the Executive or the Corporation may have under this Employment Agreement, including without limitation the right of the Executive to terminate employment for Good Reason pursuant to Section 4(c) of this Employment Agreement, or the right of the Corporation to terminate the Executive's employment for Cause pursuant to
Section 4(b) of this Employment Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Employment Agreement.

f. This instrument contains the entire agreement of the Executive and the Corporation with respect to the subject matter hereof; and all promises, representations, understandings, arrangements and prior agreements are merged into this Employment Agreement and accordingly superseded.

g. This Employment Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

h. The Corporation and the Executive agree that Cinergy shall be authorized to act for the Corporation with respect to all aspects pertaining to the administration and interpretation of this Employment Agreement.

IN WITNESS WHEREOF, the Executive and the Corporation have caused this Employment Agreement to be executed as of the day and year first above written.

CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.

By: JAMES E. ROGERS
James E. Rogers
Vice Chairman and Chief Executive Officer

EXECUTIVE

ELIZABETH K. LANIER
Elizabeth K. Lanier

Adopted by the PSI Energy, Inc.
Board of Directors on December 17, 1996

AMENDMENT TO THE PSI ENERGY, INC.
UNION EMPLOYEES' 401(k) SAVINGS PLAN

The PSI Energy, Inc. Union Employees' 401(k) Savings Plan, as amended and restated effective January 1, 1992, and as amended effective January 1, 1992, is hereby further amended pursuant to Article 16 thereof. Amendments with respect to the modification of Sections 3.1, 5.5, 7.6(a)(4), and 7.6(b)(4) are effective January 1, 1996. Amendments with respect to the modification of Sections 14.1, 14.2(b), and 14.2(h) are effective April 1, 1996. Amendments with respect to the modification of Sections 1.13, 1.79, 5.1(a), and 5.1(c) are effective July 1, 1996.

(1) Explanation of Amendments

Section 3.1 is amended, effective January 1, 1996, by deleting the requirement that an employee must be an employee for at least nine months before he or she is eligible to participate in the Plan. Thus, with the amendment each new employee is eligible to enroll immediately in the Plan.

Section 5.5 is amended, effective January 1, 1996, to provide that there are no limitations as to the number of times during a calendar year that a participant may reduce or increase his or her before-tax or after-tax contributions.

Sections 7.6(a)(4) and 7.6(b)(4) are amended, effective January 1, 1996, to lower to age 50 the age at which participants in the Plan may reallocate balances held in the Stock Fund whenever the Plan is on a monthly or daily accounting basis, respectively.

Sections 14.1, 14.2(b), and 14.2(h) are amended, effective April 1, 1996. Each of these sections pertains to loans from a participant's accounts. Section 14.1 is amended to allow loan applications to be made in any manner prescribed by PSI's Comptroller. This amendment will allow loan applications to be made in writing or orally by telephone. Section 14.2(b) removes the former $1,000 minimum loan requirement and allows the participant's rollover account to be considered in determining the maximum available loan. Section 14.2(h) provides that proceeds equal to the amount of a loan shall be transferred pro rata from a participant's account and repaid proportionately into the participant's accounts in accordance with the investment directive in effect when the loan was made.

Section 1.12 is amended, effective July 1, 1996, to include overtime pay as compensation subject to deferral into the Plan. However, overtime pay will not be considered when calculating the company matching contributions.

Section 1.78, the definition of "overtime pay" is added, effective July 1, 1996.

Sections 5.1(a) and 5.1(c) are amended, effective July 1, 1996, to provide that the maximum before-tax and/or after-tax contribution that can be made annually by a participant is 15% of the participant's eligible compensation.

(2) Amendments Effective January 1, 1996

(a) Section 3.1 as Amended

Section 3.1, as hereby amended, reads as follows:

"3.1 Eligibility Requirements for Participation.

Each Union Employee on January 1, 1996, who was participating in the Plan as of December 31, 1995, shall continue as a Participant in the Plan as of January 1, 1996.

Each other Employee may become a Participant on the first Entry Date following the date on which he meets all of the following requirements:

(a) The Employee has attained age 21;
(b) The Employee is a Union Employee; and
(c) The Employee has elected to enroll in the Plan pursuant to Section 3.2 (Entry Dates for Participation).

No Employee shall become a Participant prior to the Plan's effective date. An Employee who meets the requirement of Items (a), and (b), but who does not elect to enroll in the Plan pursuant to
Section 3.2 (Entry Dates for Participation), shall be considered an `Eligible Employee.'"

(b) Section 5.5 as Amended
Section 5.5, as hereby amended, reads as follows:
"5.5 Modification of Deferred Compensation Contribution and After-Tax Contribution.

(a) A Participant who desires to reduce or increase the amount of his Deferred Compensation Contribution may elect to do so, in writing, on a form prescribed by PSI's Comptroller. There shall be no limitation on the total number of reductions, increases, or combination of reductions and increases, including any discontinuances or resumptions of Deferred Compensation Contributions, effected by a Participant during any Plan Year. If a Participant elects to discontinue his Deferred Compensation Contributions, then he shall not be able to resume having any contributions made until the first full Payroll Period of any calendar quarter which quarter begins at least 90 days after the last day of the last Payroll Period with respect to which Deferred Compensation Contributions were previously elected. Any election to resume Deferred Compensation Contributions shall be made by the Participant in the manner described in this Subsection with respect to reducing or increasing contributions.

(b) A Participant who desires to reduce or increase the amount of his After-Tax Contribution may elect to do so, in writing, on a form prescribed by PSI's Comptroller. There will be no limitation on the total number of reductions, increases, or combination of reductions and increases, including any discontinuances or resumptions of After-Tax Contributions, effected by a Participant during any Plan Year. If a Participant elects to discontinue his After-Tax Contributions, then he shall not be able to resume having contributions made until the first full Payroll Period of any calendar quarter which quarter begins at least 90 days after the last day of the last Payroll Period with respect to which After-Tax Contributions were previously elected. Any election to resume After- Tax Contributions shall be made by the Participant in the manner described in this Subsection with respect to reducing or increasing the contributions. A Participant's election to reduce or increase either his Deferred Compensation Contribution or his After-Tax Contribution shall become effective as of the first day of the Participant's first Payroll Period following by 15 days (or any shorter period of time as may be designated by PSI's Comptroller) the date on which PSI's Manager, Payroll-Benefits receives the Participant's written modification election."

(c) Section 7.6(a)(4) as Amended
Section 7.6(a)(4), as hereby amended, reads as follows:

"(4) A Participant may not reallocate the Fund balances of his Employer Matching Account or his Incentive Matching Account with regard to Employer Matching Contributions or Incentive Matching Contributions made on or after January 1, 1992. Instead, these amounts must remain invested in the Stock Fund until the Participant attains age 55 (age 50 effective January 1, 1996) at which time the Fund balances may be reallocated, at least once during any calendar quarter, in multiples of five percent, among the Fund options upon the receipt by PSI's Manager, Payroll-Benefits of a written reallocation on a form prescribed by PSI's Comptroller. A reallocation shall become effective as of the first day of the first calendar quarter of a Plan Year (or as of any other day or days of a Plan Year as designated by PSI's Comptroller) that follows by 15 days (or any shorter period of time as designated by PSI's Comptroller) receipt of the proper form by PSI's Manager, Payroll-Benefits."

(d) Section 7.6(b)(4) as Amended Article 7.6(b)(4), as hereby amended, reads as follows:

"(4) A Participant may not reallocate the Fund balances of his Employer Matching Account or his Incentive Matching Amount with regard to Employer Matching Contributions made on or after January 1, 1992. Instead, these amounts must remain invested in the Stock Fund until the Participant attains age 55 (age 50 effective January 1, 1996) at which time the Fund balances may be reallocated, at least once during any calendar quarter, in multiples of five percent, among the Fund options upon the receipt by PSI's Manager, Payroll- Benefits of a written reallocation on a form prescribed by PSI's Comptroller. A reallocation shall become effective as of the first day of the first calendar quarter of a Plan Year (or as of any other day or days of a Plan Year as designated by PSI's Comptroller) that follows by 15 days (or any shorter period of time as designated by PSI's Comptroller) receipt of the proper form by PSI's Manager, Payroll-Benefits."

(3) Amendments Effective April 1, 1996

(a) Section 14.1 as Amended

Section 14.1, as hereby amended, reads as follows:

"14.1 Effective Date

Upon proper application by a Participant, in a manner prescribed by PSI's Comptroller and delivered to PSI's Manager, Payroll-Benefits, who shall administer the Plan's loan program, PSI may direct the Trustee to make a loan to a Participant subject to the requirements of this Article and any other rules as PSI may prescribe. In deciding whether to approve or deny any written request for a loan, PSI's Manager, Payroll-Benefits shall take into consideration the factors applied by commercial banks in making loan decisions, including the Participant's creditworthiness and the available security for the loan. PSI shall apply the eligibility requirements and rules for a loan uniformly to all Participants. For purposes of this Article, the term `Participant' includes Employees and former Employees and Beneficiaries who are `parties in interest,' as defined in ERISA Section 3(14)."

(b) Section 14.2(b) as Amended

Section 14.2(b), as hereby amended, reads as follows:

"(b) There is no minimum principal amount requirement for a loan. The principal amount of any loan to be made plus the principal amount of all loans to a Participant outstanding at the time the loan is to be made shall not exceed the lesser of (1) 50% of the balance of the Participant's Deferred Compensation Account, ESOP Transfer Account, and Rollover Account, and (2) $50,000 reduced by the excess of the highest outstanding balance of loans to the Participant from the Plan during the period beginning one year and one day before the day the loan is to be made over the outstanding balance of loans from the Plan on the date on which the loan is to be made. A Participant may have no more than two loans outstanding at any time. A loan shall be made within 30 days after the loan is approved by PSI or as soon thereafter as administratively feasible. All charges, including all expenses and fees incurred in connection with the processing, record keeping, or refinancing of any loan are, to the extent administratively feasible, charged to the Participant who received the loan, except to the extent paid by the Employers."

(c) Section 14.2(h) as Amended

Section 14.2(h), as hereby amended, reads as follows:

"(h) Amounts equal to any loans shall be transferred pro rata from the Participant's subaccounts under his Deferred Compensation Account, ESOP Transfer Account, and Rollover Account in proportion to the principal amount of the loan. PSI's Comptroller shall establish, operate, and maintain a loan subaccount or otherwise account for the receipt of amounts transferred from the Participant's Fund
subaccounts. Appropriate accounting entries reflecting transfers shall be concurrent with the disbursement to the Participant of amounts borrowed. Interest received by the Trustee in respect of amounts borrowed by a Participant shall be credited to the Participant's loan subaccount or otherwise properly credited at the end of each month. Interest so allocated to a Participant shall then be allocated proportionately among the Participant's Fund subaccounts in accordance with the Participant's investment directions in effect when the loan was made. A repayment of principal by a Participant shall be invested among the Funds and credited proportionately to the Participant's appropriate Fund subaccounts in accordance with the Participant's investment directions in effect when the loan was made. If contributions on behalf of the Participant have been suspended or discontinued for any other reason at the time of any interest payment or principal repayment, the payments or repayments shall be invested in accordance with the investment direction in effect when the loan was made."

(4) Amendments Effective July 1, 1996

(a) Section 1.12 as Amended

Section 1.12, as hereby amended, reads as follows:

"1.12 `Compensation' means, effective July 1, 1996, with respect to an Employee for any period of reference, the sum of the Employee's (1) Base Wage, (2) Ratification Pay, (3) Overtime Pay, and
(4) Pre-Paid Sick-Time, plus (5) Deferred Compensation Contributions made on behalf of the Employee for the Plan Year and other elective contributions made by the Employer on behalf of the Employee during the Plan Year that are not includible in gross income under Code Section 125, Paragraph 402(a)(8), Subsection 402(h), or Subsection 403(b), provided, however, that annual Compensation taken into account under the Plan for any Plan Year beginning on or after January 1, 1989, shall not exceed the limitation specified in Code Paragraph 401(a)(17) (as adjusted for increases in the limitation pursuant to Code Subparagraph 401(a)(17)(B)). For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation specified in Code Paragraph 401(a)(17) shall mean the OBRA '93 Annual Compensation Limit. In determining an Employee's Compensation, the rules of Code Paragraph 414(q)(6) shall apply, except that in applying those rules, the term `family' shall include only the Employee's spouse and lineal descendants who have not attained age 19 before the close of the Plan Year.

Notwithstanding anything in this Subsection to the contrary, with respect to any Employee, the term `Compensation' shall not include Overtime Pay for purposes of Article 6 (Employer
Contributions)."

(b) Section 1.78 as Added
Section 1.78, as hereby added, reads as follows:

"1.78 `Overtime Pay' means, with respect to an Employee, the pay received at one-half times the Employee's regular rate of pay as remuneration for hours worked in a work day or a work week in excess of 8 hours or 40 hours, respectively, for the relevant period."

(c) Section 5.1(a) as Amended

Section 5.1(a), as hereby amended, reads as follows:

"(a) Deferred Compensation Contributions. Subject to the limitations set forth in Section 5.6 (Deferred Compensation Contribution Limitation), each Employer shall contribute to the Trust Fund, on behalf of each Participant employed by the Employer as a Deferred Compensation Contribution an amount elected by the Participant equal to not less than one percent nor more than 15 percent (expressed as a whole percentage) of the Participant's Compensation for the first full Payroll Period of the month for which the Participant's election to defer Compensation is to become effective and shall continue for each subsequent Payroll Period that the election is in effect. However, if a Participant receives a hardship withdrawal under Section 12.1 (Hardship Withdrawals) of the Plan or under Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Employees' 401(k) Savings Plan, the Participant's Deferred Compensation Contributions shall be suspended for a period of 12 months after the receipt of the hardship withdrawal. An election shall be made by the Participant filing with PSI's Manager, Payroll-Benefits the written form prescribed by PSI's Comptroller at least 15 days (or such shorter period of time as may be designated by PSI's Comptroller) before the first day of the month during which the election is to be effective. The total sum of Deferred Compensation Contributions made under this Plan when combined with the amount of elective deferrals made under any other Employer plan established and maintained by any Employer or Affiliate under Code Subsection 401(k) for a Participant's taxable year, shall not exceed the excess deferral limitation set forth in Code Paragraph 402(g)(1), as adjusted pursuant to Code Paragraph 402(g)(5). However, if a Participant receives a hardship withdrawal under Section 12.1 (Hardship Withdrawals) of the Plan or under
Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Employees' 401(k) Savings Plan, the Participant may not make Deferred Compensation Contributions for the Participant's taxable year immediately following the taxable year of the hardship withdrawal in excess of the applicable limit under Code Subsection 402(g) for the next taxable year less the amount of the Participant's Deferred Compensation Contributions for the taxable year of the hardship withdrawal. The Deferred Compensation Contribution attributed to each Participant shall be allocated to the Participant's Deferred Compensation Account."

(d) Section 5.1(c) as Amended

Section 5.1(c), as hereby amended, reads as follows:

"(c) After-Tax Contributions. A Participant may also elect to make an After-Tax Contribution of his Compensation to the Trust Fund on his behalf in an amount (expressed as a whole percentage) which together with his Deferred Compensation Contributions, shall not exceed 15 percent of his Compensation (1) for the first full Payroll Period of the month for which the Participant's election (as described in this Paragraph) to make After-Tax Contributions is to become effective and shall continue for each subsequent Payroll Period that the election is in effect (payroll deduction). In the alternative, a Participant may elect to make once per Plan Year an After-Tax Contribution in lump sum payment by a check or money order by the Participant payable to the Trustee and submitted to PSI's Manager, Payroll-Benefits. However, the amount of a Participant's After-Tax Contributions for a Plan Year shall not cause the Participant's Annual Addition to exceed his Maximum Permissible Amount. If a Participant receives a hardship withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Employees' 401(k) Savings Plan, the Participant's After-Tax Contributions shall be suspended for a period of 12 months after the receipt of the hardship withdrawal. If a Participant receives a withdrawal under Section 12.2 (Withdrawals from After-Tax Contribution Account) of the Plan, the Participant's After-Tax Contributions shall be suspended for a period of 12 months after the receipt of the withdrawal. The After-Tax Contribution attributed to each Participant shall be allocated to the Participant's After-Tax Contribution Account. Any election described in this Subsection shall be made by the Participant in the same manner described in Subsection 5.1(a) with respect to Deferred Compensation
Contributions."

This Amendment is executed and approved by the duly authorized officers of PSI Energy, Inc., effective as of the dates set forth herein.

                                                                By:             JAMES E.
ROGERS
                                                                                  James E.
Rogers
                                                                                   Vice
Chairman and
                                                                            Chief Executive
Officer

                                                                Dated:           December
30, 1996

APPROVED:

By:             CHERYL M. FOLEY
                      Cheryl M. Foley
        Vice President, General Counsel
               and Corporate Secretary

Dated:          December 30, 1996

Adopted by the PSI Energy, Inc.
Board of Directors on December 17, 1996

AMENDMENT TO THE PSI ENERGY, INC.
EMPLOYEES' 401(k) SAVINGS PLAN

The PSI Energy, Inc. Employees' 401(k) Savings Plan, as amended and restated effective January 1, 1992, and as amended effective January 1, 1992, is hereby further amended pursuant to Article 16 thereof. Amendments with respect to the modification of Sections 3.1, 5.5, 7.6(a)(4), and 7.6(b)(4) are effective January 1, 1996. Amendments with respect to the modification of Sections 14.1, 14.2(b), and 14.2(h) are effective April 1, 1996. Amendments with respect to the modification of Sections 1.13, 1.79, 5.1(a), and 5.1(c) are effective July 1, 1996.

(1) Explanation of Amendments

Section 3.1 is amended, effective January 1, 1996, by deleting the requirement that an employee must be an employee for at least nine months before he or she is eligible to participate in the Plan. Thus, with the amendment each new employee is eligible to enroll immediately in the Plan.

Section 5.5 is amended, effective January 1, 1996, to provide that there are no limitations as to the number of times during a calendar year that a participant may reduce or increase his or her before-tax or after-tax contributions.

Sections 7.6(a)(4) and 7.6(b)(4) are amended, effective January 1, 1996, to lower to age 50 the age at which participants in the Plan may reallocate balances held in the Stock Fund whenever the Plan is on a monthly or daily accounting basis, respectively.

Sections 14.1, 14.2(b), and 14.2(h) are amended, effective April 1, 1996. Each of these sections pertains to loans from a participant's accounts. Section 14.1 is amended to allow loan applications to be made in any manner prescribed by PSI's Comptroller. This amendment will allow loan applications to be made in writing or orally by telephone. Section 14.2(b) removes the former $1,000 minimum loan requirement and allows the participant's rollover account to be considered in determining the maximum available loan. Section 14.2(h) provides that proceeds equal to the amount of a loan shall be transferred pro rata from a participant's account and repaid proportionately into the participant's accounts in accordance with the investment directive in effect when the loan was made.

Section 1.13 is amended, effective July 1, 1996, to include overtime pay as compensation subject to deferral into the Plan. However, overtime pay will not be considered when calculating the company matching contributions.

Section 1.79, the definition of "overtime pay" is added, effective July 1, 1996.

Sections 5.1(a) and 5.1(c) are amended, effective July 1, 1996, to provide that the maximum before-tax and/or after-tax contribution that can be made annually by a participant is 15% of the participant's eligible compensation.

(2) Amendments Effective January 1, 1996

(a) Section 3.1 as Amended

Section 3.1, as hereby amended, reads as follows:

"3.1 Eligibility Requirements for Participation.

Each Exempt Employee and Non-Exempt Employee on January 1, 1996, who was participating in the Plan as of December 31, 1995, shall continue as a Participant in the Plan as of January 1, 1996.

Each other Employee may become a Participant on the first Entry Date following the date on which he meets all of the following requirements:

(a) The Employee has attained age 21;
(b) The Employee is an Exempt Employee or a Non- Exempt Employee; and
(c) The Employee has elected to enroll in the Plan pursuant to Section 3.2 (Entry Dates for Participation).

No Employee shall become a Participant prior to the Plan's effective date. An Employee who meets the requirement of Items (a), and (b), but who does not elect to enroll in the Plan pursuant to
Section 3.2 (Entry Dates for Participation), shall be considered an `Eligible Employee.'"

(b) Section 5.5 as Amended
Section 5.5, as hereby amended, reads as follows:

"5.5 Modification of Deferred Compensation Contribution and After-Tax Contribution.

(a) A Participant who desires to reduce or increase the amount of his Deferred Compensation Contribution may elect to do so, in writing, on a form prescribed by PSI's Comptroller. There shall be no limitation on the total number of reductions, increases, or combination of reductions and increases, including any discontinuances or resumptions of Deferred Compensation Contributions, effected by a Participant during any Plan Year. If a Participant elects to discontinue his Deferred Compensation Contributions, then he shall not be able to resume having any contributions made until the first full Payroll Period of any calendar quarter which quarter begins at least 90 days after the last day of the last Payroll Period with respect to which Deferred Compensation Contributions were previously elected. Any election to resume Deferred Compensation Contributions shall be made by the Participant in the manner described in this Subsection with respect to reducing or increasing contributions.

(b) A Participant who desires to reduce or increase the amount of his After-Tax Contribution may elect to do so, in writing, on a form prescribed by PSI's Comptroller. There will be no limitation on the total number of reductions, increases, or combination of reductions and increases, including any discontinuances or resumptions of After-Tax Contributions, effected by a Participant during any Plan Year. If a Participant elects to discontinue his After-Tax Contributions, then he shall not be able to resume having contributions made until the first full Payroll Period of any calendar quarter which quarter begins at least 90 days after the last day of the last Payroll Period with respect to which After-Tax Contributions were previously elected. Any election to resume After- Tax Contributions shall be made by the Participant in the manner described in this Subsection with respect to reducing or increasing the contributions. A Participant's election to reduce or increase either his Deferred Compensation Contribution or his After-Tax Contribution shall become effective as of the first day of the Participant's first Payroll Period following by 15 days (or any shorter period of time as may be designated by PSI's Comptroller) the date on which PSI's Manager, Payroll-Benefits receives the Participant's written modification election."

(c) Section 7.6(a)(4) as Amended
Section 7.6(a)(4), as hereby amended, reads as follows:

"(4) A Participant may not reallocate the Fund balances of his Employer Matching Account or his Incentive Matching Account with regard to Employer Matching Contributions or Incentive Matching Contributions made on or after January 1, 1992. Instead, these amounts must remain invested in the Stock Fund until the Participant attains age 55 (age 50 effective January 1, 1996) at which time the Fund balances may be reallocated, at least once during any calendar quarter, in multiples of five percent, among the Fund options upon the receipt by PSI's Manager, Payroll-Benefits of a written reallocation on a form prescribed by PSI's Comptroller. A reallocation shall become effective as of the first day of the first calendar quarter of a Plan Year (or as of any other day or days of a Plan Year as designated by PSI's Comptroller) that follows by 15 days (or any shorter period of time as designated by PSI's Comptroller) receipt of the proper form by PSI's Manager, Payroll-Benefits."

(d) Section 7.6(b)(4) as Amended Article 7.6(b)(4), as hereby amended, reads as follows:

"(4) A Participant may not reallocate the Fund balances of his Employer Matching Account or his Incentive Matching Amount with regard to Employer Matching Contributions made on or after January 1, 1992. Instead, these amounts must remain invested in the Stock Fund until the Participant attains age 55 (age 50 effective January 1, 1996) at which time the Fund balances may be reallocated, at least once during any calendar quarter, in multiples of five percent, among the Fund options upon the receipt by PSI's Manager, Payroll- Benefits of a written reallocation on a form prescribed by PSI's Comptroller. A reallocation shall become effective as of the first day of the first calendar quarter of a Plan Year (or as of any other day or days of a Plan Year as designated by PSI's Comptroller) that follows by 15 days (or any shorter period of time as designated by PSI's Comptroller) receipt of the proper form by PSI's Manager, Payroll-Benefits."

(3) Amendments Effective April 1, 1996

(a) Section 14.1 as Amended

Section 14.1, as hereby amended, reads as follows:

"14.1 Effective Date

Upon proper application by a Participant, in a manner prescribed by PSI's Comptroller and delivered to PSI's Manager, Payroll-Benefits, who shall administer the Plan's loan program, PSI may direct the Trustee to make a loan to a Participant subject to the requirements of this Article and any other rules as PSI may prescribe. In deciding whether to approve or deny any written request for a loan, PSI's Manager, Payroll-Benefits shall take into consideration the factors applied by commercial banks in making loan decisions, including the Participant's creditworthiness and the available security for the loan. PSI shall apply the eligibility requirements and rules for a loan uniformly to all Participants. For purposes of this Article, the term `Participant' includes Employees and former Employees and Beneficiaries who are `parties in interest,' as defined in ERISA Section 3(14)."

(b) Section 14.2(b) as Amended

Section 14.2(b), as hereby amended, reads as follows:

"(b) There is no minimum principal amount requirement for a loan. The principal amount of any loan to be made plus the principal amount of all loans to a Participant outstanding at the time the loan is to be made shall not exceed the lesser of (1) 50% of the balance of the Participant's Deferred Compensation Account, ESOP Transfer Account, and Rollover Account, and (2) $50,000 reduced by the excess of the highest outstanding balance of loans to the Participant from the Plan during the period beginning one year and one day before the day the loan is to be made over the outstanding balance of loans from the Plan on the date on which the loan is to be made. A Participant may have no more than two loans outstanding at any time. A loan shall be made within 30 days after the loan is approved by PSI or as soon thereafter as administratively feasible. All charges, including all expenses and fees incurred in connection with the processing, record keeping, or refinancing of any loan are, to the extent administratively feasible, charged to the Participant who received the loan, except to the extent paid by the Employers."

(c) Section 14.2(h) as Amended

Section 14.2(h), as hereby amended, reads as follows:

"(h) Amounts equal to any loans shall be transferred pro rata from the Participant's subaccounts under his Deferred Compensation Account, ESOP Transfer Account, and Rollover Account in proportion to the principal amount of the loan. PSI's Comptroller shall establish, operate, and maintain a loan subaccount or otherwise account for the receipt of amounts transferred from the Participant's Fund
subaccounts. Appropriate accounting entries reflecting transfers shall be concurrent with the disbursement to the Participant of amounts borrowed. Interest received by the Trustee in respect of amounts borrowed by a Participant shall be credited to the Participant's loan subaccount or otherwise properly credited at the end of each month. Interest so allocated to a Participant shall then be allocated proportionately among the Participant's Fund subaccounts in accordance with the Participant's investment directions in effect when the loan was made. A repayment of principal by a Participant shall be invested among the Funds and credited proportionately to the Participant's appropriate Fund subaccounts in accordance with the Participant's investment directions in effect when the loan was made. If contributions on behalf of the Participant have been suspended or discontinued for any other reason at the time of any interest payment or principal repayment, the payments or repayments shall be invested in accordance with the investment direction in effect when the loan was made."

(4) Amendments Effective July 1, 1996

(a) Section 1.13 as Amended

Section 1.13, as hereby amended, reads as follows:

"1.13 `Compensation' means, effective July 1, 1996, with respect to any Exempt Employee for any period of reference, the sum of the Employee's
(1) Base Salary, (2) Overtime Pay, and (3) Performance Lump Sum Pay, plus (4) any Deferred Compensation Contributions made on behalf of the Employee for the Plan Year and other elective contributions made by the Employer on behalf of the Employee during the Plan Year that are not includible in gross income under Code Section 125, Paragraph 402(a)(8), Subsection 402(h), or Subsection 403(d), provided, however, that annual Compensation taken into account under the Plan for any Plan Year beginning on or after January 1, 1989, shall not exceed the limitation specified in Code Paragraph 401(a)(17) (as adjusted for increases in the limitation pursuant to Code Subparagraph 401(a)(17)(B)). For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation specified in Code Paragraph 401(a)(17) shall mean the OBRA '93 Annual Compensation Limit. In determining an Employee's Compensation, the rules of Code Paragraph 414(q)(6) shall apply, except that in applying those rules, the term `family' shall include only the Employee's spouse and lineal descendants who have not attained age 19 before the close of the Plan Year.

With respect to a Non-Exempt Employee,
`Compensation' means, effective July 1, 1996, the sum of the Employee's (1) Base Wage, (2) Overtime Pay, and (3) Performance Lump Sum Pay, plus (4) Deferred Compensation Contributions made on behalf of the Employee for the Plan Year and other elective contributions made by the Employer on behalf of the Employee during the Plan Year that are not includable in gross income under Code Section 125, Paragraph 402(a)(8), Subsection
402(h), or Subsection 403(b), provided, however, that annual Compensation taken into account under the Plan for any Plan Year beginning on or after January 1, 1989, shall not exceed the limitation specified in Code Paragraph 401(a)(17) (as adjusted for increases in the limitation pursuant to Code Subparagraph 401(a)(17)(B)). For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation specified in Code Paragraph 401(a)(17) shall mean the OBRA '93 Annual Compensation Limit. In determining an Employee's Compensation, the rules of Code Paragraph 414(q)(6) shall apply, except that in applying those rules, the term `family' shall include only the Employee's spouse and lineal descendants who have not attained age 19 before the close of the Plan Year.

Notwithstanding anything in this Subsection to the contrary, with respect to any Exempt Employee or Non-Exempt Employee, the term `Compensation' shall not include Overtime Pay for purposes of Article 6 (Employer Contributions)."

(b) Section 1.79 as Added
Section 1.79, as hereby added, reads as follows:

"1.79 `Overtime Pay' means, with respect to a Non- Exempt Employee, the pay received at one-half times the Employee's regular rate of pay as remuneration for hours worked in a work day or a work week in excess of 8 hours or 40 hours, respectively, for the relevant period. With respect to an Exempt Employee, `Overtime Pay' means the pay received in excess of the Employee's regular rate of pay as remuneration for hours worked in a work day or work week in excess of the Employee's regularly scheduled hours pursuant to the Employer's overtime pay policy applicable to Exempt Employees ."

(c) Section 5.1(a) as Amended

Section 5.1(a), as hereby amended, reads as follows:

"(a) Deferred Compensation Contributions. Subject to the limitations set forth in Section 5.6 (Deferred Compensation Contribution Limitation), each Employer shall contribute to the Trust Fund, on behalf of each Participant employed by the Employer as a Deferred Compensation Contribution an amount elected by the Participant equal to not less than one percent nor more than 15 percent (expressed as a whole percentage) of the Participant's Compensation for the first full Payroll Period of the month for which the Participant's election to defer Compensation is to become effective and shall continue for each subsequent Payroll Period that the election is in effect. However, if a Participant receives a hardship withdrawal under Section 12.1 (Hardship Withdrawals) of the Plan or under Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Union Employees' 401(k) Savings Plan, the Participant's Deferred Compensation Contributions shall be suspended for a period of 12 months after the receipt of the hardship withdrawal. An election shall be made by the Participant filing with PSI's Manager, Payroll-Benefits the written form prescribed by PSI's Comptroller at least 15 days (or such shorter period of time as may be designated by PSI's Comptroller) before the first day of the month during which the election is to be effective. The total sum of Deferred Compensation Contributions made under this Plan when combined with the amount of elective deferrals made under any other Employer plan established and maintained by any Employer or Affiliate under Code Subsection 401(k) for a Participant's taxable year, shall not exceed the excess deferral limitation set forth in Code Paragraph 402(g)(1), as adjusted pursuant to Code Paragraph 402(g)(5). However, if a Participant receives a hardship withdrawal under Section 12.1 (Hardship Withdrawals) of the Plan or under
Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Union Employees' 401(k) Savings Plan, the Participant may not make Deferred Compensation Contributions for the Participant's taxable year immediately following the taxable year of the hardship withdrawal in excess of the applicable limit under Code Subsection 402(g) for the next taxable year less the amount of the Participant's Deferred Compensation Contributions for the taxable year of the hardship withdrawal. The Deferred Compensation Contribution attributed to each Participant shall be allocated to the Participant's Deferred Compensation Account."

(d) Section 5.1(c) as Amended

Section 5.1(c), as hereby amended, reads as follows:

"(c) After-Tax Contributions. A Participant may also elect to make an After-Tax Contribution of his Compensation to the Trust Fund on his behalf in an amount (expressed as a whole percentage) which together with his Deferred Compensation Contributions, shall not exceed 15 percent of his Compensation (1) for the first full Payroll Period of the month for which the Participant's election (as described in this Paragraph) to make After-Tax Contributions is to become effective and shall continue for each subsequent Payroll Period that the election is in effect (payroll deduction). In the alternative, a Participant may elect to make once per Plan Year an After-Tax Contribution in lump sum payment by a check or money order by the Participant payable to the Trustee and submitted to PSI's Manager, Payroll-Benefits. However, the amount of a Participant's After-Tax Contributions for a Plan Year shall not cause the Participant's Annual Addition to exceed his Maximum Permissible Amount. If a Participant receives a hardship withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1 (Hardship Withdrawals) of the PSI Energy, Inc. Union Employees' 401(k) Savings Plan, the Participant's After-Tax Contributions shall be suspended for a period of 12 months after the receipt of the hardship withdrawal. If a Participant receives a withdrawal under Section
12.2 (Withdrawals from After-Tax Contribution Account) of the Plan, the Participant's After-Tax Contributions shall be suspended for a period of 12 months after the receipt of the withdrawal. The After-Tax Contribution attributed to each Participant shall be allocated to the Participant's After-Tax Contribution Account. Any election described in this Subsection shall be made by the Participant in the same manner described in Subsection 5.1(a) with respect to Deferred Compensation Contributions."

This Amendment is executed and approved by the duly authorized officers of PSI Energy, Inc., effective as of the dates set forth herein.

By:           JAMES E. ROGERS
                 James E. Rogers
              Vice Chairman and
              Chief Executive Officer

Dated:          December 30, 1996

APPROVED:

By:             CHERYL M. FOLEY
                      Cheryl M. Foley
        Vice President, General Counsel
               and Corporate Secretary

Dated:        December 30, 1996

AGREEMENT

This Agreement is made and entered into as of the _____ day of ____________, 1996, by and among PSI Energy, Inc. ("PSI"), an Indiana corporation, Cinergy Corp., a Delaware corporation, individually and on behalf of its subsidiaries (the "Company"), and John M. Mutz (the "Executive").

WHEREAS, as of October 4, 1993, the Executive entered into an Employment Agreement with PSI Resources, Inc., an Indiana corporation, and PSI (the "Employment Agreement"); and

WHEREAS, the Company and PSI, pursuant to the terms of the Employment Agreement, have assumed and agreed to perform the obligations of the parties to the Employment Agreement other than the Executive; and

WHEREAS, the Company and the Executive desire to amend and clarify certain provisions of the Employment Agreement;

NOW, THEREFORE, in consideration of the mutual premises, covenants and agreements set forth below, it is hereby agreed as follows:

1. The parties agree that Section 2 (a) of the Employment Agreement is hereby amended to reflect that during the remaining term of the Employment Agreement the Executive shall hold the titles of President of PSI Energy, Inc. and Vice President of Cinergy Corp., and that he shall have such authority, duties and responsibilities as may be mutually agreed upon, from time to time, by Executive and James E. Rogers, Vice Chairman and Chief Executive Officer of the Company.

2. The parties agree that Section 4 (d) of the Employment Agreement is hereby amended to reflect that the Executive must give the Company at least two (2) months advance written notice to terminate the Employment Agreement for Good Reason.

3. The parties agree that Executive, at any time during the remaining term of the Employment Agreement, has the right to terminate the Employment Agreement for Good Reason, to deliver a Notice of Termination, and to receive the benefits provided for in Section 5(a)(i) and (ii).

4. Provided that Executive gives proper and timely Notice of Termination of the Employment Agreement for Good Reason, the Company and PSI hereby waive any right to object to the Executive's decision during the remaining term of the Employment Agreement to terminate his employment for Good Reason, deliver a Notice of Termination to the Company or PSI relating to such termination, and to receive the benefits provided for in Sections 5(a)(i) and (ii) on the grounds that Executive consented to the material reduction of his title, authority, duties, or responsibilities as specified in Section 2(a) or to any material breach of the Employment Agreement by the Company, or waived his right to exercise such rights and receive the benefits to which he would thereby be entitled, or on grounds of laches, or for any other reason related to Executive's decision at this time not to deliver a Notice of Termination or terminate his employment for Good Reason.

5. Pursuant to Section 5(c) of the Employment Agreement, PSI and the Company agree to pay all of Executive's legal fees and expenses incurred by the Executive in connection with this Agreement, which fees shall not exceed $10,000.

6. The parties agree that in computing benefits payable pursuant to Section 5(a)(ii) of the Employment Agreement, in addition to all other benefits provided for in such section, at the time of his termination of his employment for Good Reason, (i) the Executive would be entitled to receive from the Company the difference between the fair market value of all shares of Cinergy Corp. common stock subject to stock options held by him which are not fully vested at the time of Executive's termination of employment and the aggregate exercise price of such options, assuming they are 100% vested, and that for such purposes, the "fair market value" shall mean the average of the high and low sales prices of a share of Cinergy Corp. common stock as reported by the "NYSE - Composite Transactions" in The Wall Street Journal on the date of the Executive's termination of employment or the preceding trading day, if that date is not a trading day, and
(ii) the Executive would be entitled to receive the present value of any Performance Share Awards held by him on the date of termination of his employment, based on the assumptions that the Committee had made a determination to vest them as permitted by
Section 10.3(b) of the Performance Shares Plan and that the Executive continued to work until the last day of the applicable Performance Period for Performance Share Awards held by him (adjusted to reflect, on a pro rata basis, the percentage of service during the applicable Performance Period represented by five years of service through October 4, 1998).

IN WITNESS WHEREOF, the Executive and PSI and the Company have caused this Agreement to be executed as of the day and year first written above.

CINERGY CORP., on behalf of itself and all of its subsidiaries, including PSI ENERGY, INC.

By: JAMES E. ROGERS
James E. Rogers, Vice Chairman and Chief Executive Officer

JOHN M. MUTZ
John M. Mutz

THE CINCINNATI GAS &

ELECTRIC COMPANY

DEFERRED
COMPENSATION
AND
INVESTMENT
PLAN

As Amended and Restated Effective January 1, 1995

TABLE OF CONTENTS

ARTICLE PAGE

1: INTRODUCTION 1

2: DEFINITIONS 3

3: PARTICIPATION 6

4: CONTRIBUTIONS 18

5: INVESTMENTS 32

6: ACCOUNTS 40

7: VESTING AND FORFEITURES 43

8: DISTRIBUTIONS 49

9: WITHDRAWALS DURING EMPLOYMENT 67

10: LOANS 78

11: DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES 90

12: FIDUCIARIES: AUTHORITY & RESPONSIBILITY 100

13: ADMINISTRATIVE PROVISIONS 109

14: MISCELLANEOUS PROVISIONS 119

15: DISCRIMINATION TESTING 122

16: LIMITATION ON ANNUAL ADDITIONS 137

17: AMENDMENT AND TERMINATION OF THE PLAN 143

18: TOP-HEAVY PROVISIONS 146

INDEX 154

INTRODUCTION

ARTICLE
I. : INTRODUCTION

A. History. The Cincinnati Gas & Electric Company (CG&E) instituted the Employee Incentive Thrift Plan in 1967. CG&E amended the plan on October 1, 1983 for executive, supervisory, administrative and professional employees to enable those employees to delay the payment of some income taxes and to choose from a wider variety of investment options. As a result of the extensive amendments, the plan was renamed The Cincinnati Gas & Electric Company Deferred Compensation and Investment Plan.

A. Purpose. The plan is designed to provide retirement income to the executive, supervisory, administrative and professional paid employees of CG&E and certain death benefits to their beneficiaries. The plan is designed to supplement the participants' Management Retirement Plan benefits which in turn are to be supplemented by the benefits payable under the Social Security Act, and their personal savings for retirement.

A. Plan Qualification. CG&E has designed this plan to comply with the provisions of Internal Reve- nue Code 401(a), 401(k), and 501 as a qualified pension plan and to conform to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). All plan provisions are subject to change at any time to the extent necessary to retain the qualified status of the plan or to bring it into compliance with ERISA. The plan and trust agreement shall be construed and interpreted in a manner that gives effect to the intent of retaining the qualified status of the plan.

A. Effective Date. Except as otherwise noted with respect to a particular provision, the effective date of the amendment and restatement of this plan is January 1, 1995. Earlier or later amendments to this plan become effective on the date specifically designated in the plan document.

ADMINISTRATIVE NOTES

DEFINITIONS

ARTICLE
I. : DEFINITIONS

A. Scope of this Article. Definitions of terms relevant to more than one article of the plan are generally included in this Article. Definitions of terms which are used primarily in a single article are defined in that article.
B. List of Defined Terms. This section contains a complete list of all defined terms used in this plan. Each defined term is followed by a reference to the section in which it is defined.

account
ACP
ADP
aggregation group
alternate payee
annual addition
base pay
beneficial owner
beneficiary
board of directors
break in service
CG&E
CINergy
Committee
company
company-matched contributions , ,
company-matched stock incentive contributions , , company stock fund
compensation
DCIP
deferred compensation contribution
defined benefit fraction
defined benefit plan
defined contribution fraction
defined contribution plan
determination date
distribution
distribution valuation date
DRO
eligible employee , ,
eligible retirement plan
employee
entry date ,
ERISA
excess aggregate contribution
excess amount
excess contribution
Fidelity Equity-Income Fund
Fidelity Intermediate Bond Fund
Fidelity Magellan Fund
Fidelity Retirement Money Market Fund
fiduciary
flipover provision ,
forfeiture ,
hardship
hardship withdrawals
highly compensated employee ,
hour of service
IRC
key employee
loan fund
mandatory distribution year ,
military leaves
money market fund ,
non-eligible employee
optional contributions
parental leaves
participant

plan
plan participation forms
plan year
present value
projected annual benefit
quarterly account statements
rollover contributions
SIP
sub-account ,
terminated participant
the PNC fund
top heavy
top heavy group
trust
trust agreement
trustee
vesting
VIR Line
window cashouts
withdrawal
year of service
year of vesting service
1% owner
5% owner

A. Board of Directors. The board of directors is the board of directors of The Cincinnati Gas & Electric Company.

A. CG&E. CG&E is The Cincinnati Gas & Electric Company, the plan's sponsor, and any related company which has adopted the plan and has employees participating in the plan.

A. CINergy. CINergy is CINergy Corp., the name of the parent holding company of CG&E.

A. DCIP. The DCIP is the CG&E Deferred Compensation and Investment Plan.

A. ERISA. ERISA is the Employee Retirement Income Security Act of 1974, as amended.

A. IRC. IRC is the Internal Revenue Code of 1986, as amended.

A. MRP. The MRP is the CG&E Management Retirement Plan.

A. Plan. The plan is the CG&E Deferred Compensation and Investment Plan, as set forth in this document.

A. Plan Year. The plan year is the calendar year.

A. SIP. The CG&E Savings Incentive Plan.

A. Related Company. A related company is any entity which is:

1. A member of a controlled group of corporations, as defined in IRC 1563(a), ignoring IRC 1563(e)(C)(3), and, solely for the purpose of , modifying the IRC 1563 (a) phrase "at least 80%" to read "more than 50%", and

1. An unincorporated trade or business which is under common control with The Cincinnati Gas & Electric Company, as determined under IRC 414(c), and

1. A member of an affiliated service group as defined in IRC 414(m), and

1. Any entity required to be aggregated with The Cincinnati Gas & Electric Company under IRC 414(o), and

1. Any other subsidiary or affiliate of The Cincinnati Gas & Electric Company designated by its board of directors to be a related company.

PARTICIPATION

ARTICLE
I. : PARTICIPATION

A. Employee. An employee is any person earning a wage or salary from CG&E, including leased employees.

A. Participation.

1. Eligible Employee. An eligible employee is any full-time employee on the CG&E executive, supervisory, administrative or professional (ESA&P) payroll who has completed a year of service pursuant to 3.8. The term eligible employee shall include employees who have completed a year of service with a related company. A year of service performed for a related company prior to the date the relationship with The Cincinnati Gas & Electric Company began is included for the purpose of determining eligibility to participate in this plan. The term eligible employee shall include an individual who is a citizen of the United States and is an employee of a related company, if that company has entered into an agreement under IRC 3121(l).

[This sub-section should be deleted effective 08-01- 95.]

1. Eligible Employee. An eligible employee is any full-time employee who works 30 or more hours per week on a regular work schedule, or part-time employee who works less than 30 hours per week on a regular work schedule, on the CG&E executive, supervisory, administrative or professional (ESA&P) payroll who has completed a year of service pursuant to 3.8. The term eligible employee shall include employees who have completed a year of service with a related company. A year of service performed for a related company prior to the date the relationship with The Cincinnati Gas & Electric Company began is included for the purpose of determining eligibility to participate in this plan. The term eligible employee shall include an individual who is a citizen of the United States and is an employee of a related company, if that company has entered into an agreement under IRC 3121(l).

[This sub-section becomes effective on 08-01-95 and should be deleted effective 01-01-96.]

1. Eligible Employee. An eligible employee is any full-time employee who works 30 or more hours per week on a regular work schedule, or part-time employee who works less than 30 hours per week on a regular work schedule, on the CG&E executive, supervisory, administrative or professional (ESA&P) payroll. The term eligible employee shall include an individual who is a citizen of the United States and is an employee of a related company, if that company has entered into an agreement under IRC 3121(l).

[This sub-section becomes effective on 01-01-96.]

1. Non-Eligible Employees. The following defined classes of employees are excluded from plan participation.

a) Co-op Employees. Co-op employees are students working for CG&E through a recognized cooperative education program.

a) Summer Employees. Summer employees are students employed by CG&E during the summer.

a) Temporary Employees. Temporary employees are employees of an employment agency who perform services for CG&E on specific tasks and/or for a specified time period. Generally, temporary employees are directly supervised by CG&E employees.

a) Part-time Employees. Part-time employees are employees whose regular work schedule is limited to less than 1,000 hours in any given calendar year.

[This sub-section 4) should be deleted effective 08-01-95.]

a) Leased Employees. Leased employees are any persons who are not on CG&E's payroll and who have performed services for CG&E pursuant to an agreement between CG&E and any other person on a substantially full time basis for a period of at least one year. The period for which these employees are leased employees under the terms of this plan is limited to the term of service for which they are assigned to CG&E.

a) Hourly-Paid Employees. Hourly paid employees are full-time CG&E employees whose compensation for a given payroll period is calculated based on the number of hours worked during the period, times an hourly rate.

a) Weekly-Paid Employees. Weekly paid employees are full-time CG&E employees whose compensation for a weekly payroll period is predetermined.

a) Independent Contractors. Independent contractors are persons or entities with whom CG&E contracts to complete specific tasks without supervision by CG&E employees. Employees of entities which are independent contractors regarding tasks performed for CG&E may be classified as leased employees if they fall within the definition in above.

a) Participants in Other 401(k) Plans. Employees who are eligible to participate in a qualified plan which includes IRC 401(k) features sponsored by any related company are not eligible to participate in this plan.

1. Fail-Safe Provision. In the event that any co-op employee, summer employee, or part-time employee completes a year of service, that employee shall be permitted to participate in this plan.

[This sub-section should be deleted effective 08- 01-95.]

1. Fail-Safe Provision. In the event that any co-op employee or summer employee completes a year of service, that employee shall be permitted to participate in this plan.

[This sub-section becomes effective on 08-01-95.]

A. Participant. A participant is any eligible employee who has assets in the plan. (See also )

A. Terminated Participant. A terminated participant is a participant who has terminated employment with CG&E by reason of death, disability, discharge, retirement, or resignation, but who has assets remaining in the plan.

A. Determining Participation and Vesting. An hour of service is the basic unit of measurement used to determine an employee's participation and vesting in the plan.

A. Hour of Service.

1. Current Pay. An employee earns an hour of service for each hour for which s/he is directly or indirectly paid or entitled to payment by CG&E during the applicable computation period. These hours are for either the performance of duties or on account of a period of time during which no duties are performed (irrespective of whether the employment relationship is terminated) due to vacation, holiday, jury duty, personal days, incapacity (including disability) and lay-off. In these cases participants will be credited with 8 hours of service for each normally scheduled working day during which no duties are performed. An hour of service for which no duties are performed shall be calculated pursuant to 2530.200b-2 of the U.S. Department of Labor regulations, which are incorporated herein by reference.

1. Back Pay. A participant earns an hour of service for each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by CG&E. The same hours of service shall not be credited under both sub-section above and under this sub-section. These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made.

1. Salaried Employees. Salaried employees are employees whose pay is not determined on the basis of certain amounts for each hour worked during a given period and whose hours are not required to be counted and recorded by any federal law. Salaried employees shall be credited with 8 hours of service per day in which the employee would be credited with an hour of service pursuant to and above, provided that the employee is credited with no less than 1,000 hours of service per computation period.

1. Effect of Leaves of Absence. Generally, an employee will not earn hours of service while s/he is on a leave of absence. However, hours of service credited during certain military leaves and parental leaves under the provisions of also apply for purposes of determining eligibility to participate in the plan.

1. Consistent Personnel Practices. All leaves of absence affecting accreditation of service under this plan shall be authorized by CG&E in accordance with standard personnel policies applied in a nondiscriminatory manner to all employees similarly situated.

A. Limitation Upon Earning Hours of Service. Hours of service earned by CG&E employees generally not eligible to participate in the plan shall be credited, but only for determining the vesting rights of these employees upon their change of status to plan participants. The provisions of and govern- ing transfers of participants and plan assets to and from the SIP are an exception to the general rule.

A. Year of Service. A year of service is 12 consecutive months of employment with CG&E, beginning with the first hour of service, during which the employee completes at least 1,000 hours of service. Eligible employees who do not complete a year of service by the first anniversary of their employment commencement date shall be credited with a year of service if they complete at least 1,000 hours of service during a period of 12 consecutive months beginning with the first, and, if necessary, any subsequent anniversary of their employment commencement date.

[This section should be deleted effective 01-01-96.]

A. Year of Service. A year of service is 12 consecutive months of employment with CG&E, beginning with the first hour of service, during which a co-op employee or summer employee completes at least 1,000 hours of service. Co-op employees or summer employees who do not complete a year of service by the first anniversary of their employment commencement date shall be credited with a year of service if they complete at least 1,000 hours of service during a period of 12 consecutive months beginning with the first, and, if necessary, any subsequent anniversary of their employment commencement date.

[This section becomes effective on 01-01-96.]

A. Break in Service. A break in service is any period of 12 consecutive months beginning on the employee's employment commencement date, and on any subsequent anniversary of that date, during which the employee completes less than 501 hours of service.

A. Commencement of Participation. Except with respect to the company-matched stock incentive contributions (see ), an eligible employee must file a completed set of plan participation forms with the Committee to become a participant. See also .

[This section should be deleted effective 01-01-96.]

A. Commencement of Participation. An eligible employee must notify the Committee of his or her intent to participate in the plan, except with respect to the company-matched stock incentive contributions (see and ), through the use of the voice or other electronic response system or other media authorized by CG&E.

[This section becomes effective on 01-01-96.]

A. Entry Date. The entry date is the date an eligible employee becomes a participant in the plan. The entry date is the first monthly or semi-monthly pay date of the month that is at least 30 days following the date the Committee receives the plan participation forms from the eligible employee.

[This section should be deleted effective 01-01-96.]

A. Entry Date. The entry date is the date an eligible employee becomes a participant in the plan. The entry date is the date an eligible employee first completes an hour of service.

[This section becomes effective on 01-01-96.]

A. Plan Participation Forms. Plan participation forms are the set of documents which the eligible employee must file with the Committee in order to participate in the plan, except with respect to the company-matched stock incentive contributions. (See ). The forms are:

1. The plan participation agreement ; and

1. The beneficiary form.

[This section should be deleted effective 01-01-96.]

A. Beneficiary. The beneficiary is the person or entity designated in writing by a participant to receive plan benefits after the participant's death.
(See and )

A. Beneficial Owner. The beneficial owner is the owner or beneficiary of an account with the plan. A beneficial owner may be a participant, a terminated participant, a participant's spouse, or an alternate payee.

A. Beneficiary Designation. A participant must designate a beneficiary. Married participants must designate their spouse as beneficiary, unless the participant's spouse consents to someone else being named as beneficiary. The consent must be in writing on the form approved by the Committee and the spouse's signature must be notarized. The form must be filed with the Committee to become effective. A consenting spouse may withdraw consent by written notice to the Committee, notarized in the same manner as the consent. Once the retraction of consent has been filed with and accepted by the Committee, the spouse is reinstated by plan operation as the participant's beneficiary.

A. Transfer to Weekly or Hourly Payroll. A participant who transfers to the weekly or hourly payroll is no longer eligible to participate in the plan. All of the participant's contributions to the plan shall cease, effective with his or her last pay date as an employee on the executive, supervisory, administrative and professional payroll.

A. Transfers From The Weekly or Hourly Payroll.

1. Transfers of SIP Accounts. The trustee shall transfer to this plan the SIP account of any employee who becomes eligible for participation. The transfer shall be made as soon as possible following the date that the employee becomes eligible. The transferred account shall be allocated to the sub-accounts and the investment funds in the manner most similar to the participant's SIP sub-accounts.

1. Continuing Contributions. The contribution percentages and investment directions of any SIP participant who becomes eligible for participation in this plan will continue as contributions and investment directions to this plan.

A. Participatory Restrictions on the Activities of Terminated Participants. Subject to the limitations of , and of this plan, a terminated participant's account will remain in this plan until s/he takes a distribution. A terminated participant may not contribute to the plan, withdraw from an optional sub-account, or obtain hardship withdrawals or loans. A terminated participant may not reallocate past contributions except in conjunction with a distribution.

[This section should be deleted effective 08-01-95.]

A. Participatory Restrictions on the Activities of Terminated Participants. Subject to the limitations of , , , , and of this plan, a terminated participant's account will remain in this plan until s/he takes a distribution. A terminated participant may not contribute to the plan, withdraw from an optional sub-account, or obtain hardship withdrawals or loans.

[This section becomes effective on 08-01-95.]

A. Participation of Rehired Participants.

1. Non-Vested Participants.

a) 5 or Fewer Breaks in Service. Any terminated participant in this plan or in the SIP, who is not yet vested in company-matched contributions or company-matched stock incentive contributions under this plan or the SIP and who is subsequently rehired on the executive, supervisory, administrative and professional payroll before the completion of 5 consecutive breaks in service, becomes an eligible employee on his or her date of rehire. See regarding restoration of the company-matched sub- account.

a) More than 5 Breaks in Service. If the individual described in sub-section above is rehired after incurring 5 consecutive breaks in service, eligibility will be subject to the requirements of and of this plan, beginning with the date of rehire.

1. Vested Participants. Any terminated participant in this plan or in the SIP, who is vested in company-matched contributions or company-matched stock incentive contributions under this plan or the SIP and who is subsequently rehired on the executive, supervisory, administrative and professional payroll becomes an eligible employee on his or her reemployment date.

[This section should be deleted effective 01-01-96.]

A. Participation of Rehired Participants. Any terminated participant in this plan or the SIP who is subsequently rehired on or after January 1, 1996, on the executive, supervisory, administrative and professional payroll becomes an eligible employee on his or her reemployment date.

[This section becomes effective on 01-01-96.]

CONTRIBUTIONS

ARTICLE
I. : CONTRIBUTIONS

A. Base Pay.

1. Definition. Base pay is the annual salary paid by CG&E to a participant determined as of each pay period. Base pay excludes bonuses, shift differentials, overtime, incentive pay, moving allowances, living and similar allowances, and imputed income. Base pay includes the amount of all elective contributions made by CG&E on behalf of the participant pursuant to salary reduction agreements, if the amount is not included in the gross income of the participant under IRC 125. Base pay includes deferred compensation contributions made under this plan.

[This sub-section should be deleted effective 07-01- 96.]

1. Definition. Base pay is the annual salary paid by CG&E to a participant determined as of each pay period. Base pay excludes bonuses, shift differentials, incentive pay, moving allowances, living and similar allowances, and imputed income. Base pay includes the amount of all elective contributions made by CG&E on behalf of the participant pursuant to salary reduction agreements, if the amount is not included in the gross income of the participant under IRC 125. Base pay includes deferred compensation contributions made under this plan. For purposes of determining deferred compensation and optional contributions, base pay includes overtime. For purposes of determining company-matched contributions and company-matched stock incentive contributions, base pay excludes overtime.

[This sub-section becomes effective on 07-01-96 and should be deleted effective 01-01-97.]
1. Definition. Base pay is the annual salary paid by CG&E to a participant determined as of each pay period. Base pay excludes shift differentials, incentive pay, moving allowances, living and similar allowances, and imputed income. Base pay includes the amount of all elective contributions made by CG&E on behalf of the participant pursuant to salary reduction agreements, if the amount is not included in the gross income of the participant under IRC 125. Base pay includes deferred compensation contributions made under this plan. For purposes of determining deferred compensation and optional contributions, base pay includes overtime and bonuses. For purposes of determining company- matched contributions and company-matched stock incentive contributions, base pay excludes overtime, but includes bonuses.

[This sub-section becomes effective on 01-01-97.]

1. Use of Base Pay. Base pay shall be taken into account only while an employee is a participant in the plan.

1. Limitation on Base Pay. Base pay taken into account for determining contributions under the plan shall not exceed $150,000, as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with IRC 401(a)(17)(B).

1. Use of Base Pay Limitation. In determining the base pay of a participant for the purpose of determining the participant's accruals under this plan, the rules of IRC 414(q)(6) shall generally apply. However, the term "family" shall include only the spouse of the participant and any lineal descendants of the participant who have not attained age 19 prior to the close of the plan year. If, as a result of this application, the adjusted $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's base pay prior to the application of the limitation.

[This sub-section should be deleted effective 01-01- 97.]

A. Contributions. The plan will accept four types of contributions:

1. Deferred Compensation Contributions. A deferred compensation contribution is the amount by which a participant directs CG&E to reduce his or her base pay and which CG&E is obligated to contribute to the plan. Participants may elect to have their base pay reduced by executing a plan participation agreement. CG&E will then make a contribution to the plan in an amount equal to the participant's selected reduction each pay period. The amount reduced, expressed in 1/2% increments, shall not exceed 15% of the participant's base pay.

1. Optional Contributions. An optional contribution is the participant's voluntary contribution made to the plan through payroll deduction after taxes have been withheld. Participants may choose to make contributions to the plan each pay period through payroll deduction. These optional contributions, expressed in 1/2% increments, are deducted after taxes have been withheld. The amount of the optional contribution together with the deferred compensation contribution, shall not exceed 15% of the participant's base pay.

1. Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions and/or optional contributions, as applicable. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 55% of each participant's deferred compensation and optional contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

1. Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock equal in value to between $0.10 and $0.30 for each dollar of a participant's deferred compensation and optional contributions up to and including 4% of the participant's base pay for that year. Participants' contributions exceeding 4% of base pay will not be matched. If a participant did not make any deferred compensation or optional contributions during the year, s/he may still receive a company-matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation or optional contributions of 1% of his or her base pay for that year.

[This section should be deleted effective 01-01-96.]

A. Contributions. The plan will accept five types of contributions:

1. Deferred Compensation Contributions. A deferred compensation contribution is the amount by which a participant directs CG&E to reduce his or her base pay and which CG&E is obligated to contribute to the plan. Participants may elect to have their base pay reduced by informing the Committee through the voice or electronic response system or other media authorized by CG&E. CG&E will then make a contribution to the plan in an amount equal to the participant's selected reduction each pay period. The amount reduced, expressed in 1/2% increments, shall not exceed 15% of the participant's base pay.

1. Optional Contributions. An optional contribution is the participant's voluntary contribution made to the plan through payroll deduction after taxes have been withheld. Participants may choose to make contributions to the plan each pay period through payroll deduction. These optional contributions, expressed in 1/2% increments, are deducted after taxes have been withheld. The amount of the optional contribution together with the deferred compensation contribution, shall not exceed 15% of the participant's base pay.

1. Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions and/or optional contributions, as applicable. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 55% of each participant's deferred compensation and optional contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

[This sub-section should be deleted effective 01-01- 97.]

1. Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 60% of each participant's deferred compensation contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

[This sub-section becomes effective on 01-01-97.]

1. Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock between $0.10 and $0.30 for each dollar of a participant's deferred compensation and optional contributions up to and including 4% of the participant's base pay for that year. Participants' contributions exceeding 4% of base pay will not be matched. If a participant did not make any deferred compensation or optional contributions during the year, s/he may still receive a company-matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation or optional contributions of 1% of his or her base pay for that year.

[This sub-section should be deleted effective 01-01- 97.]

1. Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock between $0.20 and $0.40 for each dollar of a participant's deferred compensation contributions up to and including 5% of the participant's base pay for that year. Participants' deferred compensation contributions exceeding 5% of base pay will not be matched. If a participant did not make any deferred compensation contributions during the year, s/he may still receive a company-matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation contributions of 1% of his or her base pay for that year.

[This sub-section becomes effective on 01-01-97.]

1. Rollover Contributions. A rollover contribution is the amount contributed by a participant to his or her plan account attributable to a distribution from a retirement plan of a former employer. A participant must make a written request to the Committee to make a rollover contribution. The request must include a statement detailing the type of property to be rolled over and that such property is an eligible rollover contribution. If the Committee so permits, the participant may transfer the amount of the rollover contribution to the trustee.

[This section becomes effective on 01-01-96.]

A. Contributions Due to Military Leave.
Notwithstanding any provision of this plan to the contrary, contributions with respect to qualified military service will be provided in accordance with IRC 414(u).

A. Contributions from Sources other than Base Pay.

1. Settlement of Disputes. Prior to the time a participant becomes entitled to receive a lump sum payment of wages in settlement of a dispute with CG&E, the participant may direct contributions to this plan from the lump sum payment in the same percentages and allocation to funds as are in effect at the time when the lump sum amount is paid. CG&E may also make company-matched contributions and/or company- matched stock incentive contributions on the settlement amount.

1. Lump Sum Payment in Lieu of Salary. If a class of participants is designated by CG&E to receive certain pay in the form of a lump sum, the determination of whether that special pay may be used as base pay for making contributions to this plan shall be determined by CG&E. CG&E may also make a determination whether it will make company-matched contributions and/or company- matched stock incentive contributions for each payment of a special lump sum. In the event that the special pay is permitted to be used as base pay for plan contributions, those contributions must be in the same percentages designated by the participant and in effect at the time when the lump sum amount is paid.

A. Changing the Percentage of Contributions.

1. Participants. A participant may change the percentage of deferred compensation contributions or optional contributions four times per year.

[This sub-section should be deleted effective 01-01-96.]

1. Participants. A participant may change the percentage of deferred compensation contributions and/or optional contributions at anytime through the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

1. Other Beneficial Owners. Terminated participants, beneficiaries and alternate payees may not contribute to this plan.

A. Limitation on Deferred Compensation Contributions.

1. Maximum Amount. A participant's deferred compensation contributions shall not exceed the maximum deferred amount in effect for that tax year pursuant to IRC 402(g) . The maximum amount for 1995 is $9,240 and is adjusted annually as announced by the Internal Revenue Service.

1. Flipover Provision. At the time the IRC 402(g) limit is reached for the amount being deferred by a participant, the same percentage contribution shall be continued as an optional contribution for that participant for the remainder of the year. These optional contributions will be allocated to investment funds in accordance with the most recent directions filed by the participant regarding optional contributions. If the participant has never filed an Allocation of Future Contributions form including directions for optional contributions, the contributions will be invested in the money market fund until the directions for optional contributions are filed with the Committee.

[This sub-section should be deleted effective 01-01-96.]

1. Flipover Provision. At the time the IRC 402(g) limit is reached for the amount being deferred by a participant, the same percentage contribution shall be continued as an optional contribution for that participant for the remainder of the year. These optional contributions will be allocated to investment funds in accordance with the most recent directions given by the participant through the voice or other electronic response system or other media authorized by CG&E regarding optional contributions. If the participant never furnished such directions, the contributions will be invested in the money market fund until the directions for optional contributions are provided by the participant to the Committee.

[This sub-section becomes effective on 01-01-96.]

1. Suspended Participants. When a participant affected by this section is under suspension of optional contributions under below, the or flipover provisions will not be effective. When the limit is reached, all contributions by the suspended participant shall stop.

1. Excess Deferred Compensation Contributions. If a participant files a plan participation agreement which causes CG&E to inadvertently defer more than is permitted in above, the excess deferred compensation contribution shall be returned to the participant.

[This sub-section should be deleted effective 01-01- 96.]

1. Excess Deferred Compensation Contributions. If a participant informs the Committee through the voice or other electronic response system or other media authorized by CG&E which causes CG&E to inadvertently defer more than is permitted in above, the excess deferred compensation contribution shall be returned to the participant.

[This sub-section becomes effective on 01-01-96.]

A. Voluntary Suspension of Contributions.

1. General Rule. Participants may suspend either their deferred compensation or optional contributions, or both by filing an application to suspend contributions with the Committee.

1. Effective Date. Voluntary suspensions shall become effective on a pay date no later than 30 days after the application to suspend contributions was filed with the Committee.

1. Period of Suspension. Participants may not make the suspended type of contributions to the plan for at least 12 months from the effective date of the suspension.

1. Makeup of Contributions. Participants may not make up suspended contributions.

[This section should be deleted effective 01-01-96.]

A. Involuntary Suspension of Contributions.

1. Hardship Withdrawals. Participants who have obtained a hardship withdrawal shall be automatically suspended from making deferred or optional contributions for a period of 12 months beginning from the date of the distribution of the hardship withdrawal.

1. Leaves of Absence. Contributions to the plan are automatically suspended during a participant's leave of absence, because the participant earns no base pay from which to contribute. When the participant returns to work for CG&E, contributions shall automatically resume with the first pay check in accordance with the terms of the most recent plan participation agreement.

[This sub-section should be deleted effective 01-01- 96.]

1. Leaves of Absence. Contributions to the plan are automatically suspended during a participant's leave of absence, because the participant earns no base pay from which to contribute. When the participant returns to work for CG&E, contributions shall automatically resume with the first pay check in accordance with the terms most recently provided by the participant on the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

A. Resumption of Contributions. Upon the expiration of the required period of suspension, participants may resume making contributions to the plan by filing a resumption of contributions form with the Committee. The resumption will be effective on the first pay date of the month no later than 30 days after the date the resumption of contributions form was filed with the Committee. Contributions will resume at the same percentages of base pay as were in effect at suspension. If the resumption of contributions form was filed during the period of suspension, it will become effective on the first pay date of the month following the period of suspension.

[This section should be deleted effective 01-01-96.]

A. Resumption of Contributions. Upon the expiration of the required period of suspension, participants may resume making contributions to the plan by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. The resumption will be effective on the first pay date of the month no later than 30 days after the date the participant informs the Committee of his or her intent to resume contributions. Contributions will resume at the same percentages of base pay as were in effect at suspension. If the participant informs the Committee during his or her suspension, the resumption of contributions will become effective on the first pay date of the month following the period of suspension.

[This section becomes effective on 01-01-96.]

A. Remittance of Contributions. CG&E will generally forward all deferred compensation, optional, and company-matched contributions to the trustee on the pay date for which the contributions are effective. In any event, CG&E must transmit these contributions promptly after the end of the month in which the contributions are taken.

A. Return of Company-Matched Contributions and Company-Matched Stock Incentive Contributions.

1. General Rule. Except as provided in , , , and , and in this section, the assets of the plan shall never revert to or be used by CG&E.

a) Mistaken Contributions. Company-matched contributions and company-matched stock incentive contributions made to the trust by reason of a mistake of fact may be returned to CG&E within one year after the payment of the contribution.

a) Non-deductible Contributions. Company-matched contributions and company- matched stock incentive contributions made to the plan which are deemed non-deductible pursuant to IRC 404 shall be returned to CG&E within one year after the disallowance of the deduction. If any portion of the non-deductible amount is from a participant's deferred compensation contribution, that amount shall be returned to the participant.

INVESTMENTS

ARTICLE
I. : INVESTMENTS

A. Principles of Investment Fund Selection. The Committee will establish and direct the trustee to maintain in the trust at least three investment funds, which collectively are intended to comply with ERISA 404 c) and the regulations thereunder.

A. Selection of Investment Funds. One of the investment funds will be the company stock fund. The Committee will select the other investment funds, following the principles of . If a fund is added or deleted, beneficial owners will be given the opportunity to reallocate their past contributions and redirect their sub-accounts among the authorized investment funds.

A. Investment Funds in the Plan. The following are the investment funds maintained in the plan trust:

1. Company Stock Fund. The company stock fund is a unitized fund which consists largely of shares of CINergy common stock, and a proportionately small amount of cash. It has been available (formerly with CG&E common stock) since the plan was established on October 1, 1983. The stock will be purchased at fair market value on the open market or from CINergy through the issuance of authorized but previously unissued shares at the option of CINergy. The stock may also be obtained through the exercise of stock rights. Stock received by the trustee as a stock dividend distribution or right is reflected by an increase in the unit value.

1. Fidelity Magellan Fund. The Fidelity Magellan Fund seeks capital appreciation by in- vesting primarily in common stock and securities convertible into common stock. It was added as an additional investment option on 10-01-92.

1. Fidelity Equity-Income Fund. The Fidelity Equity- Income Fund seeks reasonable income by investing primarily in income-producing equity securities. It has been available since the plan was established on October 1, 1983.

1. Fidelity Intermediate Bond Fund. The Fidelity Intermediate Bond Fund seeks to obtain a high level of current income by investing primarily in high and upper-medium grade fixed-income obligations. It has been available since the plan was established on October 1, 1983.

1. The PNC Fund (Sower Money Market Fund - Money Market Portfolio). The investment objective of this portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. This fund is called the money market fund throughout this plan. A money market fund, but not necessarily this particular fund, has been available since the plan was established on October 1, 1983.

[This sub-section should be deleted effective 01-01-96.]

1. Fidelity Retirement Money Market Fund. The investment objective of this portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. This fund is called the money market fund throughout this plan. A money market fund, but not necessarily this particular fund, has been available since the plan was established on October 1, 1983.

1. Loan Fund. The loan fund consists of all promissory notes securing plan loans to participants. The loan fund is administered as described in Article .

A. Vested Interest Response Line (VIR Line). The vested interest response line is the telephone line established and maintained by the trustee for use by participants to access their account information and to effectuate certain transactions affecting their accounts. The Vested Interest Response Line is referred to as the VIR Line throughout this plan.

A. Participant Investment Elections. A participant selects investment funds for his or her future contributions by using the investment election menu on the VIR Line. Investments must be made in whole percentage increments.

A. Investment of Contributions. The trustee shall invest the participants' contributions from CG&E in the participants' current designated investment selections. If the trustee has no record of a current investment selection for a participant's contribution, it shall invest the contribution in the money market fund. The trustee shall invest all company-matched contributions and company-matched stock incentive contributions in the company stock fund.

[This section should be deleted effective 01-01-96.]

A. Investment of Contributions. The trustee shall invest the participants' contributions from CG&E in the participants' current designated investment selections. If the trustee has no record of a current investment selection for a participant's contribution, it shall invest the contribution in the money market fund. The trustee shall invest all company-matched contributions and company-matched stock incentive contributions in the company stock fund. However, a participant who has reached age 50 may elect to invest his or her company-matched contributions and company-matched stock incentive contributions in any one or more of the investment funds as s/he directs by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. Allocations must be made in whole percentages.

[This section becomes effective on 01-01-96.]

A. Initial Allocation of Deferred and Optional Contributions. A participant's deferred compensation and/or optional contributions will be allocated to any one or more of the investment funds as s/he directs by filing an allocation of future contributions form with the Committee. Allocations must be made in any whole percentage. Allocations will apply to all contributions made on or after the entry date (see ). Participants' contributions will be invested in the investment funds as of the valuation date coinciding with or next following the date on which they are received by the trustee. If the allocation form is not yet received by the trustee when it must allocate contributions, the contributions will be invested in the money market fund, until the directions for allocations are filed with the Committee.

[This section should be deleted effective 01-01-96.]

A. Initial Allocation of Deferred and Optional Contributions. A participant's deferred compensation and/or optional contributions, collectively, will be allocated to any one or more of the investment funds as s/he directs by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. Allocations must be made in any whole percentage. Allocations will apply to all contributions made on or after the entry date (see ). Participants' contributions will be invested in the investment funds as of the valuation date coinciding with or next following the date on which they are received by the trustee. If the trustee has not yet received the participant's investment directions when it must allocate contributions, the contributions will be invested in the money market fund, until the directions for allocations are provided by the participant to the Committee.

[This section becomes effective on 01-01-96.]

A. Investment Fund Transfers of Current Balances. A participant can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line. Investments must be made in whole percentage increments. A participant may elect or change investment funds and/or the percentages in which contributions will be allocated once per quarter.

[This section should be deleted effective 08-01-95.]

A. Investment Fund Transfers of Current Balances. Except for participants or terminated participants whose accounts are frozen due to pending domestic relations orders, any participant or terminated participant with an account balance under the plan can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line. Investments must be made in whole percentage increments. A participant or terminated participant may elect or change investment funds and/or the percentages in which allocation will be allocated once per quarter.

[This section becomes effective on 08-01-95 and should be deleted effective 01-01-96.]

A. Investment Fund Transfers of Current Balances. Except for participants or terminated participants whose accounts are frozen due to pending domestic relations orders, any participant or terminated participant with an account balance under the plan can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line. Investments must be made in whole percentage increments. A participant or terminated participant may elect or change investment funds and/or the percentages in which allocations will be allocated at anytime.

[This section becomes effective on 01-01-96.]

A. Risk of Loss. The participant (or terminated participant) bears the effect for all gain or loss in market value of the investments selected for his or her plan assets. The participant (or terminated participant) also bears the effect of any market fluctuations which occur between the time his or her instructions are delivered to the Committee or the trustee and the time that the instructions are effectuated. The trustee, the Committee, the individual Committee members, and CG&E will not be responsible or liable to participants (or terminated participants) for the negative or positive effect of market fluctuations or reasonable delay in processing transactions upon their accounts.

A. Voting CINergy Stock.

1. Participation Instructions. The trustee shall vote the shares of CINergy stock credited to the accounts of beneficial owners in accordance with the instructions given by the beneficial owner. If the instructions are not received by the trustee by a date the trustee designates prior to any meeting of shareholders of CINergy, the trustee shall vote such uninstructed shares at its discretion.

1. Trustee Discretion. The trustee shall vote at its discretion the CINergy stock held in the company stock fund which have not been allocated to beneficial owners' accounts as of the record date of any meeting of shareholders of CINergy.

ACCOUNTS

ARTICLE
I. : ACCOUNTS

A. Accounts and Sub-accounts.

1. Account. Each beneficial owner's total assets in the plan shall be maintained in a separate account. The account shall reflect all transactions regarding the beneficial owner's assets. The assets in an account shall be allocated among sub-accounts.

1. Sub-account. Each account must include one or more of the following sub-accounts:

a) a deferred compensation sub-account ;

a) an optional sub-account; and

a) a company-matched sub-account.

[This sub-section should be deleted effective 01-01-96.]

1. Sub-account. Each account must include one or more of the following sub accounts:

1) a deferred compensation sub-account;

2) an optional sub-account;

3) a company-matched sub-account; and

4) a rollover sub-account.

[Thi
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1. A
ccoun
t
Value
.
Each
parti
cipan
t's
accou
nt is
value
d
daily
.
The
value
of an
accou
nt
refle
cts
the
numbe
r of
units
of
each
inves
tment
fund
owned
by
the
parti
cipan
t and
is
based
upon
the
unit
price
of
each
fund.
Both
the
units
owned
and
the
price
refle
ct a
close
of
busin
ess
valua
tion.

2. Investment Ownership. The trustee owns all plan assets as a fiduciary on behalf of the beneficial owners .

A. Quarterly Statements. The trustee shall prepare an individual statement of account for each beneficial owner on a quarterly basis. The statements will reflect the status of the account and sub-accounts of the beneficial owner. The trustee shall mail the statements to the beneficial owners as soon as practical after each quarter end.

VESTING AND FORFEITURES

ARTICLE
I. : VESTING AND FORFEITURES

A. Vesting. The process by which an employee becomes entitled to a nonforfeitable benefit under this plan.

A. Year of Vesting Service. Each period of 12 consecutive months of employment, beginning with the date on which the employee first performed an hour of service for CG&E or any related company, during which he or she completes at least 1,000 hours of service. The calculation period begins on the date (and subsequent anniversaries of that date) the employee first performed an hour of service for CG&E or a related company. Hours of service prior to the date on which the relationship to the Cincinnati Gas & Electric Company began are not included for the purpose of vesting under this plan. The hours of service of non-participating employees, leased employees and co-ops are included in determining their years of vesting service.

[This section should be deleted effective 01-01-96.]

A. Vested Benefits.

1. Vested Accrued Benefit. The portion of a participant's account available for distribution to the participant upon termination of employment with CG&E.

1. Deferred Compensation Sub-account and Optional Sub-account. Participants are immediately vested in their deferred compensation sub-accounts and optional sub-accounts.

[This sub-section should be deleted effective 01-01- 96.]

1. Deferred Compensation Sub-account, Optional Sub-account and Rollover Sub-account. Participants are immediately vested in their deferred compensation sub-accounts, optional sub- accounts and rollover sub-accounts.

[This sub-section becomes effective on 01-01-96.]

1. Company-Matched Sub-account. Participants are vested in their company-matched sub-accounts upon occurrence of any of the following:

a) termination of this plan,

a) partial termination of this plan with respect to affected participants,

a) the participant attains 5 years of vesting service,

a) the participant dies,

a) the participant becomes disabled,

a) the participant retires under the MRP,

a) the participant is permanently laid off for lack of work,

a) the participant attains age 65.

[This sub-section should be deleted effective 01-01-96.]

[This sub-section becomes effective on 01-01-96.]

A. Vesting of Former Employees.

1. Impact of Breaks in Service. Non-vested former employees who resume employment will be credited for vesting purposes with their prior years of service so long as the number of consecutive breaks in service (see ) incurred by the employees do not exceed five.

[This sub-section should be deleted effective 01-01-2001.]

1. Impact of Breaks in Service. Terminated participants who are credited with an hour of service on or after January 1, 1996 are not subject to the break in service rules provided in .

[This sub-section becomes effective on 01-01-96.]

1. Immediate Vesting. Former employees or participants who were vested in SIP or DCIP prior to termination of employment will retain or immediately obtain vested status in this plan.

A. Special Vesting Rules.

1. Parental Leaves. For the purpose of deter- mining a participant's years of vesting service, a non-vested participant who is granted a leave of absence for the purpose of giving birth to and/or nurturing a newborn, or adopting a child, will be granted credit for 190 hours of vesting service per month, not to exceed a total of 501 hours, during that leave of absence. Hours of vesting service will be granted in the year in which the absence commences to the extent necessary to prevent the employee from incurring a break in service for vesting purposes. To the extent the hours of vesting service are not needed to prevent a break in vesting service, the employee will be credited with the hours of vesting service in the immediately following year to prevent the occurrence of a break in vesting service during that year.

1. Military Leaves. Notwithstanding any provision of this plan to the contrary, credit for vesting service with respect to qualified military service will be provided in accordance with IRC 414(u) .

A. Forfeitures and Restorations.

1. Forfeiture. A participant who terminates employment with CG&E and is not vested in his or her company-matched sub-account will forfeit the amount in the company-matched sub-account. The participant shall be deemed to have received a distribution of zero for the company-matched account. The forfeiture will occur upon the participant's termination of employment with CG&E. This forfeiture may be restored in accordance with below.

[This sub-section should be deleted effective 01-01-2001.]

1. Forfeiture. A participant's benefit will be forfeited only in accordance with if the participant is credited with an hour of service on or after January 1, 1996.

[This sub-section becomes effective on 01-01-96.]

1. Use of Forfeitures. Forfeitures shall be used to reduce the company-matched contributions which are to be made in accordance with , and .

1. Restoration of Forfeitures. A terminated participant, described in above, who resumes employment with CG&E before incurring 5 consecutive breaks in service shall have his or her company-matched sub-account restored, without dividends earned in the interim.

[This sub-section should be deleted effective 01-01-96.]

1. Restoration of Forfeitures. A terminated participant who is credited with an hour of service on or after January 1, 1996, shall have his or her benefit restored in accordance with .

[This sub-section becomes effective on 01-01-96.]

1. Source of Restorations. Restorations of the company-matched sub-account shall be made from forfeitures during the plan year of the restoration. If there are insufficient forfeitures to cover restorations in any given plan year, CG&E shall make additional contributions to cover the deficit.

DISTRIBUTIONS

ARTICLE
I. : DISTRIBUTIONS

A. Distribution. A distribution is the delivery of all of the vested assets in a plan account to its beneficial owner.

A. Eligibility for Distribution.

1. Termination. Terminated participants are eligible to receive distribution upon termination of employment for any reason .

1. Disability. Participants and terminated participants are eligible to receive distribution as of the dates on which they become eligible to receive disability benefits under the MRP if they:

a) have been granted disability benefits by the Social Security Administration, or

a) are determined to be disabled by CG&E's medical director.

[This sub-section should be deleted effective 01-01- 97.]

1. Death. Beneficiaries are eligible to receive distribution upon the death of the participant from whom their interests are derived.

1. Acceptance of a DRO. An alternate payee under a DRO which has been accepted by the plan is given a window opportunity to elect distribution. See .

1. Plan Termination. The Committee shall make a distribution to all participants if the plan is terminated without the establishment of a successor plan.

[This sub-section should be deleted effective 01-01- 96.]
1. Plan Termination. The Benefits Manager shall make a distribution to all participants if the plan is terminated without the establishment of a successor plan.

[This sub-section becomes effective on 01-01-96.]

1. Sale of CG&E. The Committee shall make a distribution to all participants if substantially all of CG&E's assets are sold.

[This sub-section should be deleted effective 01-01- 96.]

1. Sale of CG&E. The Benefits Manager shall make a distribution to all participants if substantially all of CG&E's assets are sold.

[This sub-section becomes effective on 01-01-96.]

1. Sale of a Subsidiary. The Committee shall make a distribution to participants who are employed by a CG&E subsidiary if the subsidiary is sold and the participants are no longer employed by CG&E. If CG&E sells a subsidiary, but retains the employees who formerly worked for that subsidiary, those employees will not qualify for a distribution as a result of the sale.

[This sub-section should be deleted effective 01-01- 96.]

1. Sale of a Subsidiary. The Benefits Manager shall make a distribution to participants who are employed by a CG&E subsidiary if the subsidiary is sold and the participants are no longer employed by CG&E. If CG&E sells a subsidiary, but retains the employees who formerly worked for that subsidiary, those employees will not qualify for a distribution as a result of the sale.

[This sub-section becomes effective on 01-01-96.]

A. Distribution Valuation Date. The distribution valuation date for a beneficial owner is the business day on which the beneficial owner's units in the funds are sold for the purpose of disbursing funds for a loan, a withdrawal or a distribution.

A. Valuing a Distribution. The value of an account for the purpose of distribution shall be based upon the value of the units in the CINergy stock funds and the mutual funds, determined as of the distribution valuation date .

A. Events Triggering Distribution. As used in this Article, an event consists of a participant's termination, retirement, permanent layoff for lack of work, disability, or death.

1. Vested Benefit of $3,500 or Less. If the vested benefit is $3,500 or less, the Committee shall make a distribution in a lump sum.

[This sub-section should be deleted effective 01-01- 96.]

1. Vested Benefit of $3,500 or Less. If the vested benefit is $3,500 or less, the Benefits Manager shall make a distribution in a lump sum.

[This sub-section becomes effective on 01-01-96.]

1. Vested Benefit Over $3,500. If the vested benefit is over $3,500, the participant or beneficiary shall elect to receive or delay the distribution. The election must be filed with the Committee within 60 days of the event. A participant or beneficiary who has elected to delay the distribution can elect a distribution at a later time by filing an application for distribution with the Committee.

[This sub-section should be deleted effective 01-01-96.]

1. Vested Benefit Over $3,500. If the vested benefit is over $3,500, the participant or beneficiary shall elect to receive or delay the distribution. The election must be received by the Benefits Manager within 60 days of the event. A participant or beneficiary who has elected to delay the distribution can elect a distribution at a later time by informing the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E.

[Thi
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1. Mandatory Distribution After an Event. The Committee shall disburse a distribution no later than the 60th day after the close of the calendar year in which the terminated participant who has been affected by an event attains or would have attained age 65. If the terminated employee is age 65 or older on the date of the event, the distribution shall be made within 60 days of the year end during which the event occurred.

[This sub-section should be deleted effective 01- 01-96.]

1. Mandatory Distribution After an Event. The Benefits Manager shall disburse a distribution no later than the 60th day after the close of the calendar year in which the terminated participant who has been affected by an event attains or would have attained age 65. If the terminated employee is age 65 or older on the date of the event, the distribution shall be made within 60 days of the year end during which the event occurred.

[This sub-section becomes effective on 01-01-96.]

A. Participant's Mandatory Distribution Year. The following rules shall apply regardless of any other distribution provision in the plan.

1. Definition. A participant's mandatory distribution year is the year in which s/he attains age 70 1/2.

1. Lump Sum Distribution. The Committee shall make a distribution of all vested benefits accrued as of the September 30 of a participant's mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's mandatory distribution year.

[This sub-section should be deleted effective 01-01- 96.]

1. Lump Sum Distribution. The Benefits Manager shall make a distribution of all vested benefits accrued as of the September 30 of a participant's mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's mandatory distribution year.

[This sub-section becomes effective on 01-01-96.]

1. Subsequent Annual Distributions. If the participant has assets in the plan after the mandatory distribution year, the Committee shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This sub-section should be deleted effective 01-01- 96.]

1. Subsequent Annual Distributions. If the participant has assets in the plan after the mandatory distribution year, the Benefits Manager shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This sub-section becomes effective on 01-01-96.]

1. Continuing Contributions. Participants may continue to contribute to the plan after their mandatory distribution year.

[This section should be deleted effective 01-01-97 for all participants, except 5% owners.]

A. Participant's (Other than 5% Owner's) Mandatory Distribution Year. The following rules shall apply regardless of any other distribution provision in the plan.

1. Definition. A participant's (other than a 5% owner's) mandatory distribution year is the later of the year in which s/he attains age 70 1/2 or retires. A 5% owner's mandatory distribution year is the year in which s/he attains age 70 1/2. See above for details.

1. Lump Sum Distribution. The Benefits Manager shall make a distribution of all vested benefits accrued as of the September 30 of a participant's (other than a 5% owner's) mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's (other than a 5% owner's) mandatory distribution year.

1. Subsequent Annual Distributions. If the participant (other than a 5% owner) has assets in the plan after the mandatory distribution year, the Benefits Manager shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This section becomes effective on 01-01-97 for all participants, except 5% owners.]

A. Filing Forms for Distribution or Delay.

1. General Rule. A beneficial owner generally must file an application for distribution 90 days in advance of disbursement of a distribution from the plan.

[This sub-section should be deleted effective 01-01- 96.]

1. General Rule. A beneficial owner generally must apply for distribution by the voice or other electronic response system or other media authorized by CG&E 90 days in advance of disbursement of a distribution from the plan.

[This sub-section becomes effective on 01-01-96.]

1. Timing A Distribution. A beneficial owner must file an application for distribution with the Committee at least 15 business days before disbursement of a distribution from the plan.

[This sub-section should be deleted effective 01-01- 96.]

1. Timing A Distribution. A beneficial owner must apply for distribution with the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E at least 15 business days before disbursement of a distribution from the plan.

[This sub-section becomes effective on 01-01-96.]

1. Required Elections. If a beneficial owner fails to make a required election to immediately receive distribution or to delay distribution, the plan may process an election to delay distribution filed by the Committee on behalf of the beneficial owner.

[This sub-section should be deleted effective 01-01- 96.]

1. Required Elections. If a beneficial owner fails to make a required election to immediately receive distribution or to delay distribution, the plan may process an election to delay distribution as requested by the Benefits Manager on behalf of the beneficial owner.

[This sub-section becomes effective on 01-01-96.]

1. Mandatory Distributions. Any mandatory distribution required by the plan or the Internal Revenue Code may be made under the authority of an application for distribution filed by the Committee on behalf of the beneficial owner.

[This sub-section should be deleted effective 01-01-96.]

1. Mandatory Distributions. Any mandatory distribution required by the plan or the Internal Revenue Code may be made under the authority of a request for distribution made by the Benefits Manager on behalf of the beneficial owner.

[This sub-section becomes effective on 01-01-96.]

A. Timing of Distributions. The Committee will disburse distributions as a lump sum or in 5 annual installments.

1. Lump Sum Distributions. The trustee shall mail a lump sum payment to the beneficial owner approximately 15 business days following the day on which the application for distribution was filed with the Committee.

1. Five Annual Installments. A participant whose employment is terminated by reason of retirement under the terms of the MRP, disability, or permanent layoff for lack of work, may irrevocably elect to receive his or her account in five annual installments. Installment distributions are not available to beneficiaries or to participants terminated for other reasons.

1. Timing of Installments. The eligible participant may elect to receive the first installment as soon as practical after the end of the month that the event occurs, or as soon as practical after the end of the year in which the event occurs. The trustee shall disburse the first installment no later than March 1 following the calendar year when the event occurred which triggered the distribution.
a) Amount of Each Installment. Those who have elected 5 annual installments shall receive their accounts as follows: 1/5 of the account in the first installment, 1/4 of the account at the time of the second install- ment, 1/3 of the account at the time of the third installment, 1/2 of the account at the time of the fourth installment, and the balance of the account at the time of the last installment.

a) Subsequent Installments. The payment date for each subsequent installment shall be as soon as is practicable within each plan year following the anniversary date of the initial payment. The balance of the account shall be revalued in accordance with and any CINergy stock will continue to be voted by such a participant in accordance with . If a participant dies prior to receiving all installments, the remainder in his or her account will be paid in a lump sum to the beneficiary or, if none, in accordance with .

[This section should be deleted effective 01-01-96.]

A. Timing of Distributions. The Benefits Manager will disburse distributions as a lump sum or in 5 annual installments.

1. Lump Sum Distributions. The trustee shall mail a lump sum payment to the beneficial owner approximately 15 business days following the day on which the Benefits Manager was informed of the participant's request for distribution through the voice or other electronic response system or other media authorized by CG&E.

1. Five Annual Installments. A participant whose employment is terminated by reason of retirement under the terms of the MRP, disability, or permanent layoff for lack of work, may irrevocably elect to receive his or her account in five annual installments. Installment distributions are not available to beneficiaries or to participants terminated for other reasons.

1. Timing of Installments. The eligible participant may elect to receive the first installment as soon as practical after the end of the month that the event occurs, or as soon as practical after the end of the year in which the event occurs. The trustee shall disburse the first installment no later than March 1 following the calendar year when the event occurred which triggered the distribution.

a) Amount of Each Installment. Those who have elected 5 annual installments shall receive their accounts as follows: 1/5 of the account in the first installment, 1/4 of the account at the time of the second install- ment, 1/3 of the account at the time of the third installment, 1/2 of the account at the time of the fourth installment, and the balance of the account at the time of the last installment.

a) Subsequent Installments. The payment date for each subsequent installment shall be as soon as is practicable within each plan year following the anniversary date of the initial payment. The balance of the account shall be revalued in accordance with and any CINergy stock will continue to be voted by such a participant in accordance with . If a participant dies prior to receiving all installments, the remainder in his or her account will be paid in a lump sum to the beneficiary or, if none, in accordance with .

[This section becomes effective on 01-01-96.]

A. In Kind Distribution.

1. General Rule. Distributions generally consist of a CINergy stock certificate reflecting the value of the units of the CINergy stock fund in the account as of the distribution valuation date, plus cash from the sale of all other plan investments and incidental cash from the CINergy stock fund.

1. Company Stock Fund. To the extent that a beneficial owner's account includes units of the CINergy stock fund as of the distribution valuation date, s/he may elect to receive cash in lieu of a CINergy stock certificate.

1. Fidelity Funds. The beneficial owner can direct the trustee to transfer his or her Fidelity Equity Income, Intermediate Bond and/or Magellan funds, upon distribution, to an individual account at Fidelity by submitting an application to the Committee.

[This sub-section should be deleted effective 01-01-96.]

1. Fidelity Funds. The beneficial owner can direct the trustee to transfer his or her Fidelity Equity Income, Intermediate Bond and/or Magellan funds, upon distribution, to an individual account at Fidelity by informing the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

A. Direct Rollovers to Other Plans.

1. Election.

a) Who May Elect. Participants, terminated participants, their beneficiaries who are surviving spouses, and alternate payees who are former spouses of participants, may elect to have any portion of an eligible rollover distribution paid directly to their designated eligible retirement plan. Those making this election must be entitled to distribution or withdrawal of their plan assets, under the terms of this plan. The only plan assets subject to direct rollover are those acquired by reason of being a participant, a surviving spouse or a former spouse alternate payee.

a) Manner of Election. This election must be made at the time and in the manner prescribed by the Committee.

1. Distributions Eligible for Rollover. An eligible rollover distribution is any distribution or withdrawal, except as stated in below, of all or any portion of the account of one of the persons listed in above.

1. Distributions Not Eligible for Rollover.

a) Portions of Mandatory Distributions. The portion of a mandatory distribution under which is required to be distributed under IRC 401(a)(9) is not eligible for direct rollover.

[This sub-section should be deleted effective 01- 01-97 for all participants, except 5% owners.]

a) Portions of Mandatory Distributions. The portion of a mandatory distribution under which is required to be distributed under IRC 401(a)(9) is not eligible for direct rollover.

[This sub-section becomes effective on 01-01-97 for all participants, except 5% owners.]

a) Portions Excluded from Gross Income. The portion of any distribution which is not able to be included in the gross income of the beneficial owner is not eligible for direct rollover. For this purpose, gross income can include any unrealized appreciation of CINergy stock.

a) Optional Contributions. Optional contributions are not eligible for direct rollover. However, interest and earnings attributable to optional contributions are eligible for direct rollover.

a) Deemed Distributions. A deemed distribution which has occurred because of a participant's failure to make one or more loan payments is not eligible for direct rollover.

a) Loan Offsets. The portion of a distribution due to termination of the participant's employment with CG&E which offsets the unpaid portion of a plan loan will not be eligible for direct rollover.

a) Periodic Distributions. Any distribution that is one of a series of substantially equal periodic payments, made at least annually, to be paid over the life of the beneficial owner or the joint lives of the beneficial owner and his or her designated beneficiary, or to be paid for a specified period of at least 10 years is not eligible for direct rollover.

a) Other. Returns of elective deferrals and corrective distributions of excess contributions and attributable net income are not eligible for direct rollover. Returns of deferrals in excess of the IRC 402(g) limits or in excess of the 415 limits are not eligible for direct rollover.

1. Eligible Retirement Plan. The definition of an eligible retirement plan for the purpose of accepting direct rollovers varies with the class of the person electing the direct rollover. The eligible retirement plan must be willing to accept the rollover distribution.

a) Participants and Former Spouse Alternate Payees. Participants and former spouse alternate payees may direct rollovers to an individual retirement account , an individual retirement annuity , an annuity plan or a qualified trust.
b) Surviving Spouses. Surviving spouses may direct rollovers only to an individual retirement account, or an individual retirement annuity.

A. Settlement Statement. The trustee shall furnish a settlement statement with every distribution.

A. Distribution Upon Death of a Participant or Beneficiary. In the event that the participant dies with assets remaining in the plan, the assets will be distributed to the participant's beneficiary. If there is no beneficiary, the assets will be distributed to the participant's surviving spouse. If the participant has no beneficiary or surviving spouse at the time of the participant's death, assets will be distributed to the participant's estate. If the beneficiary of a deceased participant dies while assets remain in the plan, the assets will be distributed to the estate of the beneficiary. In the event an alternate payee dies with assets remaining in the plan, the assets will be paid to the estate of the alternate payee. In each case, the assets will be distributed no later than the close of the plan year which contains the fifth anniversary of the participant's death. If the spouse of a participant or terminated participant is the beneficiary of the plan account, the spouse may delay distribution until the end of the calendar year in which the participant or terminated participant would have attained age 65. See and .

A. Plan Hierchary for Distributions. Any sale of a participant's plan assets, which is necessary to generate cash for the purpose of disbursing cash in the amount of after-tax contributions, will be made using the plan hierarchy.

WITHDRAWALS DURING EMPLOYMENT

ARTICLE
I. : WITHDRAWALS DURING EMPLOYMENT

A. Withdrawal. A withdrawal is disbursement of any part of the vested assets of a participant to that participant. Distribution installments are not withdrawals. Only participants are eligible to take withdrawals. All other beneficial owners are eligible only for distributions.

A. Withdrawals from Company-Matched Sub-Accounts. A participant may not withdraw from the company-matched sub-account during the period s/he is employed by CG&E.

A. Withdrawals from Optional Sub-Accounts. Participants may withdraw from their optional sub-accounts plan by filing an application for withdrawal with the Committee. The trustee will disburse the withdrawal directly to the participant , or to another plan if the participant elects and the withdrawal qualifies for direct rollover. See .

[This section should be deleted effective 01-01-96.]

A. Withdrawals from Optional Sub-Accounts. Participants may withdraw from their optional sub-accounts by the voice or other electronic response system or other media authorized by CG&E. The trustee will disburse the withdrawal directly to the participant , or to another plan if the participant elects and the withdrawal qualifies for direct rollover. See .

[This section becomes effective on 01-01-96.]

A. Amount Available for Optional Withdrawal. Participants may withdraw either a specific whole dollar amount or the entire balance from their optional sub-accounts. If the participant withdraws less than 100% of his or her optional sub-account balance and requests a second withdrawal within a 12 month period, s/he will be required to withdraw the remaining balance.
B. Plan Hierarchy For Withdrawals. If the portion of the participant's account which is to be withdrawn is invested in more than one fund, the withdrawal amount will be deducted from the investment funds using the plan hierarchy. Each fund will be exhausted before the withdrawal draws upon the next fund in the hierarchy.

A. Form of Withdrawals. Withdrawals generally consist of a CINergy stock certificate for the units of the CINergy stock fund in the sub-account as of the distribution valuation date, plus cash from the sale of all other plan investments and incidental cash from the CINergy stock fund.

A. Cash In Lieu of Stock. A participant may elect to receive cash in lieu of a CINergy stock certificate for his or her assets in the company stock fund.

A. Hardship. A hardship is an immediate and heavy financial need of a participant which cannot be met except through a withdrawal from the participant's deferred compensation sub-account in the plan.

A. Hardship Withdrawals. A participant may apply to the Committee for a withdrawal of all or a portion of his or her deferred compensation sub-account. The Committee shall not grant the request unless it qualifies under the criteria listed in .

[This section should be deleted effective 01-01-96.]

A. Hardship Withdrawals. A participant may apply to the Benefits Manager for a withdrawal of all or a portion of his or her deferred compensation sub-account. The Benefits Manager shall not grant the request unless it qualifies under the criteria listed in .

[This section becomes effective on 01-01-96.]

A. Amount Available for Hardship Withdrawals. The amount available for a hardship withdrawal includes all deferred compensation contributions made in years prior to 1989, including any earnings and losses thereon, and deferred compensation contributions made on or after 01-01-89, excluding earnings and losses thereon. Hardship withdrawals are limited to the actual amount in the participant's account.

A. Criteria for Granting a Hardship Withdrawal. The Committee shall use the following criteria when considering an application for a hardship withdrawal:

1. Immediate and Heavy Financial Need. The request must be to satisfy an immediate and heavy financial need for one of the following reasons:

a) Medical Expenses. Unreimbursed medical expenses, as described in IRC
213(d), incurred by the participant, the participant's spouse, or any dependents of the participant, as defined in IRC 152, or necessary for those persons to obtain medical care as described in IRC 213(d).

a) Purchase of a Principal Residence. Purchase, excluding mortgage payments, of a principal residence of the participant.

a) Tuition. Payment of tuition, related educational fees, and room and board for the next 12 months of post-secondary education for the participant, the participant's spouse, children, or dependents.

a) Prevention of Foreclosure. Prevention of eviction from, or foreclosure of the mortgage upon, the principal residence of the participant.

a) Funeral Expenses. Payment of the funeral expenses of the participant's spouse, children or dependents.

a) Other Expenses. Any other expense identified by the Internal Revenue Commissioner as an immediate and heavy financial need.

1. Amount Necessary to Satisfy the Need. The hardship withdrawal is limited to the amount necessary to satisfy the need, plus any amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the hardship withdrawal. The participant must submit reasonable documentation of the existence and amount of the need. There must be no other resources reasonably available to satisfy the need. The participant must first take all available non-hardship distributions/loans from all of CG&E's other plans: RIP, SIP, MRP . This includes a withdrawal of available funds from the optional sub-account. If a plan loan is either unavailable to the participant, or the available loan is insufficient to meet the need of a participant, and the other criteria of this section are met, the Committee may grant a hardship withdrawal.

[This section should be deleted effective 01-01-96.]

A. Criteria for Granting a Hardship Withdrawal. The Benefits Manager shall use the following criteria when considering a request for a hardship withdrawal:

1. Immediate and Heavy Financial Need. The request must be to satisfy an immediate and heavy financial need for one of the following reasons:

a) Medical Expenses. Unreimbursed medical expenses, as described in IRC
213(d), incurred by the participant, the participant's spouse, or any dependents of the participant, as defined in IRC 152, or necessary for those persons to obtain medical care as described in IRC 213(d).

a) Purchase of a Principal Residence. Purchase, excluding mortgage payments, of a principal residence of the participant.

a) Tuition. Payment of tuition, related educational fees, and room and board for the next 12 months of post-secondary education for the participant, the participant's spouse, children, or dependents.

a) Prevention of Foreclosure. Prevention of eviction from, or foreclosure of the mortgage upon, the principal residence of the participant.

a) Funeral Expenses. Payment of the funeral expenses of the participant's spouse, children or dependents.

a) Other Expenses. Any other expense identified by the Internal Revenue Commissioner as an immediate and heavy financial need.

1. Amount Necessary to Satisfy the Need. The hardship withdrawal is limited to the amount necessary to satisfy the need, plus any amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the hardship withdrawal. The participant must submit reasonable documentation of the existence and amount of the need. There must be no other resources reasonably available to satisfy the need. The participant must first take all available non-hardship distributions/loans from all of CG&E's other plans: RIP, SIP, MRP . This includes a withdrawal of available funds from the optional sub-account. If a plan loan is either unavailable to the participant, or the available loan is insufficient to meet the need of a participant, and the other criteria of this section are met, the Benefits Manager may grant a hardship withdrawal.

[This section becomes effective on 01-01-96.]

A. Required Documentation for Hardship Withdrawals. The participant must file the following documents with the Committee for consideration of a hardship withdrawal:

1. Application. The participant must complete an application for hardship withdrawal, including the spouse's signature acknowledging notice of the application, if the participant is married.

1. Documentation. The participant must attach photocopies of all papers which document the existence and the amount of the need.

1. Written Explanation. The participant must provide a clear and concise explanation, in his or her own words, of how the funds are to be used.

1. Quarterly Statement. The Committee will provide a copy of the participant's most recent quarterly statement indicating the amount of funds that are available to the participant.

1. Personal Financial Statement. A personal financial statement of the participant's assets and liabilities, including the spouse's notarized signature, if the participant is married.

[This section should be deleted effective 01-01-96.]

A. Required Substantiation for Hardship
Withdrawals. The participant must provide the following information to the Benefits Manager for consideration of a hardship withdrawal:

a) Request. The participant must make a request to the Benefits Manager for a hardship withdrawal through the voice or other electronic response system or other media authorized by CG&E. If the participant is married, the participant must furnish the Benefits Manager with the signature of the participant's spouse acknowledging notice by the spouse of the request.

b) Documentation. The participant must furnish photocopies of all papers which document the existence and the amount of the need.

c) Explanation. The participant must provide a clear and concise explanation, in his or her own words, of how the funds are to be used through the voice or other electronic response system or other media authorized by CG&E.

d) Quarterly Statement. The Benefits Manager will provide a copy of the participant's most recent quarterly statement indicating the amount of funds that are available to the participant.

e) Personal Financial Statement. A personal financial statement of the participant's assets and liabilities, including the spouse's notarized signature, if the participant is married.

[This section becomes effective on 01-01-96.]

A. Disbursement of Hardship Withdrawals. The trustee will disburse a hardship withdrawal which has been accepted by the Committee directly to the participant.

[This section should be deleted effective 01-01-96.]

A. Disbursement of Hardship Withdrawals. The trustee will disburse a hardship withdrawal which has been accepted by the Benefits Manager directly to the participant.

[This section becomes effective on 01-01-96.]

A. Settlement Statement. The trustee shall furnish a settlement statement with every distribution.

A. Suspension Following Withdrawal.

1. Optional Sub-Account Withdrawal. Participants who have withdrawn from their optional sub-accounts will not be permitted to make optional contributions to the plan until at least 12 months from the date of disbursement of the withdrawal.

1. Hardship Withdrawal. A participant who is granted a hardship withdrawal shall not be permitted to make deferred compensation or optional contributions to the plan until at least 12 months from the date of the hardship withdrawal disbursement. The IRC 402(g) limit on a participant's deferred compensation contributions for the taxable year of the participant following the taxable year in which the hardship withdrawal occurred shall be reduced by the amount of the participant's deferred compensation contributions during the taxable year in which the hardship withdrawal occurred.

LOANS

ARTICLE
I. : LOANS

A. Eligibility for Loans . Participants currently receiving pay from CG&E may apply for and receive a loan from their deferred compensation sub-accounts. No other beneficial owners are eligible for loans. Specifically, participants on leaves of absence, terminated participants, beneficiaries and alternate payees are not eligible to receive loans.

A. Loan Requests. Participants may request loans through the current process established by the Committee. The participant must complete and return the promissory note to the trustee. Upon receipt of the completed promissory note, the trustee will send a check for the loan amount to the participant.

[This section should be deleted effective 01-01-96.]

A. Loan Requests. Participants may request loans through the current process established by the Committee. The participant must execute the promissory note. The promissory note, at the sole discretion of the Committee, may be provided on the back of the check which is issued to the participant for the loan amount. The promissory note will be properly executed and legally enforceable once the participant endorses the back of the check. The participant's endorsement evidences that s/he agrees to the repayment terms.

[This section becomes effective on 01-01-96.]

A. Limitation of Two Loans at any Given Time. A participant may apply for and obtain a second loan while the first loan remains outstanding. The second loan will be granted at the then prevailing rate of interest and for an entirely separate term of five years or less. The outstanding balance in the participant's loan account will reflect the total of the two loans, although the loans will remain separate and distinct on the trustee's records. The dollar limitation imposed by the plan for one loan will apply to the total outstanding balance for two loans for any given participant. A participant is limited to two outstanding loans at any given time.

A. Granting Loans. Loans will be granted from the plan for any reason.

A. Loan Amount.

1. 50% of Vested Account Limited by Deferred Compensation Sub-Account. The loaned amount cannot exceed the lesser of $50,000 or 50% of the balance of the participant's vested accrued benefit (company-matched, deferred compensation and optional sub-accounts) and will be further limited by the actual amount in the deferred compensation contribution sub-account on the distribution valuation date for the loan.

[This sub-section should be deleted effective 01-01- 96.]

1. 50% of Vested Account Limited by Deferred Compensation Sub-Account and Rollover Sub- Account. The loaned amount cannot exceed the lesser of $50,000 or 50% of the balance of the participant's vested accrued benefit (company- matched, deferred compensation, optional and rollover sub-accounts) and will be further limited by the actual amount in the deferred compensation contribution sub-account and rollover sub-account on the distribution valuation date for the loan.

[This sub-section becomes effective on 01-01-96.]

1. Reduction of $50,000 Maximum. The $50,000 maximum loan amount is reduced by the excess (if any) of the highest outstanding balance of loans to that participant during the one-year period ending on the day before the date the loan is made, over the outstanding balances of loans to that participant made under all qualified plans sponsored by CG&E on the date the loan is made.

A. Denial of Loans. The trustee shall not loan funds to a participant if granting the loan would result in a violation of any federal or state statute or regulation regarding loans.

A. Plan Hierarchy For Loans. If the participant's deferred compensation sub-account is invested in more than one fund, the loan amount will be deducted from the investments funds using the plan hierarchy. Each fund will be exhausted before the loan draws upon the next fund in the hierarchy.

[This section should be deleted effective 01-01-96.]

A. Pro-rata Liquidation for Loans. The trustee shall liquidate the participant's deferred compensation sub-account investments and rollover sub-account investments in the same proportion that each investment bears to the entire deferred compensation contribution sub-account and rollover sub-account except for the loan fund. The trustee will disburse the cash produced to the participant minus any administrative fee.

[This section becomes effective on 01-01-96.]

A. Valuing an Account For A Loan. The trustee shall use the value of the account as of the opening of the business day on which it writes the check for the loan to the participant to determine the amount available for the loan.

A. Collateral for Loans.

1. Assignment and Restriction of Withdrawals. The participant shall assign 50% of his or her vested accrued account, and shall sign a promissory note for the amount of the loan, including interest, payable to the order of the trustee. No collateral other than the participant's interest in the plan will be accepted as security for a plan loan. If a participant's optional sub-account becomes collateral for his or her loan, s/he will only be able to withdraw from the optional sub-account the difference between its total value and the portion of the balance of the optional sub-account necessary as collateral for the unpaid loan balance.

1. Effect of a DRO Upon Loan Collateral. If there are insufficient assets in the deferred compensation sub-account of a participant to satisfy the terms of a DRO because of one or more outstanding loans, the trustee will first take additional assets from the participant's optional sub-account, second from the company-matched sub- account, and finally from the loan account portion of the deferred compensation sub-account, in order to satisfy the DRO.

[This sub-section should be deleted effective 01-01- 96.]

1. Effect of a DRO Upon Loan Collateral. If there are insufficient assets in the deferred compensation sub-account, or next in the rollover sub-account, if any, of a participant to satisfy the terms of a DRO because of one or more outstanding loans, the trustee will first take additional assets from the participant's optional sub-account, second from the company-matched sub- account, third, from the loan account portion of the deferred compensation sub-account, and finally from the loan account portion of the rollover sub-account, if any, in order to satisfy the DRO.

[This sub-section becomes effective on 01-01-96.]

A. Interest Rate for Loans. The rate of interest charged on loans will be 1/2 of 1% above the prime rate charged by the trustee in its banking business on the first business day of the month during which the application is received by the trustee.

[This section should be deleted effective 01-01-96.]
A. Interest Rate for Loans. The rate of interest charged on loans will be a reasonable rate based on commercial standards in the lending industry.

[This section becomes effective on 01-01-96.]

A. Payment of Loans. A participant who applies for a loan must authorize CG&E to deduct loan payments from his or her pay. CG&E will remit loan deductions to the trustee concurrent with disbursements of the payroll.

A. Minimum and Maximum Term of Loans. The participant shall specify the number of months for payment of the loan, with 12 months being the minimum term, and 60 months the maximum term.

[This section should be deleted effective 01-01-96.]

A. Minimum and Maximum Term of Loans. The participant shall specify the number of months for payment of the loan, with 12 months being the minimum term, and 54 months the maximum term.

[This section becomes effective on 01-01-96.]

A. Investment of Loan Payments. The trustee will direct loan payments to the investment funds according to the participant's most recent allocation of future contributions form that is on file.

[This section should be deleted effective 01-01-96.]

A. Investment of Loan Payments. The trustee will direct loan payments to the investment funds according to the most recently provided directions given by the participant through the voice or other electronic response system or other media authorized by CG&E.

[This section becomes effective on 01-01-96.]

A. Outstanding Loans for Terminated Participants. Upon termination of employment, any outstanding loan of a terminated participant is due immediately or the outstanding amount of the loan will be in default pursuant to or and reclassified as a partial distribution.

[This section becomes effective on 01-01-96.]

A. Outstanding Loans for Participants on Military Leave. Subject to the Committee's approval of such a policy, loan repayments will be suspended under this plan as permitted under IRC 414(u)(4).

A. Prepayment of Loans. A participant may pay the remaining loan balance at any time without any pre-payment penalties by check or money order made payable to the trustee. The prepayment should be sent or delivered to the Committee.

A. Loan Default. A participant's loan will go into default upon failure to make one or more payments during a calendar year, violation of any term of the promissory note signed by the participant, or upon declaration of the Committee at its discretion under the terms of the promissory note.

[This section should be deleted effective ___________.]

A. Loan Default. A participant's loan will go into default upon failure to timely make any payment during a calendar year or violation of any term of the promissory note signed by the participant.

[This section becomes effective on __________.]

A. Tax Effects of Loan Default. The participant shall pay the tax incurred for any events which arise out of any loan transaction with the plan or any failure to make payments under plan and promissory note requirements.

A. Curing Loan Default. A participant who has missed one or more loan payments during a plan year may make those payments up by direct payment to the Committee with a check or money order made payable to the order of the trustee in the amount of the payment, plus interest, on or before the final valuation date of the plan year to cure the default without tax or recharacterization consequences.

[This section should be deleted effective _________.]

A. Curing Loan Default. A participant who misses any loan payment may make up the missed payment by direct payment to the Committee with a check or money order made payable to the order of the trustee in the amount of the payment, plus interest, on or before the last day of the calendar quarter following the calendar quarter in which the required payment was due to cure the default without tax consequences.

[This section becomes effective on __________.]

A. Reamortization of Loans. A participant may reamortize a loan so long as the total time for repayment of the loan does not exceed 60 months. Loan reamortizations will be under the plan terms and conditions in effect at the time of the
reamortization.

[This section should be deleted effective 01-01-96.]

A. Reamortization of Loans. A participant who is on a leave of absence (other than military leave) for not longer than one year may reamortize a loan so long as the total time for repayment of the loan does not exceed 54 months and the loan payments due after the leave expires (or, if earlier, after the first year of the leave) are not less than those required under the original terms of the loan. Loan reamortizations will be under the plan terms and conditions in effect at the time of the
reamortization.

[This section becomes effective on 01-01-96.]

A. Recharacterization of Sub-accounts . Effective as of the final valuation date of each plan year, the trustee shall recharacterize all or any portion of the optional and/or company-matched sub-accounts of a participant who has failed to make any loan payment(s) during the year, if those missed payments are still outstanding at the final valuation date. The amount recharacterized shall be limited to the amount of the missed payments. The amount rechar- acterized will be credited to the participant's deferred compensation sub-account as a loan payment. The trustee will notify the participant of the taxable amount of the distribution. The Committee does not waive its ability to determine that a loan is in default, or to foreclose upon a loan, by exercising its right to recharacterize the participant's sub-accounts under this provision.

[This section should be deleted effective ___________.]

A. Loan Fund Administration.

1. Single Loans. The promissory notes securing payment of loans from plan assets will be reflected on participants' quarterly statements under the loan fund assets. When participants receive plan loans, their investment allocations will reflect credits to their loan funds in an amount equal to the principal amount of the loan. Their other sub-accounts will reflect a total reduction in value equivalent to the principal amount of the loan. As participants make loan payments, the value of the participants' loan funds will be reduced by the amount of the payments attributable to the principal of the loans. Principal and interest, as they are paid, will be allocated to investments per the most recent directions given by the participant. Once the loan is completely repaid, the participant's quarterly statement will reflect no investment in the loan fund.

1. Multiple Loans. The trustee shall maintain separate records of principal, interest, and payment schedule for each loan that a participant has outstanding at any given time. The participant's statement will not reflect each separate loan. The loan fund segment of the quarterly statements distributed to participants will reflect the total of all current loans outstanding to the participant.

1. Loans and DROs. The trustee will allocate as much of the participant's loan fund to the alternate payee as is necessary to satisfy the terms of the DRO if there are insufficient other assets in the participant's account due to the amount of the participant's assets on loan. To the extent possible, loans extended prior to the Committee's receipt of the DRO will be allocated to the alternate payee. However, loans extended after receipt of the DRO will be allocated, if necessary to meet the terms of the DRO. The participant will remain solely responsible for loan payments, even if some portion of a loan or loans has been allocated to an alternate payee to satisfy the terms of a DRO.

DOMESTIC RELATIONS ORDERS
AND ALTERNATE PAYEES

ARTICLE
I. : DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES

A. Domestic Relations Order (DRO). A domestic relations order is any judgment, decree or order, made pursuant to a state domestic relations law, which provides that child support, alimony, maintenance payments or marital property allocation will be made from the plan assets of a participant. A domestic relations order is referred to as a DRO throughout the plan.

A. General Rule. The benefits due or to become due to any participant are subject to a domestic relations order accepted by the Committee.

A. Qualification and Acceptance of a DRO.

1. Initial Order. The DRO must meet the requirements of IRC 414(p) and use the sample DRO language that has been approved by the Committee to be considered as qualified and to be accepted by the plan. The Committee shall determine whether or not a DRO is qualified. A court order which contains language presuming that it is qualified shall not be binding upon the plan.

1. Amended Orders. A DRO which modifies the terms of a previously qualified DRO may be accepted by the Committee. The amended DRO must meet the qualifications of above, and must be filed with the Committee before any irrevocable action has been taken on execution of the initial DRO. Irrevocable actions include executed cash-outs and any transaction which the Committee decides is impossible or impractical to attempt to reverse.

A. Special Conditions Applicable to DROs.

1. Prohibition of Allocating Identical Assets Multiple Times. No DRO may allocate benefits which have been allocated by a previously qualified and accepted DRO. However, an amended DRO which is accepted by the plan may reallocate benefits previously allocated without violating this provision.

1. Applicable Plan(s). The nature of benefits allocated to an alternate payee will be determined in accord with the terms of the plan in effect on the date the DRO is entered onto the records of the issuing court.

A. Alternate Payee. An alternate payee is a participant's child, spouse, former spouse or other dependent who is designated to receive benefits under the plan by a DRO. The Committee may rely upon the determination of the court which issues the DRO that the designated alternate payee in the order is entitled, under the law of the appropriate state, to be so named.

A. Acknowledgment and Acceptance or Rejection of a DRO. As soon as practical after the Committee receives a DRO, it will send the participant and designated alternate payee an acknowledgment of receipt, notice of acceptance or rejection and a copy of the plan procedures for acceptance or rejection of DROs. The Committee will send a copy of the DRO and notice of acceptance or rejection to the trustee. The Committee shall accept or reject a DRO within 18 months of receiving it.

A. Division of Assets By the Trustee.

1. On Receipt of a DRO. The trustee shall freeze the account of the participant upon receiving notice from any plan agent that an Order purporting to be a DRO has been received. Participants with frozen accounts may not obtain loans or withdrawals from the plan, and may not reallocate among funds. Distributions on frozen accounts are subject to delay, pending acceptance of a DRO.

1. On Rejection of a DRO. If the order is rejected, the trustee shall keep the account of the participant frozen for a reasonable period of time, pending receipt of an amended DRO which is accepted by the Committee, or direction from the Committee that the participant's account may become active.

1. On Acceptance of a DRO. The trustee shall segregate the plan assets into two or more accounts as directed by the order as soon as it receives notification that an order is accepted. The trustee shall set up new accounts in the name of each alternate payee under the order. The assets in the sub-accounts of the alternate payees shall be allocated among the investment funds in the same proportions as allocated in the sub-accounts of the participant from which they originated.

1. Participant with Outstanding Loans. If a participant has one or more loans outstanding and insufficient liquid deferred compensation sub-account assets to satisfy the terms of an accepted DRO, the trustee shall avoid allocating loan investment assets if possible. The trustee shall first take the necessary additional assets from the optional sub-account until it is exhausted. Second, the trustee shall take the necessary additional assets from the company-matched sub-account until it is exhausted. Finally, the trustee shall allocate the remaining funds necessary to satisfy the DRO from the loan investment portion of the deferred sub-account. (See ).

[This sub-section should be deleted effective 01-01- 96.]

1. Participant with Outstanding Loans. If a participant has one or more loans outstanding and insufficient liquid deferred compensation sub-account assets or next rollover sub-account assets, if any, to satisfy the terms of an accepted DRO, the trustee shall avoid allocating loan investment assets if possible. The trustee shall first take the necessary additional assets from the optional sub-account until it is exhausted. Second, the trustee shall take the necessary additional assets from the company-matched sub-account until it is exhausted. Third, the trustee shall take the necessary additional assets from the loan investment portion of the deferred sub-account. Finally, the trustee shall allocate the remaining funds necessary to satisfy the DRO from the loan investment portion of the rollover sub-account. (See ).

[This sub-section becomes effective on 01-01-96.]

1. Denial of DRO within 18 Months. If within 18 months of the original receipt of a DRO it, or a successor DRO, is determined to be not qualified, and no amended DRO acceptable to the plan has been submitted to the Committee, the assets in the alternate payees' sub-accounts will be restored to the sub-accounts of the partici- pant. The trustee shall restore the participant's account to active status.

A. Participatory Functions of Alternate Payees. Alternate payees may not withdraw from any sub-account, contribute to any sub-account, apply for loans, apply for hardship withdrawals, or elect an installment distribution. An alternate payee may not change his or her investment direction of sub-accounts, except in conjunction with a distribution. The rights of an alternate payee are limited to: receipt of a quarterly statement of his or her account, receipt of the account proceeds in accord with the terms of the DRO or the plan, a change in the allocation of past contributions in conjunction with a distribution , the right to all claims procedures mandated by ERISA and the right to obtain copies of the plan document and summary plan description as mandated by ERISA. None of these rights under the plan will be in effect until the Committee certifies the pertinent DRO as qualified and so notifies the alternate payee.

A. Distribution of Assets Valued at $3,500 or Less. The Committee shall distribute any alternate payee's account assets valued at $3,500 or less at any valuation date. Upon the determination of the value of the account, the alternate payee must file an application for distribution. The Committee shall file an application for distribution on behalf of the alternate payee if s/he does not do so within 60 days of the determination of the value of the account pursuant to . If insufficient cash assets are available to distribute because of loans allocated to the account of the alternate payee, this mandatory distribution will be delayed until there are sufficient cash assets in the account.

[This section should be deleted effective 01-01-96.]

A. Distribution of Assets Valued at $3,500 or Less. The Benefits Manager shall distribute any alternate payee's account assets valued at $3,500 or less at any valuation date. Upon the determination of the value of the account, the alternate payee must apply for distribution through the voice or other electronic response system or other media authorized by CG&E. The Benefits Manager shall apply for distribution on behalf of the alternate payee if s/he does not do so within 60 days of the determination of the value of the account pursuant to . If insufficient cash assets are available to distribute because of loans allocated to the account of the alternate payee, this mandatory distribution will be delayed until there are sufficient cash assets in the account.

[This section becomes effective on 01-01-96.]

A. Distribution of Assets Valued Over $3,500. If an alternate payee's assets in the plan are valued over $3,500, s/he is not eligible to receive a lump sum distribution until the participant from whom the account was derived reaches age 50, terminates employment, or dies. An alternate payee who becomes eligible for a distribution must file an application for a lump sum distribution with the Committee no later than the 90 days before the end of the year in which the participant from whom the account was derived becomes age 65. If the alternate payee does not file the application for distribution in a timely manner, the Committee shall file the application on his or her behalf pursuant to .

[This section should be deleted effective 01-01-96.]

A. Distribution of Assets Valued Over $3,500. If an alternate payee's assets in the plan are valued over $3,500, s/he is not eligible to receive a lump sum distribution until the participant from whom the account was derived reaches age 50, terminates employment, or dies. An alternate payee who becomes eligible for a distribution must apply for a lump sum distribution with the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E no later than the 90 days before the end of the year in which the participant from whom the account was derived becomes age 65. If the alternate payee does not apply for distribution in a timely manner, the Benefits Manager shall apply on his or her behalf pursuant to .

[This section becomes effective on 01-01-96.]

A. Window Cashouts for Alternate Payees.

1. Effective Date. Alternate payees who have been awarded benefits from this plan shall be given a one-time opportunity to receive a lump sum payment of all their plan interest, regardless of the amount of the present value of the benefit.

1. Retroactivity of Provision. Alternate payees who had been awarded plan benefits prior to the effective date of this provision (April 1, 1991) shall also be given this one-time opportunity to receive their total plan benefit.

1. Notification to Alternate Payees. Notification to the alternate payee of this offer shall allow a minimum of 30 days and a maximum of 90 days to make the irrevocable election to receive the lump sum benefit.

1. Timing of Notification. The Committee shall notify the alternate payee of the availability of the window cashout as soon as practical after the assets have been allocated to the account of the alternate payee. Notice of the window distribution shall be sent to alternate payee with an account containing loan fund assets, but shall indicate the delay in availability. See .

1. Effect of Failure to Elect Window Cashout. The plan assets of an alternate payee who does not elect a cashout under this section shall be governed by the other plan rules regarding distributions to alternate payees.

A. Death. In the event of an alternate payee's death, his or her remaining plan assets will be distributed to his or her estate.

A. Alternate Payees' Responsibilities. Alternate payees must notify the Committee in writing of any address changes, or the name and address of a designated representative. The notification should be signed and dated by the alternate payee and should reference this plan, and the name of the participant from whom the account derives.

A. Limitation on Distribution to Alternate Payees. An alternate payee may not receive any mandatory or elective distribution until the alternate payee's account no longer includes loan fund assets, unless the mandatory distribution is required by the IRC or ERISA. An alternate payee may not receive any elective distribution until all assets allocated to the account of the alternate payee have become vested.

FIDUCIARIES:
AUTHORITY & RESPONSIBILITY

ARTICLE
I. : FIDUCIARIES: AUTHORITY & RESPONSIBILITY

A. Fiduciary. Any person who exercises any discretionary authority or discretionary control respecting management or administration of the plan or the trust pursuant to the provisions of ERISA.

A. Fiduciaries. The following are named as fiduciaries:

1. the members of the Committee, and

1. the trustee.

A. Trustee.

1. Appointment. The board of directors shall appoint a trustee for the plan. All assets of the plan shall be held for use in accordance with the plan in providing the benefits payable under the plan and for such investment expenses as may properly be incurred by the trustee.

1. Amendment. The trust agreement may be amended and the trustee changed in the manner provided in the trust agreement.

1. Responsibility. The responsibility for the retention of the trust shall lie with the trustee and not with the Committee.

1. Voting. The trustee shall vote the shares of CINergy stock credited to the accounts of beneficial owners in accordance with the instructions given by the beneficial owner. If the instructions are not received by the trustee by the date it has designated prior to any annual or special meeting of shareholders of CINergy, the trustee shall vote the uninstructed shares at its discretion. The trustee shall also vote at its discretion the shares of CINergy stock held in the company stock fund that have not been allocated to participants' accounts as of the record date of any annual or special meeting of shareholders of CINergy.

A. Establishment of the Committee. The Committee is the plan administrator, commonly referred to as the DCIP Committee other than in this plan document. The Committee shall consist of not more than five nor less than three members, who shall be appointed by, and serve at the pleasure of, the board of directors. Members of the Committee may resign by delivering written resignation to the board of directors. Resignations shall become effective at delivery or at any later date specified within the written statement.

A. Organization of the Committee. The Committee shall elect a chairperson from their number, and a secretary and such other officers as the Committee may designate, who may, but need not, be members of the Committee, to serve at the pleasure of the Committee. No member of the Committee who is also an employee shall receive any compensation for services as such member.

A. Powers of the Committee. The powers of the Committee shall include, but not be limited to, the following:

1. Appoint Committees. The Committee may ap- point committees with any powers it deems neces- sary, including an executive committee to exercise all powers of the Committee between meetings of the Committee.

1. Set Meetings. The Committee may determine the times and places for holding meetings of the Committee, and the notice to be given of the meetings.

1. Establish a Quorum. The Committee shall determine the number of members of the Committee necessary to constitute a quorum for the transaction of business. A quorum must be at least a majority of the committee members.

1. Engage Assistants. The Committee may engage agents and assistants, counsel, clerical, medical, vocational, and accounting services as required to carry out the provisions of the plan.

1. Establish an Agent. The Committee may authorize one or more of their members or any employee as its agent to make any payment, or to execute or deliver any instrument on behalf of the Committee or to perform any other function of the Committee.

[This sub-section should be deleted effective 01-01- 96.]

1. Establish an Agent. The Committee may authorize one or more of their members or any employee as its agent to make any payment, or to execute or deliver any instrument on behalf of the Committee or to perform any other function of the Committee. The Benefits Manager and the General Manager of Human Resources Services shall serve as agents of the Committee with respect to the duties assigned to these persons under the plan.

[This sub-section becomes effective on 01-01-96.]

1. Select Investment Funds. The Committee shall establish, and change as appropriate, an overall plan for providing a diversified group of investments for the trust assets. The Committee shall also select, and change as appropriate, the various investment funds.

1. Litigate on Behalf of the Plan. The Committee shall commence or defend litigation on behalf of the plan and represent the plan in all such proceedings before any court or other tribunal.

1. Interpret the Plan. The Committee shall interpret the plan, resolve any ambiguities in the plan and establish provisions for any circumstances not provided for in the plan, in a manner fair to plan participants in similar circumstances and consistent with other plan provisions.

1. Determine Eligibility for Benefits. The Committee shall determine eligibility for benefits under the plan, including claims to determine a participant's rights to benefits under any former plan provision.

[This sub-section should be deleted effective 01-01-96.]

1. Determine Eligibility for Benefits. The Benefits Manager, the General Manager of Human Resources Services and the Committee shall determine eligibility for benefits under the plan, including claims to determine a participant's rights to benefits under any former plan provision.

[This sub-section becomes effective on 01-01-96.]

1. Approve or Deny Requests for Hardship Withdrawals. The Committee shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan.

[This sub-section should be deleted effective 10-17- 95.]

1. Approve or Deny Requests for Hardship Withdrawals. The Senior Manager of Human Resource Strategy shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan.

[This sub-section becomes effective on 10-17-95 and should be deleted effective 01-01-96.]

1. Approve or Deny Requests for Hardship Withdrawals. The Benefits Manager shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan. If a request for a hardship withdrawal is denied or a participant does not receive a response within 30 days from the day the request was made to the Benefits Manager, then the participant may make a request to the General Manager of Human Resources Services for a hardship withdrawal. If a participant's request is denied by the General Manager of Human Resources Services, or a participant does not receive a response within 60 days from the day the request was made to the General Manager of Human Resources Services, then the participant may petition the Committee to receive a hardship withdrawal. The Committee's decision as to a participant's hardship withdrawal request shall be final. See .

[This sub-section becomes effective on 01-01-96.]

1. Accept or Reject DROs . The Committee shall determine if a DRO which directs allocation of plan benefits to one or more alternate payees is qualified.

1. Adopt Procedures. The Committee may estab- lish rules, regulations and procedures necessary for the administration of the plan and the transaction of its business.

1. Amend the Plan. The Committee may adopt any amendment to ensure the continued qualification of the plan and trust under IRC 401(a) and
501(a), to comply with the provisions of any federal statute or regulation impacting pension plans, to enhance the delivery of benefits to participants and beneficiaries, to ease plan administration, or to respond to the withdrawal of CG&E or any of its subsidiaries from the plan. No amendment shall substantially increase the cost of the plan without the consent of the board of directors.

1. Require Accounting. The Committee may request accounting and other information from the trustee.

1. Direct the Trustee. The Committee may direct the trustee, by written instrument, to take action consistent with plan administration and the trust agreement.

1. Approve or Deny Requests for Rollover Contributions. The Committee shall approve or deny requests for rollover contributions to the plan.

[This sub-section becomes effective on 01-01-96.]

A. Committee Actions. All resolutions or other actions taken by the Committee at any meeting shall be by the vote of a majority of the members of the Committee attending the meeting. Any decision or determination reduced to writing and signed by a majority of the members of the Committee shall be as fully effective as if it had been made by a majority vote at a meeting.

A. Accounts and Reports. The Committee shall maintain records of its actions and other data necessary for the administration of the plan. The Committee shall prepare and file any reports required by ERISA or the IRC. A copy of these reports shall be maintained in the office of the secretary of the Committee.

A. Action Taken in Good Faith. CG&E, the board of directors, officers and employees of CG&E shall be entitled to rely upon all information furnished by the accountant, trustee, and all opinions given by legal counsel. CG&E, the board of directors, officers and employees of CG&E, and any person acting as a fiduciary under the plan shall be fully pro- tected from liability for any action taken, or permitted by them in good faith, in reliance upon any such information furnished by the accountant, trustee, or legal counsel.

A. Decisions Final and Binding. The decisions of the Committee on any matter within its authority shall be made in the sole discretion of the Committee and shall be final and binding on all parties, including, but not limited to, CG&E, participants, terminated participants, beneficiaries and alternate payees.

A. Insurance. CG&E may purchase insurance to cover liability of one or more persons who serve in a fiduciary capacity with regard to this plan.

A. Trust. The fund established under the trust agreement to which all deferred contributions, optional contributions, company-matched contributions, and company-matched stock incentive contributions are made and from which benefits are solely paid under the terms of the plan. Neither CG&E nor its subsidiaries shall be required to make direct payment of any benefit under the plan.

[This section should be deleted effective 01-01-96.]

A. Trust. The fund established under the trust agreement to which all deferred contributions, optional contributions, company-matched contributions, company-matched stock incentive contributions, and rollover contributions are made and from which benefits are solely paid under the terms of the plan. Neither CG&E nor its subsidiaries shall be required to make direct payment of any benefit under the plan.

[This section becomes effective on 01-01-96.]

A. Trust Agreement. The trust agreement is the contract between CG&E's board of directors and the trustee governing the duties and rights of the trustee with regard to plan funds. In accordance with the trust agreement, the trustee shall invest all deferred contributions, optional contributions, company-matched contributions, and company-matched stock incentive contributions, and earnings thereon, in the various investment funds.

[This section should be deleted effective 01-01-96.]

A. Trust Agreement. The trust agreement is the contract between CG&E's board of directors and the trustee governing the duties and rights of the trustee with regard to plan funds. In accordance with the trust agreement, the trustee shall invest all deferred contributions, optional contributions, company-matched contributions, company-matched stock incentive contributions, and rollover contributions, and earnings thereon, in the various investment funds.

[This section becomes effective on 01-01-96.]

A. Plan and Employer Identification Numbers. The three-digit plan identification number is 004. CG&E's employer identification number is 31-0240030. The Committee's employer identification number is 31- 0910812.

ADMINISTRATIVE PROVISIONS

ARTICLE
I. : ADMINISTRATIVE PROVISIONS

A. Filing Documents with the Plan.

1. Filing Date. Generally, documents addressed to the Committee or forms prepared for use by plan participants will be considered to be filed with the Committee or the plan on the day when they are received by any employee benefits coordinator within CG&E's Human Resources Department or the monthly payroll administrator.

1. DROs. On the day a DRO is received by CG&E's Legal Department, Human Resources Department, or the secretary of the Committee, it will be considered to be filed with the Committee.

1. Forms. Forms prepared under the aegis of the SIP Committee or the Committee for the plan will be accepted for use under the plan unless the particular form is inappropriate for use under this plan or has been supplanted by a revised form.

A. Benefit Claims Process.

1. Written Request. Any person who claims a benefit under this plan must file the request in writing with the Committee.

1. Denial of a Claim. If the Committee denies the benefit in full or in part, it will send a detailed written reply to the claimant within 90 days after the claim was filed. The written reply will include the following:

a) the specific reason(s) for the denial, referencing any specific plan provisions upon which the decision depends; and

a) a request for any additional information available to the claimant in support of his or her position and an explanation, if any, of why it would be of assistance in resolving the claim; and

a) the procedures available for a further review of the claim.

1. Automatic Denial. If the Committee has not responded in writing to the participant within 90 days of the filing of the benefit claim, the participant may consider the claim to have been denied and pursue the request for reconsideration.

1. Acceptance of a Claim. If the Committee grants the claim, payment will commence within 90 days of receipt of the claim, or a notice of acceptance will be sent to the claimant if commencement of payment is not feasible within that time frame.

1. Reconsideration of Denial. The claimant may apply in writing to the Committee for reconsideration of the claim. The claimant must file for reconsideration within 60 days of receiving the notice of denial. The claimant or his or her authorized representative may request the opportunity to review pertinent plan documents and submit a written statement of issues and comments, in conjunction with the request for reconsideration.

1. Time-frame for Reconsideration. The Committee will render a decision within 60 days after it receives the request for reconsideration. If special circumstances require extension of time for processing the request, the decision by the Committee will be issued within 120 days after it receives the re- quest for reconsideration.

1. Claimant's Representative. A claimant for plan benefits may act on his or her own behalf, or may use a representative who is authorized to act on behalf of the claimant, throughout the administrative claim process.

1. Exhaustion of Administrative Remedies. If the claim for benefits is denied or ignored in full or in part, the claimant may file suit in federal court to pursue the claim.

[This section should be deleted effective 01-01-96.]

A. Benefit Claims Process.

a) Written Request. Any person who claims a benefit under this plan must file the request in writing with the Benefits Manager.

b) Denial of a Claim or Failure to Respond by Benefits Manager. If the Benefits Manager denies the benefit in full or in part or fails to respond within 30 days from the day a claimant files his or her written request, then the claimant may petition the General Manager of Human Resources Services to review the claim.

c) Denial of a Claim by the General Manager of Human Resources Services. If the General Manager of Human Resources Services denies the benefit in full or in part, he or she will send a detailed written reply to the claimant within 60 days after the claim was filed with the General Manager of Human Resources Services. The written reply will include the following:

1) the specific reason(s) for the denial, referencing any specific plan provisions upon which the decision depends; and

2) a request for any additional information available to the claimant in support of his or her position and an explanation, if any, of why it would be of assistance in resolving the claim; and

3) the procedures available for a further review of the claim by the Committee.

d) Automatic Denial. If the General Manager of Human Resources Services has not responded in writing to the claimant within 60 days of the filing of the benefit claim with the General Manager of Human Resources Services, the claimant may consider the claim to have been denied and pursue the request for reconsideration with the Committee.

e) Acceptance of a Claim. If the General Manager of Human Resources Services grants the claim, payment will commence within 60 days of receipt of the claim by the General Manager of Human Resources Services, or a notice of acceptance will be sent to the claimant if commencement of payment is not feasible within that time frame.

f) Reconsideration of Denial by the Committee. The claimant may apply in writing to the Committee for reconsideration of the claim. The claimant must file for reconsideration within 60 days of receiving the notice of denial from the General Manager of Human Resources Services. The claimant or his or her authorized representative may request the opportunity to review pertinent plan documents and submit a written statement of issues and comments, in conjunction with the request for reconsideration.

g) Time-frame for Reconsideration. The Committee will render a decision within 60 days after it receives the request for reconsideration. If special circumstances require extension of time for processing the request, the decision by the Committee will be issued within 120 days after it receives the request for reconsideration.

h) Claimant's Representative. A claimant for plan benefits may act on his or her own behalf, or may use a representative who is authorized to act on behalf of the claimant, throughout the administrative claim process.

i) Exhaustion of Administrative Remedies. If the claim for benefits is denied or ignored in full or in part upon reconsideration by the Committee, the claimant may file suit in federal court to pursue the claim.

[This section becomes effective on 01-01-96.]

A. Uniform Administration. Decisions or actions of the Committee with respect to the eligibility for or nature of benefits to be provided under this plan shall be uniformly applied to all persons similarly situated.

[This section should be deleted effective 01-01-96.]

A. Uniform Administration. Decisions or actions of the Benefits Manager, the General Manager of Human Resources Services, and the Committee with respect to the eligibility for or nature of benefits to be provided under this plan shall be uniformly applied to all persons similarly situated.

[This section becomes effective on 01-01-96.]

A. Statutory Construction. The plan shall be construed, enforced, and administered according to the laws of the State of Ohio as to any matter not preempted by ERISA. In any case that a provision of the plan is held illegal or invalid for any reason, it shall not affect the remaining provisions of the plan. However, the plan shall be construed, enforced, and administered as if the illegal provision had not been included in the plan.

A. Limitation of Rights of the Employee. The plan is strictly a voluntary undertaking on the part of CG&E. The plan is not a contract between CG&E and any employee. The plan does not constitute consideration for, or an inducement or condition of, the employment of any employee. Nothing contained in the plan gives any employee the right to be retained in the service of CG&E or to interfere with the right of CG&E to discharge any employee at any time. A participant does not have any right or claim to a benefit under the plan except upon fulfilling all of the conditions of eligibility and qualification. The participant's right to receive the benefit must have become fixed under the terms of the plan and there must be funds available in the trust sufficient to pay the benefit.

A. Alienation of Benefits. Benefits under the plan shall not be subject in any manner to alienation or assignment. Any attempt to assign or alienate plan benefits shall be void, whether such sums remain with the trustee or are in the course of transmission to the person entitled to them. However, benefits are subject to DROs accepted by the Committee.

A. Response to Attempted Alienation. If any participant, pensioner, beneficiary, or alternate payee under the plan becomes bankrupt or attempts to alienate or assign any benefit under the plan, except as specifically provided in the plan or by law, then his or her benefit shall terminate. In that event the Committee shall hold the assets of the affected participant, pensioner, beneficiary, or alternate payee for his or her benefit.

A. Correction of Inadvertent Error. The Committee may, in its discretion, recoup any benefit payment, or correct any loan, withdrawal, or other error made in contravention of any plan provision, whether by mistake, inadvertence or misrepresentation. Recovery of overpayment may be accomplished by withholding from future benefits due the individual who was enriched by the overpayment, or may be pursued by any other feasible and appropriate manner of collection. Other corrections shall be made in the manner deemed most feasible by the Committee.

A. Information from Beneficial Owners.

1. Each beneficial owner shall be required to furnish the Committee, in the form prescribed by it, such personal data, affidavits, authorization to obtain information, and other information as the Committee may deem appropriate for the proper operation and administration of the plan.

1. Misrepresentations of fact by a beneficial owner to the extent that affects their participation or benefits hereunder shall be handled in accordance with the rules of the Committee. In no event shall CG&E, the Committee, or the trustee have an obligation to provide such a beneficial owner with benefits in excess of those which would have been provided under the plan if there had been no misstatement or misrepresentation.

A. Facility of Payment. If the Committee determines from evidence that a claimant entitled to receive benefits under this plan is (at the time the benefit is payable) physically, mentally, or legally incompetent to receive such benefit and give valid receipt therefore, and that another person or an institution is then maintaining or has custody of such incompetent individual, and that no guardian, custodian or other representative of the estate of such incompetent individual has been appointed, the Committee may cause payment to be made to that person or institution having custody or maintaining the participant, former participant or beneficiary. The payment, to the extent made, shall operate as a complete discharge of the Committee, CG&E, and the trustee.

[This section should be deleted effective 01-01-96.]

A. Facility of Payment. If the Benefits Manager determines from evidence that a claimant entitled to receive benefits under this plan is (at the time the benefit is payable) physically, mentally, or legally incompetent to receive such benefit and give valid receipt therefore, and that another person or an institution is then maintaining or has custody of such incompetent individual, and that no guardian, custodian or other representative of the estate of such incompetent individual has been appointed, the Benefits Manager may cause payment to be made to that person or institution having custody or maintaining the participant, former participant or beneficiary. The payment, to the extent made, shall operate as a complete discharge of the Committee, CG&E, and the trustee.

[This section becomes effective on 01-01-96.]

A. Lost Beneficial Owner. Any benefit payment under the plan shall be forfeited if the Committee, after reasonable effort, is unable to locate the person to whom payment is due. However, any forfeited benefit shall be restored if a valid claim is made for the forfeited benefit; first from forfeitures, and then from company-matched contributions and company-matched stock incentive contributions.

[This section should be deleted effective 01-01-96.]

A. Lost Beneficial Owner. Any benefit payment under the plan shall be forfeited if the Benefits Manager, after reasonable effort, is unable to locate the person to whom payment is due. However, any forfeited benefit shall be restored if a valid claim is made for the forfeited benefit; first from forfeitures, and then from company-matched contributions and company-matched stock incentive contributions.

[This section becomes effective on 01-01-96.]

A. Vested Right. No person shall have any vested rights under the plan except to the extent that vested rights may accrue to him or her as provided under the plan. Furthermore, any person with vested rights under the plan shall look solely to the assets of the plan for satisfaction of his or her vested rights.

A. Satisfaction of Claims. Any payment to any beneficial owner in accordance with the terms of the plan shall, to the extent thereof, be in full satisfaction of all claims hereunder, whether they be against CG&E, the Committee, or the trustee, any of whom may require the beneficial owner or his or her legal representative, as a condition precedent to any payment, to execute a release and receipt therefore.

A. Plan Amendment Procedure. This plan may be amended from time to time as necessary for compliance with laws or regulations, or to meet the needs of covered employees or the plan sponsor. The board of directors, Committee members, human resources personnel, trustee and/or record keeper personnel, plan accountants, actuaries and attorneys, and plan participants or beneficial owners may propose or recommend amendments. Proposed amendments will be discussed and adopted or rejected at Committee meetings. Those proposing amendments are not entitled to attend the meetings when the amendments are considered. In general the Committee has the authority to adopt amendments, but the board of directors reserves the authority to adopt amendments which have a significant effect upon the funding or cost of the plan. Amendments adopted will be reflected in the appropriate meeting minutes. Plan attorneys will incorporate adopted amendments into the plan document. Material modifications will be included in the summary of material modifications sent to participants periodically for attachment to the summary plan description of this plan, and eventually incorporated into the summary plan description itself.

MISCELLANEOUS PROVISIONS

ARTICLE
I. : MISCELLANEOUS PROVISIONS

A. Expenses. The operating expenses of the plan, including fees paid to a servicing organization and fees for professional services and technical or clerical assistance, are generally paid by CG&E with some charges specifically allocated to participants by plan terms. CG&E reserves the right to shift some or all of the expenses it pays to the investment funds and/or to the individual beneficial owners.

A. Number. Any use of the singular shall be interpreted to include the plural and the plural the singular.

A. Plan Procedures.

1. Conflicts between Plan and Procedures. Procedures must be in accordance with the plan as it is then being administered. Any conflict between written procedures and written plan terms, or plan terms required by law, adopted by the board of directors, or the Committee pursuant to the authority delegated to it, shall be resolved in favor of the plan terms, as administered.

1. Sunset Provision. Any procedure, if not examined and re-authorized by the Committee, shall automatically expire on the date 5 years from its date of publication.

1. Expired Procedures. Any expired procedure may be consulted for its historical value in relation to plan administration, but it shall not be dispositive of the administrative decision.

A. Titles and Headings. The names of articles, table of contents, section and sub-section headings, and the index of the plan have been inserted for convenience of reference. In the event of any conflict, the text of the plan, rather than titles, headings, etc., shall control.

A. Merger, Consolidation, and Transfer of Assets. Before this plan can be merged or consolidated with any other plan, or its assets or liabilities transferred to another plan, each participant in the plan must be entitled to receive a benefit immediately after the merger, transfer, or consolidation (as if the plan had then terminated) which is equal to or greater than the benefit he/she would have been entitled to receive immediately before the merger, consolidation or transfer (as if the plan had then terminated). This plan will accept the transfer of funds from the SIP in accordance with
. As a general rule, this plan will not accept a transfer of assets from any other plan for any reason, including rollovers and mergers.

[This section should be deleted effective 01-01-96.]

A. Merger, Consolidation, and Transfer of Assets. Before this plan can be merged or consolidated with any other plan, or its assets or liabilities transferred to another plan, each participant in the plan must be entitled to receive a benefit immediately after the merger, transfer, or consolidation (as if the plan had then terminated) which is equal to or greater than the benefit he/she would have been entitled to receive immediately before the merger, consolidation or transfer (as if the plan had then terminated). This plan will accept the transfer of funds from the SIP in accordance with
. This plan will accept rollovers from other qualified retirement plans.

[This section becomes effective on 01-01-96.]

A. Transfer of ESOP Funds. The plan will accept a one-time transfer of assets, at the election of participants in the CG&E Employee Stock Ownership Plan (ESOP), from the terminated ESOP at the time the ESOP assets are disbursed directly from the ESOP Plan Trustee to the Trustee of this plan.

A. Service of Process. The secretary of the Committee shall be the designated agent of the plan for the service of process in connection with all matters affecting the plan.

A. Warranties. Neither CG&E nor the Committee nor the trustee warrant against any loss or diminution in the value of accounts.

A. Adoption of the Plan by Subsidiaries. Any subsidiary of CG&E may participate in the plan by indicating its intention to that effect in writing and delivering a copy of the instrument to the board of directors and the trustee for acceptance in writing. Upon acceptance by the board and the trustee, the subsidiary will be bound by the terms of the plan and the trust agreement, and all subsequent plan amendments. Plan amendments are not subject to review or approval by any subsidiary which has elected to participate in the plan. A subsidiary may withdraw from plan participation at any time by delivery of its written intent to withdraw at least 60 days in advance of the effective date of the withdrawal.

DISCRIMINATION TESTING

ARTICLE
I. : DISCRIMINATION TESTING

A. Definitions. The following terms are defined for the purpose of this Article only.

1. Average Contribution Percentage (ACP). The ACP is the average of the ratios, calculated separately for each eligible employee [see , and ], of the sum of the eligible employee's optional contributions, company-matched contributions, company-matched stock incentive contributions which are fully vested or are for participants who actually make deferred compensation or optional contributions for the plan year, and any recharacterized deferred compensation contributions, to the eligible employee's compensation for the plan year.

[This sub-section should be deleted effective 01-01-97.]

1. Average Contribution Percentage (ACP). The ACP is the average of the ratios, calculated separately for each eligible employee [see , and ], of the sum of the eligible employee's optional contributions, company-matched contributions, company-matched stock incentive contributions which are fully vested or are for participants who actually make deferred compensation contributions for the plan year, and any recharacterized deferred compensation contributions, to the eligible employee's compensation for the plan year.

[This sub-section becomes effective on 01-01-97.]

1. Actual Deferral Percentage (ADP). The ADP is the average of the ratios, calculated separately for each eligible employee, of the amount of deferred compensation contributions made on behalf of the eligible employee for the plan year, to the eligible employee's compensation for that plan year.

1. Compensation. Compensation is the total wages earned and other compensation including amounts paid for sick pay, moving expense payments and reimbursements that are not deductible under IRC 217. Compensation also includes employer contributions under this plan and Code Section 125 plans which are not currently taxable to the employee. Premiums for group term life insurance that exceed the IRC 79(a) limits are also included in compensation. Compensation is limited to $150,000 as adjusted by the Internal Revenue Commissioner for increases in the cost of living in accordance with IRC 401(a)(17)(B) in the same manner as base pay is limited.

1. Excess Aggregate Contributions. A participant's excess aggregate contribution for any year is the excess of

a) The total amount of the contributions taken into account in computing the numerator of the ACP for a plan year for that participant over

a) the maximum amount of that participant's contributions permitted by the ACP test.

1. Excess Contributions. A participant's excess contribution for any year is the excess of

a) The total amount of his or her contributions taken into account in computing the numerator of the ADP for a plan year over

a) the maximum amount of his or her contributions permitted by the ADP test.

1. Highly Compensated Employee.

a) A highly compensated employee is any employee who, during the plan year or the preceding plan year, (A) was at any time a 5% owner, (B) received compensation in excess of $75,000 (or such larger amount as may be determined by the Secretary of Treasury pursuant to IRC 415(d)), (C) received compensation in excess of $50,000 (or such larger amount as may be determined by the Secretary of Treasury pursuant to IRC 415(d) and was in the top-paid group of employees for such plan year, or (D) was at any time an officer and received compensation greater than 50% of the amount in effect under IRC 415(b)(1)(A) for such plan year. Provided, sub-sections (B) through (D) shall apply to an employee meeting such criteria in the plan year only if such employee is also one of the 100 employees who received the most compensation from CG&E during the plan year. For purposes of this sub-section , "compensation" shall include compensation from CG&E and any employer required to be aggregated with CG&E under IRC 414(b), c),
(m) or (o).

a) A highly compensated employee is any employee who (A) separated from service with CG&E, or is deemed to have separated from service, prior to the plan year, (B) performs no service for CG&E during the plan year, and was a highly compensated employee during either the plan year in which such separation from service occurred or in any plan year ending on or after the employee's 55th birthday.

a) The maximum number of officers which will be considered highly compensated employees for a plan year or preceding plan year pursuant to 1)D) above is the lesser of (A) 50 or (B) the greater of three employees or 10% of CG&E's employees. If no officer of CG&E received compensation greater than 50% of the amount in effect under IRC 415(b)(1)(A) for the plan year or the preceding plan year, the highest paid officer for such plan year shall be treated as a highly compensated employee.

a) For purposes of 15.1g)1)(C) above, an employee shall be considered a member of the "top paid group" for any year if such employee is in the group consisting of the top 20% of the employees of CG&E when ranked on the basis of compensation paid during the year, pursuant to IRC 414(q)(4).

a) If an employee is a "family member" of a highly compensated employee who is a 5% owner (or an employee who was a highly compensated employee by reason of being a 5% owner during the plan year in which the employee separated from service with CG&E or any plan year ending on or after the employee's 55th birthday) during the plan year or the preceding plan year, or a family member of one of the 10 most highly compensated employees of CG&E ranked on the basis of compensation paid by CG&E during the plan year, then the family member and the highly compensated employee shall be aggregated. In such case, the family member and highly compensated employee shall be treated as a single employee receiving compensation and contributions equal to the sum of the compensation and contributions of the family member and highly compensated employee. For purposes of , the term "family member" shall include the spouse, lineal ascendants and descendants of an employee or former employee and the spouses of such lineal ascendants and descendants.

a) For purposes of determining whether an employee is a highly compensated employee, the provisions of IRC 414(q), and the regulations thereunder, shall apply.

[This sub-section should be deleted effective 01-01- 97.]

1. Highly Compensated Employee.

a) A highly compensated employee is any employee who (A) was at any time a 5% owner during the plan year or the preceding plan year, or (B) received compensation for the preceding plan year in excess of $80,000 (or such larger amount as may be determined by the Secretary of Treasury pursuant to IRC
415(d)) and if CG&E elects, was in the top-paid group of employees for such preceding plan year.

a) A highly compensated employee is any employee who (A) separated from service with CG&E, or is deemed to have separated from service, prior to the plan year, (B) performs no service for CG&E during the plan year, and was a highly compensated employee during either the plan year in which such separation from service occurred or in any plan year ending on or after the employee's 55th birthday.

a) For purposes of 15.1h)1)(B) above, an employee shall be considered a member of the "top paid group" for any year if such employee is in the group consisting of the top 20% of the employees of CG&E when ranked on the basis of compensation paid during the preceding plan year, pursuant to IRC 414(q)(4).

a) For purposes of determining whether an employee is a highly compensated employee, the provisions of IRC 414(q), and the regulations thereunder, shall apply.

[This sub-section becomes effective on 01-01-97.]

A. ADP Testing. The ADP for highly compensated eligible employees for each plan year must satisfy one of the following tests :

1. The ADP Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the ADP for non-highly compensated eligible employees for the plan year, multiplied by 1.25.

1. The ADP Alternative Limitation Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the lesser of

a) 2 times the ADP for non-highly compensated eligible employees for the plan year or,

a) 2 percentage points, plus the ADP, for non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

A. ADP Testing. The ADP for highly compensated eligible employees for each plan year must satisfy one of the following tests :

1. The ADP Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the ADP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), multiplied by 1.25.

1. The ADP Alternative Limitation Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the lesser of

a) 2 times the ADP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages) or,

a) 2 percentage points, plus the ADP, for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages).

[This section becomes effective on 01-01-97.]

A. ACP Testing. The ACP test will be performed following any recharacterization of deferred contributions required by . The ACP for highly compensated eligible employees for each plan year must satisfy one of the following tests :

1. The ACP Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the ACP for non-highly compensated eligible employees for the plan year, multiplied by 1.25.

1. The ACP Alternative Limitation Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the lesser of

a) 2 times the ACP for non-highly compensated eligible employees for the plan year or,

a) 2 percentage points, plus the ACP, for non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

A. ACP Testing. The ACP test will be performed following any recharacterization of deferred contributions required by . The ACP for highly compensated eligible employees for each plan year must satisfy one of the following tests :

1. The ACP Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), multiplied by 1.25.

1. The ACP Alternative Limitation Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the lesser of

a) 2 times the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages) or,

a) 2 percentage points, plus the ACP, for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages).

[This section becomes effective on 01-01-97.]

A. Multiple Use of Alternative Limitation. If neither the ADP nor the ACP for highly compensated employees meets the tests in and , the multiple use test of the alternative limitation must be satisfied for the plan year. In order to satisfy the multiple use test of the alternative limitation, the sum of the ACP for highly compensated employees and the ADP for highly compensated employees may not exceed the greater of the following :

1. the sum of:

a) 1.25 times the greater of the ADP or the ACP for non-highly compensated eligible employees, and

a) the lesser of:

(1) 2 percentage points plus the lesser of the ADP or ACP for the non-highly compensated eligible employees, or

(1) 2 times the lesser of the ADP or ACP of the non-highly compensated eligible employees; or

1. the sum of:

a) 1.25 times the lesser of the ADP or the ACP for non-highly compensated eligible employees, and

a) the lesser of:

(1) 2 percentage points plus the greater of the ADP or ACP of non-highly compensated eligible employees, or

(1) 2 times the greater of the ADP or ACP of non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

A. Multiple Use of Alternative Limitation. If neither the ADP nor the ACP for highly compensated employees meets the tests in and , the multiple use test of the alternative limitation must be satisfied for the plan year. In order to satisfy the multiple use test of the alternative limitation, the sum of the ACP for highly compensated employees and the ADP for highly compensated employees may not exceed the greater of the following :

1. the sum of:

a) 1.25 times the greater of the ADP or the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), and

a) the lesser of:

(1) 2 percentage points plus the lesser of the ADP or ACP for the non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), or

(1) 2 times the lesser of the ADP or ACP of the non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages); or

1. the sum of:

a) 1.25 times the lesser of the ADP or the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), and

a) the lesser of:

(1) 2 percentage points plus the greater of the ADP or ACP of non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), or

(1) 2 times the greater of the ADP or ACP of non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages).

[This section becomes effective on 01-01-97.]

A. Corrective Procedure If ADP Limitation Exceeded. If the plan fails the ADP test provided for in this Article, the following procedure will be followed:

1. Reduction of Highly Compensated Participants' ADP. The ADP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ADP test. In determining the amount of excess contributions for each highly compensated participant, the highest ratio will be reduced to the next highest ratio until the maximum allowed percentage is reached .

[This sub-section should be deleted effective 01-01- 97.]

1. Reduction of Highly Compensated Participants' ADP. The ADP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ADP test. Excess contributions will be returned to the highly compensated participants who contributed the largest dollar amounts until the maximum allowed percentage is reached .

[This sub-section becomes effective on 01-01-97.]

1. Recharacterization of Excess Contributions. The amount resulting from a reduction in a participant's deferred compensation contributions in or above shall be recharacterized as optional contributions and treated as taxable income to the participant in the tax year in which the participant would have received them if he or she had originally elected to receive them in cash. This recharacterization normally will be made within 2 1/2 months after the close of the plan year .

A. Corrective Procedure if ACP Limitation Exceeded. If the plan fails the ACP test, the following procedure will be followed, after recharacterizing any deferred compensation contributions required under or :

1. Reduction of Highly Compensated Participants' ACP. The ACP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ACP test. In determining the amount of excess aggregate contributions for each highly compensated participant, the highest ratio will be reduced to the next highest ratio until the maximum allowed percentage is reached.

[This sub-section should be deleted effective 01-01- 97.]

1. Reduction of Highly Compensated Participants' ACP. The ACP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ACP test. Excess aggregate contributions will be returned to the highly compensated participants who contributed the largest dollar amounts until the maximum allowed percentage is reached.

[This sub-section becomes effective on 01-01-97.]

1. Disposition of Excess Aggregate Contributions. The aggregate excess contributions resulting from a reduction in a highly compensated participant's ACP ratio in shall be disposed of as follows:

a) Excess Optional Contributions. Any excess optional contributions, plus the net of any income or loss attributable to optional contributions as of the last day of the plan year, normally will be distributed to the participant within 2 1/2 months after the end of the plan year. However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.

a) Excess Company-Matched Contributions. Any excess company-matched contributions which are not vested will be treated as forfeitures under . Any excess vested company-matched contributions plus the net of any income or loss attributable to the excess company-matched contributions as of the end of the plan year, shall normally be distributed to the participant within 2 1/2 months after the end of the plan year. However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.

a) Excess Company-Matched Stock Incentive Contributions. Any excess company-matched stock incentive contributions which are not vested will be treated as forfeitures under
. Any excess vested company-matched stock incentive contributions plus the net of any income or loss attributable to the excess company-matched stock incentive contributions as of the end of the plan year, shall normally be distributed to the participant within 2 1/2 months after the end of the plan year. However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.

A. Corrective Procedure if the Test for the Multiple Use of Alternative Limitation is Exceeded.

If the plan fails the test for the multiple use of the alternative limitation, the following procedure will be followed:

1. Simultaneous Reduction of the ADP and ACP of Highly Compensated Participants. After determining the amount of excess contributions and excess aggregate contributions for each highly compensated participant, the participants with the highest individual ADP and ACP ratios will have their ratios reduced to the next highest ADP and ACP ratio, until the maximum multiple use limit is reached.

[This sub-section should be deleted effective 01-01- 97.]

1. Simultaneous Reduction of the ADP and ACP of Highly Compensated Participants. After determining the amount of excess contributions and excess aggregate contributions for each highly compensated participant, the participants who contributed the largest dollar amounts will have their contributions returned, until the maximum multiple use limit is reached.

[This sub-section becomes effective on 01-01-97.]

1. Disposition of Excess Contributions and Excess Optional Contributions and Excess Vested Company-Matched Contributions and Excess Vested Company-Matched Stock Incentive Contributions. Any excess contributions, optional contributions, vested company-matched contributions and vested company-matched stock incentive contributions which are determined by the application of or , plus the net of any income or loss attributable to the excess contributions, optional contributions, vested company-matched contributions and vested company-matched stock incentive contributions as of the last day of the plan year, shall normally be distributed to the participant within 2 1/2 months after the end of the plan year. However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.

LIMITATION ON ANNUAL ADDITIONS

ARTICLE
I. : LIMITATION ON ANNUAL ADDITIONS

A. Definitions.

The following terms are defined solely for purposes of this Article:

1. Annual Addition. A participant's annual addition is the sum of the following amounts credited to the participant's account for a plan year:

a) deferred compensation contributions;

a) company-matched contributions;

a) company-matched stock incentive contributions;

a) optional contributions; and

a) forfeitures.

1. Compensation. A participant's compensation for any plan year consists of his or her total wages earned and other compensation including amounts paid for sick pay, moving expense payments and reimbursements that are not deductible under IRC 217, and premiums for group term life insurance that exceed IRC 79(a) limits. Compensation also includes any distribution from any non-qualified deferred compensation plan paid to the participant while s/he remains employed. Compensation does not include employer contributions under this plan or any IRC 125 plan which are not currently taxable to the employee or any distributions from a qualified deferred compensation plan, regardless of whether such amounts are includable in the employee's gross income when distributed.

1. Defined Benefit Fraction. The defined benefit plan fraction applicable to a participant for any plan year is a fraction: 1) the numerator of which is the participant's projected annual benefit (determined as of the close of the plan year) under the MRP; and 2) the denomi- nator of which is the lesser of 1.25 multiplied by the dollar limitation under IRC 415 for defined benefit plans for such year, or 1.4 multiplied by the participant's average compensation for the 3 consecutive calendar years aggregating the greatest compensation from CG&E during which s/he participated in the plan.

1. Defined Benefit Plan. A qualified plan as defined in IRC 414(j).

1. Defined Contribution Fraction. The defined contribution fraction applicable to a participant for any plan year is a fraction: 1) the numerator of which is the sum of annual additions to the participant's account under the plan as of the close of the limitation year; and 2) the denominator of which is the sum of the lesser of the following amounts determined for the limitation year and for each prior limitation year of service with CG&E:

(1) the product of 1.25 multiplied by the dollar limitation under IRC 415(c)(1)(A) for defined contribution plans for such year, or

(2) the product of 1.4 multiplied by 25% of the participant's compensation for such year.

1. Defined Contribution Plan. A qualified plan as defined in IRC 414(i).

1. Company. The employer that adopts this plan, and all members of a controlled group of corporations, all commonly controlled trades or businesses or affiliated service groups of which the adopting employer is a part, and any other entity required to be aggregated with the employer pursuant to IRC 414(o) regulations.

1. Excess Amount. The excess of the participant's annual additions for the plan year over the maximum annual additions permitted under this Article for the plan year.

1. Projected Annual Benefit. A participant's projected annual benefit is an amount equal to the annual benefit that the participant would be entitled to receive under the terms of the defined benefit plan in which he is a participant, assuming that:

a) the participant continues employment until his or her normal retirement age;

a) that his or her compensation continues at the same rate as in effect in the plan year under consideration; and

a) that all relevant factors used to determine benefits under such plan remain constant.

Projected annual benefit is a benefit expressed in the form of a single life annuity disregarding any ancillary benefits or benefits attributable to a rollover contribution.

A. General Limitations. Notwithstanding any other provisions of this plan, the maximum annual addition credited to the account of a participant for any plan year shall not exceed the lesser of:

1. $30,000, or

1. 25% of the participant's compensation for that plan year.

A. Estimation of Compensation. Prior to the determination of a participant's actual compensation for a plan year, the maximum annual addition for a participant may be computed using a reasonable estimation of the participant's compensation for a plan year.

A. Disposition of Excess Amount. In the event the limitations of this Article are exceeded because of an allocation of forfeitures, a reasonable error in estimating a participant's compensation or other reasonable circumstances, the excess amount shall be disposed of as follows :

1. First, any optional contributions that are not eligible for company-matched contributions and company-matched stock incentive contributions will be returned to the participant to the extent that the return would reduce the excess amount.

[This sub-section should be deleted effective 01-01- 97.]

1. First, any optional contributions will be returned to the participant to the extent that the return would reduce the excess amount.

[This sub-section becomes effective on 01-01-97.]

1. Second, any deferred compensation that are not eligible for company-matched contributions and company-matched stock incentive contributions will be returned to the participant to the extent that the return will reduce the excess amount.

1. Third, any company-matched contributions, made on behalf of a participant under this plan shall be reduced to the extent that the reduction will reduce the excess amount. Such reduction in company-matched contributions shall be treated as a forfeiture in accordance with .

1. Fourth, any company-matched stock incentive contributions, made on behalf of a participant under this plan shall be reduced by the amount needed to eliminate the excess amount. Such reduction in company-matched stock incentive contributions shall be treated as a forfeiture in accordance with .

A. Aggregation of Plans of CG&E.

1. For purposes of applying the limitation of this Article, all defined benefit plans (whether or not terminated) of CG&E shall be treated as one defined benefit plan and all defined contribution plans (whether or not terminated) shall be treated as one defined contribution plan.

1. If an excess amount results from the aggregation of annual additions under this plan with annual additions under another defined contribution plan:

a) the excess amount shall be first attributable to this plan; and

a) such excess amount shall be treated in accordance with .

1. Where a participant is a participant at any time in both a defined contribution plan and a defined benefit plan sponsored by CG&E, the sum of the defined benefit fraction and the defined contribution fraction for any plan year shall not exceed 1.0. Should this limitation be exceeded in any plan year, the participant's benefits under the MRP shall be appropriately reduced so that the defined benefit fraction is equal to the difference between 1.0 and the defined contribution fraction.

AMENDMENT AND TERMINATION OF THE PLAN

ARTICLE
I. : AMENDMENT AND TERMINATION OF THE PLAN

A. Amendment of the Plan.

1. Reservation of Right. CG&E expects to continue the plan indefinitely, but as future conditions cannot be foreseen, the board of directors reserves the right to amend or terminate the plan at any time.

1. Effect on Participants. No amendment shall retroactively reduce the rights or benefits of participants or permit the return to CG&E of the CINergy stock, other securities, obligations, deposits, or cash held by the trustee, or permit their use or diversion for any purpose other than for the exclusive benefits of the participants or their beneficiaries. In addition, no amendment shall eliminate an optional form of benefit or eliminate or reduce an early retirement option with respect to benefits attributable to service before this amendment.

1. Discontinuance of Contributions. In the event of a complete discontinuance of company-matched contributions or company-matched stock incentive contributions, the company-matched sub-account will be immediately vested.

A. Plan Termination.

If the plan is terminated all contributions will cease. The Committee shall direct the trustee to determine the value of each beneficial owner's account as of the date of termination. The value of any unallocated plan assets shall be allocated to the beneficial owners. Each beneficial owner shall become fully vested in the total value of his or her account. Each beneficial owner's balance shall be segregated by the trustee pending disposition. Distribution shall be made, in a single payment, to each beneficial owner as soon as practicable following the date of plan termination. No amendment shall deprive the beneficial owners of their vested rights upon termination of the plan.

A. Partial Termination.

If the plan is partially terminated, all contributions to the accounts of all affected participants will cease. The Committee shall direct the trustee to determine the value of each affected beneficial owner's account as of the date of the partial termination. The value of any unallocated plan assets shall be allocated to beneficial owners. Each
affected beneficial owner shall become fully vested in his or her account. Distribution shall be made, in a single payment, to each beneficial owner as soon as practical following the date of partial plan termination. However, no distribution from a participant's deferred compensation contribution sub-account shall be made at a time not otherwise permitted under the plan. No amendment shall deprive the affected beneficial owners of their vested rights upon partial termination of the plan.

A. Liquidation of the Investment Funds.

The trust and the investment funds shall continue in existence after the termination of the plan for such period of time as may be required to complete the liquidation thereof in accordance with the terms of this Article.

TOP-HEAVY PROVISIONS

ARTICLE
I. : TOP-HEAVY PROVISIONS

A. General Rule.

For any plan year for which this plan is a "top-heavy plan" the following provisions will supersede any other conflicting provisions of the Plan:

1. The vesting provisions of or .

1. The minimum contribution provisions of .

1. The limitation on contributions set by .

A. Vesting Provisions.

1. Minimum Service Requirements. Participants who have completed at least three years of service and who have completed an hour of service during any plan year in which the plan is top-heavy, shall have a nonforfeitable right to the benefit accrued under this plan.

1. Change from Top-Heavy Status. If the plan ceases to be top-heavy, each participant's vested accrued benefits shall be no less than his or her account balance as of the last day of the last plan year in which the plan was top-heavy. Each participant with 5 or more years of service shall have the right to elect to continue to vest in accordance with the provisions of this Section. Such election must be made in writing to the Committee within 60 days of receipt of written notice.

[This section should be deleted effective 01-01-96.]

A. Vesting Provisions.

a) Minimum Service Requirements. Participants who are credited with an hour of service on or after January 1, 1996 shall have a nonforfeitable right to the benefit accrued under this plan.

b) Change from Top-Heavy Status. For participants who are credited with an hour of service on or after January 1, 1996, if the plan ceases to be top-heavy, each participant's vested accrued benefits shall be no less than his or her account balance as of the last day of the last plan year in which the plan was top-heavy.

[This section becomes effective on 01-01-96.]

A. Minimum Contribution Provisions.

1. Participants Entitled to Minimum Contributions. Each participant who is a non-key employee and who is also employed on the last day of the plan year, even if s/he has failed to complete 1,000 hours of service during the plan year, or is an eligible employee who is excluded from the plan under because of a break in service, or for failing to commence participation in the plan, shall be entitled to have a combination of contributions and forfeitures allocated to his or her account totaling not less than three percent (the "minimum contribution percentage") of his or her compensation.

[This sub-section should be deleted effective 01- 01-96.]

1. Participants Entitled to Minimum Contributions. Each participant who is credited with an hour of service on or after January 1, 1996 and who is a non-key employee and who is also employed on the last day of the plan year, even if s/he has failed to complete 1,000 hours of service during the plan year, or is an eligible employee who is excluded from the plan under for failing to commence participation in the plan, shall be entitled to have a combination of contributions and forfeitures allocated to his or her account totaling not less than three percent (the "minimum contribution percentage") of his or her compensation.

[This sub-section becomes effective on 01-01-96.]

1. Reduction of Minimum Contribution Percentage. The minimum contribution percentage set forth above shall be reduced for any plan year to the percentage at which contributions (including forfeitures) are made (or required to be made) under the plan for the plan year for the key employee for whom such percentage is the highest for such plan year.

1. Determining the Percentage of Key Employees. For the purpose of above, the contribution percentage of the key employee shall be determined by dividing the company-matched contributions, company-matched stock incentive contributions and deferred compensation contributions (including forfeitures) made for the key employee by so much of his or her total compensation for the plan year as does not exceed the limitation on compensation. Contributions taken into account under the preceding sentence shall include company contributions under this plan and/or the SIP. Contributions taken into account under this sub-section shall not include any contributions under the Social Security Act or any other federal or state law.

A. Top-Heavy Plan Definition.

This plan is top-heavy if, as of the determination date the aggregation group for a given plan year is a top-heavy group. As used in this Article, these terms have the following meanings:

1. Determination Date. For any plan year the last day of the preceding plan year.

1. Present Value. The sum of (1) the account balance determined as of the most recent valuation date that is within the twelve-month period ending on the determination date, (2) an adjustment for contributions due as of the determination date, and (3) for defined contribution plans, the amount in dollar value of the aggregate distributions made to any employee under the applicable plan during the five year period ending on the determination date unless reflected in the value of the accrued benefit or account balance as of the most recent valuation date as defined in that plan.

1. Aggregation Group. An aggregation group is the group of qualified plans, if any, that are required to be aggregated in accordance with IRC 416.

1. Top-Heavy Group.

a) The aggregated group of plans is top-heavy if, as of the applicable determination date, the following ratio exceeds 60%:

(1) The ratio of:

the sum of the present value of the
cumulative accrued benefits for key
employees under the MRP, plus the sum of the account balances of key employees
under this plan and all other plans
included in the aggregation group

(1) To:

the sum of the present value of the
accrued benefits for all participants,
excluding former key employees, under the MRP, plus the sum of account balances for all participants, excluding former key
employees, under this plan and all other plans included in the group.

a) In calculating the top-heavy ratio and determining if it exceeds 60%, the MRP Committee shall comply with the provisions of IRC 416.

a) If the aggregation group is a top-heavy group as of the determination date, each plan in the group will be top-heavy. If the aggregation group is not a top-heavy group as of the determination date, no plan within such group will be top-heavy.

1. Key Employee. An employee who, at any time during the plan year or any of the 4 preceding plan years, was:

a) an officer or former officer of CG&E having annual compensation greater than 50 percent of the defined benefit limitation of IRC 415(b)(1)(A). The IRC 415(b)(1)(A) defined benefit limitation was $90,000 in 1986, and is adjusted annually; or

a) one of the 10 employees having annual compensation of more than the limitation in effect under IRC 415(c)(1)(A) and owning, or considered as owning within the meaning of IRC 318, both more than a 1/2% interest and the largest interests in CG&E ; or

a) a 5% owner, or

a) a 1% owner with annual compensation of more than $150,000.

1. 1% Owner. Any person who owns, or is considered as owning within the meaning of IRC 318, more than 1% of the outstanding stock of CG&E or stock possessing more than 1% of the combined voting power of all stock of CG&E.

1. 5% Owner. Any person who owns, or is considered as owning within the meaning of IRC 318, more than 5% of the outstanding stock of CG&E or stock possessing more than 5% of the combined voting power of all stock of CG&E.

A. Adjustments to IRC Section 415 for Top-Heavy Plans.

In the event this plan is top-heavy and participants also participate in the MRP, one of the two following provisions shall apply:
1. If for the plan year this plan would not be a "top-heavy plan" as defined in if "90%" were substituted for "60%," then shall apply for such plan year as if amended so that "four percent" were substituted for "three percent".

1. If for the plan year this plan would continue to be a "top-heavy plan" if "90%" were substituted for "60 %," then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set forth in and for the limitation year ending in such plan year by substituting "1.0" for "1.25", except with respect to any individual for whom there are no deferred compensation contributions, or company-matched contributions, company-matched stock incentive contributions, forfeitures or optional contributions allocated or any accruals for such individuals under the defined benefit plan.

A. Coordination with Other Plans.

In the event this plan is determined to be top-heavy, the provisions of the MRP dealing with minimum benefits and with limitations on benefits shall be substituted for and of this plan.

CERTIFICATE

This plan has been approved and adopted by the Deferred Compensation Investment Plan Committee on / /96, subject to comments pursuant to the issuance of a determination letter by the Internal Revenue Service.

INDEX

This index references the root of hyphenated words as if they were single words, e.g. "account" will also reference the occurrence of "sub-account".

This index also references words and phrases in the text and the endnotes. Endnote references reflect the text page where the endnote occurs, not the page where the endnote itself is printed.

THE CINCINNATI GAS &

ELECTRIC COMPANY

SAVINGS
INCENTIVE
PLAN

As Amended and Restated Effective January 1, 1995

 TABLE OF CONTENTS

         PAGE


ARTICLE  1:  INTRODUCTION 1

ARTICLE  2:  DEFINITIONS 3

ARTICLE  3:  PARTICIPATION 6

ARTICLE  4:  CONTRIBUTIONS 17

ARTICLE  5:  INVESTMENTS 30

ARTICLE  6:  ACCOUNTS 38

ARTICLE  7:  VESTING AND FORFEITURES 41

ARTICLE  8:  DISTRIBUTIONS 47

ARTICLE  9:  WITHDRAWALS DURING EMPLOYMENT  65

ARTICLE 10:  LOANS 76

ARTICLE 11:  DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES
88

ARTICLE 12:  FIDUCIARIES:  AUTHORITY & RESPONSIBILITY 98

ARTICLE 13:  ADMINISTRATIVE PROVISIONS 107

ARTICLE 14:  MISCELLANEOUS PROVISIONS 117

ARTICLE 15:  DISCRIMINATION TESTING 120

ARTICLE 16:  LIMITATION ON ANNUAL ADDITIONS 135

ARTICLE 17:  AMENDMENT AND TERMINATION OF THE PLAN 141

INDEX 144


 INTRODUCTION

ARTICLE 1: INTRODUCTION

1.1 History. The Cincinnati Gas & Electric Company (CG&E) instituted the Employee Incentive Thrift Plan in 1967. CG&E amended the plan on October 1, 1985 for weekly and hourly paid employees to enable those employees to delay the payment of some income taxes and to choose from a wider variety of investment options. As a result of the extensive amendments, the plan was renamed The Cincinnati Gas & Electric Company Savings Incentive Plan.

1.2 Purpose. The plan is designed to provide retirement income to the weekly and hourly paid employees of CG&E and certain death benefits to their beneficiaries. The plan is designed to supplement the participants' Retirement Income Plan benefits which in turn are to be supplemented by the benefits payable under the Social Security Act, and their personal savings for retirement.

1.3 Plan Qualification. CG&E has designed this plan to comply with the provisions of Internal Revenue Code
401(a), 401(k), and 501 as a qualified pension plan and to conform to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). All plan provisions are subject to change at any time to the extent necessary to retain the qualified status of the plan or to bring it into compliance with ERISA. The plan and trust agreement shall be construed and interpreted in a manner that gives effect to the intent of retaining the qualified status of the plan.

1.4 Effective Date. Except as otherwise noted with respect to a particular provision, the effective date of the amendment and restatement of this plan is January 1, 1995. Earlier or later amendments to this plan become effective on the date specifically designated in the plan document.

ADMINISTRATIVE NOTES

DEFINITIONS

ARTICLE 2: DEFINITIONS

2.1 Scope of this Article. Definitions of terms relevant to more than one article of the plan are generally included in this Article. Definitions of terms which are used primarily in a single article are defined in that article.

2.2 List of Defined Terms. This section contains a complete list of all defined terms used in this plan. Each defined term is followed by a reference to the section in which it is defined.

account 6.1a)
ACP 15.1a), 15.1b)
ADP 15.1c)
alternate payee 11.5
annual addition 16.1a)
base pay 4.1
beneficial owner 3.17
beneficiary 3.16
board of directors 2.3
break in service 3.10
CG&E 2.4
CINergy 2.5
Committee 12.4
company 16.1g)
company-matched contributions
4.2c), 4.3c), 4.3d)
company-matched stock incentive
contributions 4.2d), 4.3e), 4.3f)
company stock fund 5.3a)
compensation 15.1d), 16.1b)
DCIP 2.6
deferred compensation contributions
4.2a), 4.3a)
defined benefit fraction 16.1c)
defined benefit plan 16.1d)
defined contribution fraction 16.1e)
defined contribution plan 16.1f)
distribution 8.1
distribution valuation date 8.3
DRO 11.1
eligible employee 3.2a), 3.2b)
eligible retirement plan 8.12d)
employee 3.1
entry date 3.13, 3.14
ERISA 2.7
ESA&P 3.2c)6)
excess aggregate contribution 15.1e)
excess amount 16.1h)
excess contribution 15.1f)
Fidelity Equity-Income Fund 5.3c)
Fidelity Intermediate Bond Fund 5.3d)
Fidelity Magellan Fund 5.3b)
Fidelity Retirement Money Market Fund 5.3f) fiduciary 12.1
forfeiture 7.6a), 7.6b)
hardship 9.9
hardship withdrawals 9.10, 9.11
highly compensated employee 15.1g), 15.1h) hour of service 3.6
IBEW 3.25a)
IRC 2.8
IUU 3.25b)
loan fund 5.3g)
mandatory distribution year 8.6a), 8.7a) military leaves 7.5b)
money market fund 5.3e), 5.3f)
non-eligible employee 3.2c)
optional contributions 4.2b), 4.3b)
parental leaves 7.5a)
participant 3.3
plan 2.9
plan participation forms 3.15
plan year 2.10
pooled investment funds 5.4
projected annual benefit 16.1i)
quarterly account statements 6.2
RIP 2.11
rollover contributions 4.3g)
sub-account 6.1b), 6.1c)
terminated participant 3.4
the PNC fund 5.3e)
trust 12.12, 12.13
trust agreement 12.14, 12.15
trustee 12.3
USWA 3.25c)
vesting 7.1
VIR Line 5.4
window cashouts 11.13
withdrawal 9.1
year of service 3.8, 3.9
year of vesting service 7.2

2.3 Board of Directors. The board of directors is the board of directors of The Cincinnati Gas & Electric Company.

2.4 CG&E. CG&E is The Cincinnati Gas & Electric Company, the plan's sponsor, and any related company which has adopted the plan and has employees participating in the plan.

2.5 CINergy. CINergy is CINergy Corp., the name of the parent holding company of CG&E.

2.6 DCIP. The DCIP is the CG&E Deferred Compensation and Investment Plan.

2.7 ERISA. ERISA is the Employee Retirement Income Security Act of 1974, as amended.

2.8 IRC. IRC is the Internal Revenue Code of 1986, as amended.

2.9 Plan. The plan is the CG&E Savings Incentive Plan, as set forth in this document.

2.10 Plan Year. The plan year is the calendar year.

2.11 RIP. The RIP is the CG&E Retirement Income Plan.

2.12 SIP. The SIP is the CG&E Savings Incentive Plan.

2.13 Related Company. A related company is any entity which is:

a) A member of a controlled group of corporations, as defined in IRC 1563(a), ignoring IRC 1563(e)(C)(3), and, solely for the purpose of 2.4, modifying the IRC 1563 (a) phrase "at least 80%" to read "more than 50%", and

b) An unincorporated trade or business which is under common control with The Cincinnati Gas & Electric Company, as determined under IRC 414(c), and

c) A member of an affiliated service group as defined in IRC 414(m), and

d) Any entity required to be aggregated with The Cincinnati Gas & Electric Company under IRC 414(o), and

e) Any other subsidiary or affiliate of The Cincinnati Gas & Electric Company designated by its board of directors to be a related company.

PARTICIPATION

ARTICLE 3: PARTICIPATION

3.1 Employee. An employee is any person earning a wage or salary from CG&E, including leased employees.1

3.2 Participation.

a) Eligible Employee. An eligible employee is any full-time employee on the CG&E weekly or hourly payroll who has completed a year of service pursuant to 3.8. The term eligible employee shall include employees who have completed a year of service with a related company. A year of service performed for a related company prior to the date the relationship with The Cincinnati Gas & Electric Company began is included for the purpose of determining eligibility to participate in this plan. The term eligible employee shall include an individual who is a citizen of the United States and is an employee of a related company, if that company has entered into an agreement under IRC 3121(l).

[This sub-section should be deleted effective 01-01-96.]

b) Eligible Employee. An eligible employee is any full-time employee on the CG&E weekly or hourly payroll. The term eligible employee shall include an individual who is a citizen of the United States and is an employee of a related company, if that company has entered into an agreement under IRC 3121(l).

[This sub-section becomes effective on 01-01-96.]

c) Non-Eligible Employees. The following defined classes of employees are excluded from plan participation.

1) Co-op Employees. Co-op employees are students working for CG&E through a recognized cooperative education program.

2) Summer Employees. Summer employees are students employed by CG&E during the summer.

3) Temporary Employees. Temporary employees are employees of an employment agency who perform services for CG&E on specific tasks and/or for a specified time period. Generally, temporary employees are directly supervised by CG&E employees.

4) Part-time Employees. Part-time employees are employees whose regular work schedule is limited to less than 1,000 hours in any given calendar2 year.

5) Leased Employees. Leased employees are any persons who are not on CG&E's payroll and who have performed services for CG&E pursuant to an agreement between CG&E and any other person on a substantially full time basis for a period of at least one year. The period for which these employees are leased employees under the terms of this plan is limited to the term of service for which they are assigned to CG&E.

6) Executive, Supervisory, Administrative and Professional Employees (ESA&P). Executive, Supervisory, Administrative and Professional (ESA&P) employees are full- time employees paid on a monthly or semi- monthly salaried basis. For convenience, the semi-monthly and monthly payrolls are collectively called the ESA&P payroll.

7) Weekly & Hourly Paid Employees. Those weekly & hourly paid employees who have not completed a year of service.

[This sub-section 7)
should be deleted
effective 01-01-96.]

8) Independent Contractors. Independent contractors are persons or entities with whom CG&E contracts to complete specific tasks without supervision by CG&E employees. Employees of entities which are independent contractors regarding tasks performed for CG&E may be classified as leased employees if they fall within the definition in 3.2c)5) above.

9) Participants in Other 401(k) Plans. Employees who are eligible to participate in a qualified plan which includes IRC 401(k) features sponsored by any related company are not eligible to participate in this plan.

d) Fail-Safe Provision. In the event that any co-op employee, summer employee, or part-time employee completes a year of service, that employee shall be permitted to participate in this plan.

3.3 Participant. A participant is any eligible employee who has assets in the plan. (See also 3.4)

3.4 Terminated Participant. A terminated participant is a participant who has terminated employment with CG&E by reason of death, disability, discharge, retirement, or resignation, but who has assets remaining in the plan.

3.5 Determining Participation and Vesting. An hour of service is the basic unit of measurement used to determine an employee's participation and vesting in the plan.

3.6 Hour of Service.

a) Current Pay. An employee earns an hour of service for each hour for which s/he is directly or indirectly paid or entitled to payment by CG&E during the applicable computation period. These hours are for either the performance of duties or on account of a period of time during which no duties are per- formed (irrespective of whether the employment relationship is terminated) due to vacation, holiday, jury duty, personal days, incapacity (including disability) and lay-off. In these cases participants will be credited with 8 hours of service for each normally scheduled working day during which no duties are performed. An hour of service for which no duties are performed shall be calculated pursuant to 2530.200b-2 of the U.S. Department of Labor regulations, which are incorporated herein by reference.

b) Back Pay. A participant earns an hour of service for each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by CG&E. The same hours of service shall not be credited under both sub-section 3.6a) above and under this sub-section. These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made.

c) Effect of Leaves of Absence. Generally, an employee will not earn hours of service while s/he is on a leave of absence. However, hours of service credited during certain military leaves and parental leaves under the provisions of 7.5 also apply for purposes of determining eligibility to participate in the plan.

d) Consistent Personnel Practices. All leaves of absence affecting accreditation of service under this plan shall be authorized by CG&E in accordance with standard personnel policies applied in a nondiscriminatory manner to all employees similarly situated.

3.7 Limitation Upon Earning Hours of Service. Hours of service earned by CG&E employees generally not eligible to participate in the plan shall be credited, but only for determining the vesting rights of these employees upon their change of status to plan participants. The provisions of 3.19 and 3.20 governing transfers of participants and plan assets to and from the DCIP are an exception to the general rule.

3.8 Year of Service.3 A year of service is 12 consecutive months of employment with CG&E, beginning with the first hour of service, during which the employee completes at least 1,000 hours of service. Eligible employees who do not complete a year of service by the first anniversary of their employment commencement date shall be credited with a year of service if they complete at least 1,000 hours of service during a period of 12 consecutive months beginning with the first, and, if necessary, any subsequent anniversary of their employment commencement date.

[This section should be deleted effective 01-01-96.]

3.9 Year of Service. A year of service is 12 consecutive months of employment with CG&E, beginning with the first hour of service, during which a co-op employee, summer employee, or part- time employee completes at least 1,000 hours of service. Co-op employees, summer employees or part-time employees who do not complete a year of service by the first anniversary of their employment commencement date shall be credited with a year of service if they complete at least 1,000 hours of service during a period of 12 consecutive months beginning with the first, and, if necessary, any subsequent anniversary of their employment commencement date.

[This section becomes effective on 01-01-96.]

3.10 Break in Service. A break in service is any period of 12 consecutive months beginning on the employee's employment commencement date, and on any subsequent anniversary of that date, during which the employee completes less than 501 hours of service.

3.11 Commencement of Participation.4 Except with respect to company-matched stock incentive contributions (see 4.2d)), an eligible employee must file a completed set of plan participation forms5 with the Committee6 to become a participant. See also 3.20.

[This section should be deleted effective 01-01-96.]

3.12 Commencement of Participation. An eligible employee must notify the Committee of his or her intent to participate in the plan, except with respect to the company-matched stock incentive contributions (see 4.3e) and 4.3f)), through the use of the voice or other electronic response system or other media authorized by CG&E.

[This section becomes effective on 01-01-96.]

3.13 Entry Date. The entry date is the date an eligible employee becomes a participant in the plan. The entry date is the first weekly pay date of the month that is at least 30 days following the date the Committee receives the plan participation forms from the eligible employee.

[This section should be deleted effective 01-01-96.]

3.14 Entry Date. The entry date is the date an eligible employee becomes a participant in the plan. The entry date is the date an eligible employee first completes an hour of service.

[This section becomes effective on 01-01-96.]

3.15 Plan Participation Forms. Plan participation forms are the set of documents which the eligible employee must file with the Committee in order to participate in the plan, except with respect to the company-matched stock incentive contributions. (See 4.2d)). The forms are:

a) The plan participation agreement, and 7

b) The beneficiary designation form.8

[This section should be deleted effective 01-01-96.]

3.16 Beneficiary. The beneficiary is the person or entity designated in writing by a participant to receive plan benefits after the participant's death. (See 8.14 and 11.14)

3.17 Beneficial Owner. The beneficial owner is the owner or beneficiary of an account with the plan. A beneficial owner may be a participant, a terminated participant, a participant's spouse, or an alternate payee.

3.18 Beneficiary Designation. A participant must designate a beneficiary. Married participants must designate their spouse as beneficiary, unless the participant's spouse consents to someone else being named as beneficiary. The consent must be in writing on the form9 approved by the Committee and the spouse's signature must be notarized. The form must be filed with the Committee to become effective.10 A consenting spouse may withdraw consent by written notice to the Committee, notarized in the same manner as the consent. Once the retraction of consent has been filed with and accepted by11 the Committee, the spouse is reinstated by plan operation as the participant's beneficiary.

3.19 Transfer to the ESA&P Payroll. A participant who transfers to the ESA&P payroll is no longer eligible to participate in the plan. All of the participant's contributions to the plan shall cease, effective with his or her last pay date as an employee on the weekly or hourly payroll.

3.20 Transfers From The ESA&P Payroll.

a) Transfers of DCIP Accounts. The trustee shall transfer to this plan the DCIP account of any employee who becomes eligible for participation.12 The transfer shall be made as soon as possible following the date that the employee becomes eligible. The transferred account shall be allocated to the sub-accounts and the investment funds in the manner most similar to the participant's DCIP sub-accounts.

b) Continuing Contributions. The contribution percentages and investment directions of any DCIP participant who becomes eligible for participation in this plan will continue as contributions and investment directions to this plan.

3.21 Participatory Restrictions on the Activities of Terminated Participants. Subject to the limitations of 8.5a), 8.5e) and 8.6 of this plan, a terminated participant's account will remain in this plan until s/he takes a distribution. A terminated participant may not contribute to the plan, withdraw from an optional sub-account, or obtain hardship withdrawals or loans. A terminated participant may not reallocate past contributions except in conjunction with a distribution.13

[This section should be deleted effective 08-01-95.]

3.22 Participatory Restrictions on the Activities of Terminated Participants. Subject to the limitations of 8.5a), 8.5b), 8.5e), 8.5f), 8.6 and 8.7 of this plan, a terminated participant's account will remain in this plan until s/he takes a distribution. A terminated participant may not contribute to the plan, withdraw from an optional sub-account, or obtain hardship withdrawals or loans.

[This section becomes effective on 08-01-95.]

3.23 Participation of Rehired Participants.

a) Non-Vested Participants.

1) 5 or Fewer Breaks in Service. Any terminated participant in this plan or in the DCIP, who is not yet vested in company-matched contributions or company- matched stock incentive contributions under this plan or the DCIP and who is subsequently rehired on the weekly or hourly payroll before the completion of 5 consecutive breaks in service, becomes an eligible employee on his or her date of rehire. See 7.6 regarding restoration of the company-matched sub-account.

2) More than 5 Breaks in Service. If the individual described in sub-section 3.23a)1) above is rehired after incurring 5 consecutive breaks in service, eligibility will be subject to the requirements of 3.2a) of this plan, beginning with the date of rehire.

b) Vested Participants. Any terminated participant in this plan or in the DCIP, who is vested in company-matched contributions or company-matched stock incentive contributions under this plan or the DCIP and who is subsequently rehired on the weekly or hourly payroll becomes an eligible employee on his or her reemployment date.14

[This section should be deleted effective 01-01-96.]

3.24 Participation of Rehired Participants. Any terminated participant in this plan or the DCIP who is subsequently rehired on or after January 1, 1996, on the weekly or hourly payroll is an eligible employee on his or her reemployment date.

[This section becomes effective on 01-01-96.]

3.25 Union Representation. Eligible employees are represented or have their benefits under this plan bargained for by one of three labor-unions. The union representation of eligible employees is either under the IBEW, the IUU or the USWA.

a) IBEW. The IBEW is the International Brotherhood of Electrical Workers. IBEW is used in the plan as an adjective to describe those workers bargained for by this union.

b) IUU. The IUU is the Independent Utilities Union. IUU is used in the plan as an adjective to describe those workers bargained for by this union.

c) USWA. The USWA is the United Steelworkers of America. USWA is used in the plan as an adjective to describe those workers bargained for by this union.

CONTRIBUTIONS

ARTICLE 4: CONTRIBUTIONS

4.1 Base Pay.

a) Definition. Base pay is the amount of straight time wages paid to an eligible employee by CG&E on a weekly or hourly basis for services, up to and including a maximum of 40 hours per week.1 Base pay excludes bonuses, shift differentials, overtime, incentive pay, moving allowances, living2 and similar allowances, and imputed income. Base pay includes the amount of all elective contributions made by CG&E on behalf of the participant pursuant to salary reduction agreements, if the amount is not included in the gross income of the participant under IRC 125. Base pay includes deferred compensation contributions made under this plan.

[This sub-section should be deleted effective 01-01-97.]

b) Definition. Base pay is the amount of straight time wages paid to an eligible employee by CG&E on a weekly or hourly basis for services, up to and including a maximum of 40 hours per week.3 Base pay excludes shift differentials, incentive pay, moving allowances, living and similar allowances, and imputed income. Base pay includes the amount of all elective contributions made by CG&E on behalf of the participant pursuant to salary reduction agreements, if the amount is not included in the gross income of the participant under IRC 125. Base pay includes deferred compensation contributions made under this plan. For purposes of determining deferred compensation and optional contributions, base pay includes overtime and bonuses. For purposes of determining company-matched contributions and company- matched stock incentive contributions, base pay excludes overtime, but includes bonuses.

[This sub-section becomes effective on 01-01-97.]

c) Use of Base Pay. Base pay shall be taken into account only while an employee is a participant in the plan.

d) Limitation on Base Pay. Base pay taken into account for determining contributions under the plan shall not exceed $150,000, as adjusted4 by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with IRC 401(a)(17)(B).

e) Use of Base Pay Limitation. In determining the base pay of a participant for the purpose of determining the participant's accruals under this plan, the rules of IRC 414(q)(6) shall generally apply. However, the term "family" shall include only the spouse of the participant and any lineal descendants of the participant who have not attained age 19 prior to the close of the plan year. If, as a result of this application, the adjusted $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's base pay prior to the application of the limitation.

[This sub-section should be deleted effective 01- 01-97.]

4.2 Contributions. The plan will accept four types of contributions:

a) Deferred Compensation Contributions. A deferred compensation contribution is the amount by which a participant directs CG&E to reduce his or her base pay and which CG&E is obligated to contribute to the plan. Participants may elect to have their base pay reduced by executing a plan participation agreement. CG&E will then make a contribution to the plan in an amount equal to the participant's selected reduction each pay period. The amount reduced, expressed in 1/2% increments, shall not exceed 15% of the participant's base pay.

b) Optional Contributions. An optional contribution is the participant's voluntary contribution made to the plan through payroll deduction after taxes have been withheld. Participants may choose to make contributions to the plan each pay period through payroll deduction. These optional contributions, expressed in 1/2% increments, are deducted after taxes have been withheld. The amount of the optional contribution together with the deferred compensation contribution, shall not exceed 15%5 of the participant's base pay.

c) Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions and/or optional contributions, as applicable. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 55% of each participant's deferred compensation and optional contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

d) Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock equal in value to between $0.10 and $0.30 for each dollar of a participant's deferred compensation and optional contributions up to and including 4% of the participant's base pay for that year. Participants' contributions exceeding 4% of base pay will not be matched. If a participant did not make any deferred compensation or optional contributions during the year, s/he may still receive a company- matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation or optional contributions of 1% of his or her base pay for that year.

[This section should be deleted effective 01-01-96.]

4.3 Contributions. The plan will accept five types of contributions:

a) Deferred Compensation Contributions. A deferred compensation contribution is the amount by which a participant directs CG&E to reduce his or her base pay and which CG&E is obligated to contribute to the plan. Participants may elect to have their base pay reduced by informing the Committee through the voice or electronic response system or other media authorized by CG&E. CG&E will then make a contribution to the plan in an amount equal to the participant's selected reduction each pay period. The amount reduced, expressed in 1/2% increments, shall not exceed 15% of the participant's base pay.

b) Optional Contributions. An optional contribution is the participant's voluntary contribution made to the plan through payroll deduction after taxes have been withheld. Participants may choose to make contributions to the plan each pay period through payroll deduction. These optional contributions, expressed in 1/2% increments, are deducted after taxes have been withheld. The amount of the optional contribution together with the deferred compensation contribution, shall not exceed 15%6 of the participant's base pay.

c) Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions and/or optional contributions, as applicable. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 55% of each participant's deferred compensation and optional contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

[This sub-section should be deleted effective 01- 01-97.]

d) Company-Matched Contributions. The company- matched contribution is the amount contributed by CG&E to the participant's plan account from its earnings based upon the participant's deferred compensation contributions. For each pay period of the participant, CG&E will contribute out of its accumulated earnings an amount, together with forfeitures, equal to 60% of each participant's deferred compensation contributions up to and including 5% of the participant's base pay. Participants' contributions exceeding 5% of base pay will not be matched.

[This sub-section becomes effective on 01-01-97.]

e) Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock between $0.10 and $0.30 for each dollar of a participant's deferred compensation and optional contributions up to and including 4% of the participant's base pay for that year. Participants' contributions exceeding 4% of base pay will not be matched. If a participant did not make any deferred compensation or optional contributions during the year, s/he may still receive a company-matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation or optional contributions of 1% of his or her base pay for that year.

[This sub-section should be deleted effective 01- 01-97.]
f) Company-Matched Stock Incentive Contributions. The company-matched stock incentive contribution is the amount of CINergy stock contributed by CG&E in addition to the company-matched contribution. Depending on the performance of CINergy for the year, CG&E will contribute, if at all, an amount of CINergy stock between $0.20 and $0.40 for each dollar of a participant's deferred compensation contributions up to and including 5% of the participant's base pay for that year. Participants' deferred compensation contributions exceeding 5% of base pay will not be matched. If a participant did not make any deferred compensation contributions during the year, s/he may still receive a company-matched stock incentive contribution based on the hypothetical assumption that s/he made deferred compensation contributions of 1% of his or her base pay for that year.

[This sub-section becomes effective on 01-01-97.]

g) Rollover Contributions. A rollover contribution is the amount contributed by a participant to his or her plan account attributable to a distribution from a retirement plan of a former employer. A participant must make a written request to the Committee to make a rollover contribution. The request must include a statement detailing the type of property to be rolled over and that such property is an eligible rollover contribution.7 If the Committee so permits, the participant may transfer the amount of the rollover contribution to the trustee.

[This section becomes effective on 01-01-96.]

4.4 Contributions Due to Military Leave. Notwithstanding any provision of this plan to the contrary, contributions with respect to qualified military service will be provided in accordance with IRC 414(u).

4.5 Contributions from Sources other than Base Pay.

a) Settlement of Disputes. Prior to the time a participant becomes entitled to receive a lump sum payment of wages in settlement of a dispute with CG&E, the participant may direct contributions to this plan from the lump sum payment in the same percentages and allocation to funds as are in effect at the time when the lump sum amount is paid. CG&E may also make company-matched contributions and/or company- matched stock incentive contributions on the settlement amount.

b) Lump Sum Payment in Lieu of Salary. If a class of participants is designated by CG&E to receive certain pay in the form of a lump sum, the determination of whether that special pay may be used as base pay for making contributions to this plan shall be determined by CG&E. CG&E may also make a determination whether it will make company-matched contributions and/or company-matched stock incentive contributions for each payment of a special lump sum. In the event that the special pay is permitted to be used as base pay for plan contributions, those contributions must be in the same percentages designated by the participant and in effect at the time when the lump sum amount is paid.

4.6 Changing the Percentage of Contributions.

a) Participants. A participant may change the percentage of deferred compensation contributions or optional contributions four times per year.8

[This sub-section should be deleted effective 01- 01-96.]

b) Participants. A participant may change the percentage of deferred compensation contributions and/or optional contributions at anytime through the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

c) Other Beneficial Owners. Terminated participants, beneficiaries and alternate payees may not contribute to this plan.

4.7 Limitation on Deferred Compensation Contributions.

a) Maximum Amount. A participant's deferred compensation contributions shall not exceed the maximum deferred amount in effect for that tax year pursuant to IRC 402(g)9. The maximum amount for 1995 is $9,24010 and is adjusted annually as announced by the Internal Revenue Service.

b) Reaching Maximum Amount. At the time the IRC 402(g) limit is reached for the amount being deferred by a participant, his or her deferred compensation contribution shall cease for the remainder of that year.

c) Excess Deferred Compensation Contributions. If a participant files a plan participation agreement which causes CG&E to inadvertently defer more than is permitted in 4.7a) above, the excess deferred compensation contribution shall be returned to the participant.11

[This sub-section should be deleted effective 01- 01-96.]

d) Excess Deferred Compensation Contributions. If a participant informs the Committee through the voice or other electronic response system or other media authorized by CG&E which causes CG&E to inadvertently defer more than is permitted in 4.7a) above, the excess deferred compensation contribution shall be returned to the participant.12

[This sub-section becomes effective on 01-01-96.]
4.8 Voluntary Suspension of Contributions.

a) General Rule. Participants may suspend either their deferred compensation or optional contributions, or both by filing13 an application to suspend contributions14 with the Committee.

b) Effective Date. Voluntary suspensions shall become effective on a pay date no later than 30 days after the application to suspend contributions was filed with the Committee.

c) Period of Suspension. Participants may not make the suspended type of contributions to the plan for at least 12 months from the effective date of the suspension.

d) Makeup of Contributions. Participants may not make up suspended contributions.

[This section should be deleted effective 01-01-96.]

4.9 Involuntary Suspension of Contributions.

a) Hardship Withdrawals. Participants who have obtained a hardship withdrawal shall be automatically suspended from making deferred or optional contributions for a period of 12 months beginning from the date of the distribution of the hardship withdrawal.

b) Leaves of Absence. Contributions to the plan are automatically suspended during a participant's leave of absence, because the participant earns no base pay from which to contribute. When the participant returns to work for CG&E, contributions shall automati- cally resume with the first pay check in accordance with the terms of the most recent plan participation agreement.

[This sub-section should be deleted effective 01- 01-96.]

c) Leaves of Absence. Contributions to the plan are automatically suspended during a participant's leave of absence, because the participant earns no base pay from which to contribute. When the participant returns to work for CG&E, contributions shall automati- cally resume with the first pay check in accordance with the terms most recently provided by the participant on the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

4.10 Resumption of Contributions. Upon the expiration of the required period of suspension, participants may resume making contributions to the plan by filing a resumption of contributions form15 with the Committee. The resumption will be effective on the first pay date of the month no later than 30 days after the date the resumption of contributions form was filed with the Committee. Contributions will resume at the same percentages of base pay as were in effect at suspension. If the resumption of contributions form was filed during the period of suspension, it will become effective on the first pay date of the month following the period of suspension.

[This section should be deleted effective 01-01-96.]

4.11 Resumption of Contributions. Upon the expiration of the required period of suspension, participants may resume making contributions to the plan by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. The resumption will be effective on the first pay date of the month no later than 30 days after the date the participant informs the Committee of his or her intent to resume contributions. Contributions will resume at the same percentages of base pay as were in effect at suspension. If the participant informs the Committee during his or her suspension, the resumption of contributions will become effective on the first pay date of the month following the period of suspension.

[This section becomes effective on 01-01-96.]

4.12 Remittance of Contributions. CG&E will generally forward all deferred compensation, optional, and company-matched contributions to the trustee on the pay date for which the contributions are effective. In any event, CG&E must transmit these contributions promptly after the end of the month in which the contributions are taken.

4.13 Return of Company-Matched Contributions and Company-Matched Stock Incentive Contributions.

a) General Rule. Except as provided in 7.6, 15.9c)2), 15.9c)3), 16.4d) and 16.4e), and in this section, the assets of the plan shall never revert to or be used by CG&E.

1) Mistaken Contributions. Company-matched contributions and company-matched stock incentive contributions made to the trust by reason of a mistake of fact may be returned to CG&E within one year after the payment of the contribution.

2) Non-deductible Contributions. Company-matched contributions and company- matched stock incentive contributions made to the plan which are deemed non-deductible pursuant to IRC 404 shall be returned to CG&E within one year after the disallowance of the deduction. If any portion of the non-deductible amount is from a participant's deferred compensation contribution, that amount shall be returned to the participant

INVESTMENTS

ARTICLE 5: INVESTMENTS

5.1 Principles of Investment Fund Selection. The Committee will establish and direct the trustee to maintain in the trust at least three investment funds, which collectively are intended to comply with ERISA 404
c) and the regulations thereunder1.

5.2 Selection of Investment Funds. One of the investment funds will be the company stock fund. The Committee will select the other investment funds, following the principles of 5.1. If a fund is added or deleted, beneficial owners will be given the opportunity to reallocate their past contributions and redirect their sub-accounts among the authorized investment funds.

5.3 Investment Funds in the Plan. The following are the investment funds2 maintained in the plan trust:

a) Company Stock Fund. The company stock fund is a unitized fund which consists largely of shares of CINergy common stock, and a proportionately small amount of cash. It has been available (formerly with CG&E common stock) since the plan was established on October 1, 1985. The stock will be purchased at fair market value on the open market or from CINergy through the issuance of authorized but previously unissued shares at the option of CINergy. The stock may also be obtained through the exercise of stock rights. Stock received by the trustee as a stock dividend distribution or right is reflected by an increase in the unit value.

b) Fidelity Magellan Fund.3 The Fidelity Magellan Fund seeks capital appreciation by investing primarily in common stock and securities convertible into common stock.4 It was added as an additional investment option on 10-01-92.

c) Fidelity Equity-Income Fund. The Fidelity Equity- Income Fund seeks reasonable income by investing primarily in income-producing equity securities.5 It has been available since the plan was established on October 1, 1985.

d) Fidelity Intermediate Bond Fund. The Fidelity Intermediate Bond Fund seeks to obtain a high level of current income by investing primarily in high and upper-medium grade fixed-income obligations.6 It has been available since the plan was established on October 1, 1985.

e) The PNC Fund (Sower Money Market Fund - Money Market Portfolio).7 The investment objective of this portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal.8 This fund is called the money market fund throughout this plan. A money market fund, but not necessarily this particular fund, has been available since the plan was established on October 1, 1985.

[This sub-section should be deleted effective 01-01-96.]

f) Fidelity Retirement Money Market Fund. The investment objective of this portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. This fund is called the money market fund throughout this plan. A money market fund, but not necessarily this particular fund, has been available since the plan was established on October 1, 1985.

[This sub-section becomes effective on 01-01-96.]

g) Loan Fund. The loan fund consists of all promis- sory notes securing plan loans to participants. The loan fund is administered as described in Article 10.

5.4 Vested Interest Response Line (VIR Line). The vested interest response line is the telephone line established and maintained by the trustee for use by participants to access their account information and to effectuate certain transactions affecting their accounts. The Vested Interest Response Line is referred to as the VIR Line throughout this plan.

5.5 Participant Investment Elections. A participant selects investment funds for his or her future contributions by using the investment election menu on the VIR Line. Investments must be made in whole percentage increments.9

5.6 Investment of Contributions. The trustee shall invest the participants' contributions from CG&E in the participants' current designated investment selections. If the trustee has no record of a current investment selection for a participant's contribution, it shall invest the contribution in the money market fund. The trustee shall invest all company-matched contributions and company-matched stock incentive contributions in the company stock fund.10

[This section should be deleted effective 01-01-96.]

5.7 Investment of Contributions. The trustee shall invest the participants' contributions from CG&E in the participants' current designated investment selections. If the trustee has no record of a current investment selection for a participant's contribution, it shall invest the contribution in the money market fund. The trustee shall invest all company-matched contributions and company-matched stock incentive contributions in the company stock fund.11 However, a participant who has reached age 50 may elect to invest his or her company- matched contributions and company-matched stock incentive contributions in any one or more of the investment funds as s/he directs by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. Allocations must be made in whole percentages.

[This section becomes effective on 01-01-96.]
5.8 Initial Allocation of Deferred and Optional Contributions. A participant's deferred compensation and/or optional contributions will be allocated to any one or more of the investment funds as s/he directs by filing an allocation of future contributions form with the Committee.12. Allocations must be made in any whole percentage. Allocations will apply to all contributions made on or after the entry date (see 3.13). Participant- s' contributions will be invested in the investment funds as of the valuation date coinciding with or next following the date on which they are received by the trustee. If the allocation form is not yet received by the trustee when it must allocate contributions, the contributions will be invested in the money market fund, until the directions for allocations are filed with the Committee.13

[This section should be deleted effective 01-01-96.]

5.9 Initial Allocation of Deferred and Optional Contributions. A participant's deferred compensation and/or optional contributions, collectively, will be allocated to any one or more of the investment funds as s/he directs by informing the Committee through the voice or other electronic response system or other media authorized by CG&E. Allocations must be made in any whole percentage. Allocations will apply to all contributions made on or after the entry date (see 3.14). Participant- s' contributions will be invested in the investment funds as of the valuation date coinciding with or next following the date on which they are received by the trustee. If the trustee has not yet received the participant's investment directions when it must allocate contributions, the contributions will be invested in the money market fund, until the directions for allocations are provided by the participant to the Committee.

[This section becomes effective on 01-01-96.]

5.10 Investment Fund Transfers of Current Balances. A participant can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line.14 Investments must be made in whole percentage increments. A participant may elect or change investment funds and/or the percentages in which contributions will be allocated once per quarter.

[This section should be deleted effective 08-01-95.]

5.11 Investment Fund Transfers of Current Balances. Except for participants or terminated participants whose accounts are frozen due to pending domestic relations orders, any participant or terminated participant with an account balance under the plan can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line.15 Investments must be made in whole percentage increments. A participant or terminated participant may elect or change investment funds and/or the percentages in which allocation will be allocated once per quarter.

[This section becomes effective on 08-01-95 and should be deleted effective 01-01-96.]

5.12 Investment Fund Transfers of Current Balances. Except for participants or terminated participants whose accounts are frozen due to pending domestic relations orders, any participant or terminated participant with an account balance under the plan can select reallocation of his or her current account balance in different investment funds and/or different percentages of allocation by using the fund transfers menu on the VIR Line.16 Investments must be made in whole percentage increments. A participant or terminated participant may elect or change investment funds and/or the percentages in which allocations will be allocated at anytime.

[This section becomes effective on 01-01-96.]

5.13 Risk of Loss. The participant (or terminated participant) bears the effect for all gain or loss in market value of the investments selected for his or her plan assets. The participant (or terminated participant) also bears the effect of any market fluctuations which occur between the time his or her instructions are delivered to the Committee or the trustee and the time that the instructions are effectuated. The trustee, the Committee, the individual Committee members, and CG&E will not be responsible or liable to participants (or terminated participant) for the negative or positive effect of market fluctuations or reasonable delay in processing transactions upon their accounts.

5.14 Voting CINergy Stock.

a) Participation Instructions. The trustee shall vote the shares of CINergy stock credited to the accounts of beneficial owners in accordance with the instructions given by the beneficial owner. If the instructions are not received by the trustee by a date the trustee designates prior to any meeting of shareholders of CINergy, the trustee shall vote such uninstructed shares at its discretion.

b) Trustee Discretion. The trustee shall vote at its discretion the CINergy stock held in the company stock fund which have not been allocated to beneficial owners' accounts as of the record date of any meeting of shareholders of CINergy.

ACCOUNTS

ARTICLE 6: ACCOUNTS

6.1 Accounts and Sub-accounts.

a) Account. Each beneficial owner's total assets in the plan shall be maintained in a separate account. The account shall reflect all transactions regarding the beneficial owner's assets. The assets in an account shall be allocated among sub-accounts.

b) Sub-account. Each account must include one or more of the following sub-accounts:

1) a deferred compensation sub-account1;

2) an optional sub-account; and

3) a company-matched sub-account.

[This sub-section should be deleted effective 01-01-96.]

c) Sub-account. Each account must include one or more of the following sub accounts:

1) a deferred compensation sub-account;

2) an optional sub-account;

3) a company-matched sub-account; and

4) a rollover sub-account.

[This sub-section becomes effective on 01-01-96.]

d) Account Value. Each participant's account is valued daily.2 The value of an account reflects the number of units of each investment fund owned by the participant and is based upon the unit price of each fund. Both the units owned and the price reflect a close of business valuation.3

e) Investment Ownership. The trustee owns4 all plan assets as a fiduciary on behalf of the beneficial owners.5

6.2 Quarterly Statements. The trustee shall prepare an individual statement of account for each beneficial owner on a quarterly basis.6 The statements will reflect the status of the account and sub-accounts of the beneficial owner. The trustee shall mail the statements to the beneficial owners as soon as practical after each quarter end.

VESTING AND FORFEITURES

ARTICLE 7: VESTING AND FORFEITURES

7.1 Vesting. The process by which an employee becomes entitled to a nonforfeitable benefit under this plan.

7.2 Year of Vesting Service. Each period of 12 consecutive months of employment, beginning with the date on which the employee first performed an hour of service for CG&E or any related company, during which he or she completes at least 1,000 hours of service. The calculation period begins on the date (and subsequent anniversaries of that date) the employee first performed an hour of service for CG&E or a related company. Hours of service prior to the date on which the relationship to the Cincinnati Gas & Electric Company began are not included for the purpose of vesting under this plan. The hours of service of non-participating employees, leased employees and co-ops are included in determining their years of vesting service.

[This section should be deleted effective 01-01-96.]

7.3 Vested Benefits.

a) Vested Accrued Benefit. The portion of a participant's account available for distribution to the participant upon termination of employment with CG&E.

b) Deferred Compensation Sub-account and Optional Sub-account. Participants are immediately vested in their deferred compensation sub-accounts and optional sub-accounts.

[This sub-section should be deleted effective 01-01-96.]

c) Deferred Compensation Sub-account, Optional Sub- account and Rollover Sub-account. Participants are immediately vested in their deferred compensation sub- accounts, optional sub-accounts and rollover sub- accounts.

[This sub-section becomes effective on 01-01-96.]

d) Company-Matched Sub-account. Participants are vested in their company-matched sub-accounts upon occurrence of any of the following:

1) termination of this plan,

2) partial termination of this plan with respect to affected participants,

3) the participant attains 5 years of vesting service,1

4) the participant dies,

5) the participant becomes disabled,

6) the participant retires under the RIP,

7) the participant is permanently laid off for lack of work,

8) the participant attains age 65.2

[This sub-section should be deleted effective 01-01-96.]

e) Company-Matched Sub-account. Participants who are credited with one hour of service on or after January 1, 1996 are immediately vested in their company-matched sub-accounts.

[This sub-section becomes effective on 01-01-96.]

7.4 Vesting of Former Employees.

a) Impact of Breaks in Service. Non-vested former employees who resume employment will be credited for vesting purposes with their prior years of service so long as the number of consecutive breaks in service (see 3.10) incurred by the employees do not exceed five.

[This sub-section should be deleted effective 01-01-2001.]

b) Impact of Breaks in Service. Terminated participants who are credited with an hour of service on or after January 1, 1996 are not subject to the break in service rules provided in 3.10.

[This sub-section becomes effective on 01-01-96.]

c) Immediate Vesting. Former employees or partici- pants who were vested in SIP or DCIP prior to termina- tion of employment will retain or immediately obtain vested status in this plan.

7.5 Special Vesting Rules.

a) Parental Leaves. For the purpose of determining a participant's years of vesting service, a non-vested participant who is granted a leave of absence for the purpose of giving birth to and/or nurturing a newborn, or adopting a child, will be granted credit for 190 hours of vesting service per month, not to exceed a total of 501 hours, during that leave of absence. Hours of vesting service will be granted in the year in which the absence commences to the extent necessary to prevent the employee from incurring a break in service for vesting purposes. To the extent the hours of vesting service are not needed to prevent a break in vesting service, the employee will be credited with the hours of vesting service in the immediately following year to prevent the occurrence of a break in vesting service during that year.

b) Military Leaves. Notwithstanding any provision of this plan to the contrary, credit for vesting service with respect to qualified military service will be provided in accordance with IRC 414(u)3.

7.6 Forfeitures and Restorations.

a) Forfeiture. A participant who terminates employment with CG&E and is not vested in his or her company-matched sub-account will forfeit the amount in the company-matched sub-account. The participant shall be deemed to have received a distribution of zero for the company-matched account. The forfeiture will occur upon the participant's termination of employment with CG&E. This forfeiture may be restored in accordance with 7.6d) below.

[This sub-section should be deleted effective 01-01-2001.]

b) Forfeiture. A participant's benefit will be forfeited only in accordance with 13.15 if the participant is credited with an hour of service on or after January 1, 1996.

[This sub-section becomes effective on 01-01-96.]

c) Use of Forfeitures. Forfeitures shall be used to reduce the company-matched contributions which are to be made in accordance with 4.2c), 4.3c) and 4.3d).

d) Restoration of Forfeitures. A terminated participant, described in 7.6a) above, who resumes employment with CG&E before incurring 5 consecutive breaks in service shall have his or her company-matched sub-account restored, without dividends earned in the interim.

[This sub-section should be deleted effective 01-01-96.]

e) Restoration of Forfeitures. A terminated participant who is credited with an hour of service on or after January 1, 1996, shall have his or her benefit restored in accordance with 13.15.

[This sub-section becomes effective on 01-01-96.]

f) Source of Restorations. Restorations of the company-matched sub-account shall be made from forfeitures during the plan year of the restoration. If there are insufficient forfeitures to cover restorations in any given plan year, CG&E shall make additional contributions to cover the deficit.

DISTRIBUTIONS

ARTICLE 8: DISTRIBUTIONS

8.1 Distribution. A distribution is the delivery of all of the vested assets in a plan account to its beneficial owner.1

8.2 Eligibility for Distribution.

a) Termination. Terminated participants are eligible to receive distribution upon termination of employment for any reason2.

b) Disability. Participants and terminated participants are eligible to receive distribution as of the dates on which they become eligible to receive disability benefits under the RIP if they:

1) have been granted disability benefits by the Social Security Administration, or

2) are determined to be disabled by CG&E's medical director.3

[This sub-section should be deleted effective 01-01-97.]

c) Death. Beneficiaries are eligible to receive distribution upon the death of the participant from whom their interests are derived.

d) Acceptance of a DRO. An alternate payee under a DRO which has been accepted by the plan is given a window opportunity to elect distribution. See 11.13.

e) Plan Termination. The Committee shall make a distribution to all participants if the plan is terminated without the establishment of a successor plan.

[This sub-section should be deleted effective 01-01-96.]

f) Plan Termination. The Benefits Manager shall make a distribution to all participants if the plan is terminated without the establishment of a successor plan.

[This sub-section becomes effective on 01-01-96.]

g) Sale of CG&E. The Committee shall make a distribution to all participants if substantially all of CG&E's assets are sold.

[This sub-section should be deleted effective 01-01-96.]

h) Sale of CG&E. The Benefits Manager shall make a distribution to all participants if substantially all of CG&E's assets are sold.

[This sub-section becomes effective on 01-01-96.]

i) Sale of a Subsidiary. The Committee shall make a distribution to participants who are employed by a CG&E subsidiary if the subsidiary is sold and the participants are no longer employed by CG&E. If CG&E sells a subsidiary, but retains the employees who formerly worked for that subsidiary, those employees will not qualify for a distribution as a result of the sale.

[This sub-section should be deleted effective 01-01-96.]

j) Sale of a Subsidiary. The Benefits Manager shall make a distribution to participants who are employed by a CG&E subsidiary if the subsidiary is sold and the participants are no longer employed by CG&E. If CG&E sells a subsidiary, but retains the employees who formerly worked for that subsidiary, those employees will not qualify for a distribution as a result of the sale.

[This sub-section becomes effective on 01-01-96.]

8.3 Distribution Valuation Date. The distribution valuation date for a beneficial owner is the business day on which the beneficial owner's units in the funds are sold for the purpose of disbursing funds for a loan, a withdrawal or a distribution.4

8.4 Valuing a Distribution. The value of an account for the purpose of distribution shall be based upon the value of the units in the CINergy stock funds and the mutual funds, determined as of the distribution valuation date5.

8.5 Events Triggering Distribution. As used in this Article, an event consists of a participant's termination, retirement, permanent layoff for lack of work, disability, or death.

a) Vested Benefit of $3,500 or Less. If the vested benefit is $3,500 or less, the Committee shall make a distribution in a lump sum.

[This sub-section should be deleted effective 01-01-96.]

b) Vested Benefit of $3,500 or Less. If the vested benefit is $3,500 or less, the Benefits Manager shall make a distribution in a lump sum.

[This sub-section becomes effective on 01-01-96.]

c) Vested Benefit Over $3,500.6 If the vested benefit is over $3,500, the participant or beneficiary shall elect to receive or delay the distribution. The election7 must be filed with the Committee within 60 days of the event. A participant or beneficiary who has elected to delay8 the distribution can elect a distribution at a later time by filing an application for distribution9 with the Committee.

[This sub-section should be deleted effective 01-01-96.]

d) Vested Benefit Over $3,500.10 If the vested bene- fit is over $3,500, the participant or beneficiary shall elect to receive or delay the distribution. The election must be received by the Benefits Manager within 60 days of the event. A participant or beneficiary who has elected to delay11 the distribution can elect a distribution at a later time by informing the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

e) Mandatory Distribution After an Event. The Committee shall disburse a distribution no later than the 60th day after the close of the calendar year in which the terminated participant who has been affected by an event attains or would have attained age 65. If the terminated employee is age 65 or older on the date of the event, the distribution shall be made within 60 days of the year end during which the event occurred.

[This sub-section should be deleted effective 01-01-96.]

f) Mandatory Distribution After an Event. The Benefits Manager shall disburse a distribution no later than the 60th day after the close of the calendar year in which the terminated participant who has been affected by an event attains or would have attained age 65. If the terminated employee is age 65 or older on the date of the event, the distribution shall be made within 60 days of the year end during which the event occurred.

[This sub-section becomes effective on 01-01-96.]

8.6 Participant's Mandatory Distribution Year. The following rules shall apply regardless of any other distribution provision in the plan.12

a) Definition. A participant's mandatory distribution year is the year in which s/he attains age 70 1/2.

b) Lump Sum Distribution. The Committee shall make a distribution of all vested benefits accrued as of the September 30 of a participant's mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's mandatory distribution year.13

[This sub-section should be deleted effective 01-01-96.]

c) Lump Sum Distribution. The Benefits Manager shall make a distribution of all vested benefits accrued as of the September 30 of a participant's mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's mandatory distribution year.14

[This sub-section becomes effective on 01-01-96.]

d) Subsequent Annual Distributions. If the partici- pant has assets in the plan after the mandatory distribution year, the Committee shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This sub-section should be deleted effective 01-01-96.]

e) Subsequent Annual Distributions. If the partici- pant has assets in the plan after the mandatory distribution year, the Benefits Manager shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This sub-section becomes effective on 01-01-96.]

f) Continuing Contributions. Participants may continue to contribute to the plan after their mandatory distribution year.

[This section should be deleted effective 01-01-97 for all participants, except 5% owners.]

8.7 Participant's (Other than 5% Owner's) Mandatory Distribution Year. The following rules shall apply regardless of any other distribution provision in the plan.15

a) Definition. A participant's (other than a 5% owner's) mandatory distribution year is the later of the year in which s/he attains age 70 1/2 or retires. A 5% owner's mandatory distribution year is the year in which s/he attains age 70 1/2. See 8.6 above for details.

b) Lump Sum Distribution. The Benefits Manager shall make a distribution of all vested benefits accrued as of the September 30 of a participant's (other than a 5% owner's) mandatory distribution year. The distribution shall be in a lump sum. The distribution shall be disbursed by April 1 following the end of the participant's (other than a 5% owner's) mandatory distribution year.16

c) Subsequent Annual Distributions. If the partici- pant (other than a 5% owner) has assets in the plan after the mandatory distribution year, the Benefits Manager shall distribute all vested benefits accrued as of September 30 each subsequent year, by December 31st of that year.

[This section becomes effective on 01-01-97 for all participants, except 5% owners.]

8.8 Filing Forms for Distribution or Delay.

a) General Rule. A beneficial owner generally must file an application for distribution17 90 days in advance of disbursement of a distribution from the plan.

[This sub-section should be deleted effective 01-01-96.]

b) General Rule. A beneficial owner generally must apply for distribution by the voice or other electronic response system or other media authorized by CG&E 90 days in advance of disbursement of a distribution from the plan.

[This sub-section becomes effective on 01-01-96.]

c) Timing A Distribution. A beneficial owner must file an application for distribution with the Committee at least 15 business days before disbursement of a distribution from the plan.

[This sub-section should be deleted effective 01-01-96.]

d) Timing A Distribution. A beneficial owner must apply for distribution with the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E at least 15 business days before disbursement of a distribution from the plan.

[This sub-section becomes effective on 01-01-96.]

e) Required Elections. If a beneficial owner fails to make a required election to immediately receive distribution or to delay distribution, the plan may process an election to delay distribution filed by the Committee on behalf of the beneficial owner.

[This sub-section should be deleted effective 01-01-96.]

f) Required Elections. If a beneficial owner fails to make a required election to immediately receive distribution or to delay distribution, the plan may process an election to delay distribution as requested by the Benefits Manager on behalf of the beneficial owner.

[This sub-section becomes effective on 01-01-96.]

g) Mandatory Distributions. Any mandatory distribution required by the plan or the Internal Revenue Code may be made under the authority of an application for distribution filed by the Committee18 on behalf of the beneficial owner.
[This sub-section should be deleted effective 01-01-96.]

h) Mandatory Distributions. Any mandatory distribution required by the plan or the Internal Revenue Code may be made under the authority of a request for distribution made by the Benefits Manager19 on behalf of the beneficial owner.

[This sub-section becomes effective on 01-01-96.]

8.9 Timing of Distributions. The Committee will disburse distributions as a lump sum or in 5 annual installments.

a) Lump Sum Distributions. The trustee shall mail a lump sum payment to the beneficial owner approximately 15 business days following the day on which the application for distribution was filed with the Committee.

b) Five Annual Installments. A participant whose employment is terminated by reason of retirement under the terms of the RIP, disability, or permanent layoff for lack of work, may irrevocably elect to receive his or her account in five annual installments.20 Installment distributions are not available to beneficiaries or to participants terminated for other reasons.21

c) Timing of Installments. The eligible participant may elect to receive the first installment as soon as practical after the end of the month that the event occurs, or as soon as practical after the end of the year in which the event occurs. The trustee shall disburse the first installment no later than March 122 following the calendar year when the event occurred which triggered the distribution.

1) Amount of Each Installment. Those who have elected 5 annual installments shall receive their accounts as follows: 1/5 of the account in the first installment, 1/4 of the account at the time of the second installment, 1/3 of the account at the time of the third installment, 1/2 of the account at the time of the fourth installment, and the balance of the account at the time of the last installment.

2) Subsequent Installments. The payment date for each subsequent installment shall be as soon as is practicable within each plan year following the anniversary date of the initial payment. The balance of the account shall be revalued in accordance with 8.4 and any CINergy stock will continue to be voted by such a participant in accordance with 5.14. If a participant dies prior to receiving all installments, the remainder in his or her account will be paid in a lump sum to the beneficiary or, if none, in accordance with 8.14.

[This section should be deleted effective 01-01-96.]

8.10 Timing of Distributions. The Benefits Manager will disburse distributions as a lump sum or in 5 annual installments.

a) Lump Sum Distributions. The trustee shall mail a lump sum payment to the beneficial owner approximately 15 business days following the day on which the Benefits Manager was informed of the participant's request for distribution through the voice or other electronic response system or other media authorized by CG&E.

b) Five Annual Installments. A participant whose employment is terminated by reason of retirement under the terms of the RIP, disability, or permanent layoff for lack of work, may irrevocably elect to receive his or her account in five annual installments.23 Installment distributions are not available to beneficiaries or to participants terminated for other reasons.24

c) Timing of Installments. The eligible participant may elect to receive the first installment as soon as practical after the end of the month that the event occurs, or as soon as practical after the end of the year in which the event occurs. The trustee shall disburse the first installment no later than March 125 following the calendar year when the event occurred which triggered the distribution.

1) Amount of Each Installment. Those who have elected 5 annual installments shall receive their accounts as follows: 1/5 of the account in the first installment, 1/4 of the account at the time of the second installment, 1/3 of the account at the time of the third installment, 1/2 of the account at the time of the fourth installment, and the balance of the account at the time of the last installment.

2) Subsequent Installments. The payment date for each subsequent installment shall be as soon as is practicable within each plan year following the anniversary date of the initial payment. The balance of the account shall be revalued in accordance with 8.4 and any CINergy stock will continue to be voted by such a participant in accordance with 5.14. If a participant dies prior to receiving all installments, the remainder in his or her account will be paid in a lump sum to the beneficiary or, if none, in accordance with 8.14.

[This section becomes effective on 01-01-96.]

8.11 In Kind Distribution.

a) General Rule. Distributions generally consist of a CINergy stock certificate reflecting the value of the units of the CINergy stock fund in the account as of the distribution valuation date, plus cash from the sale of all other plan investments and incidental cash from the CINergy stock fund.

b) Company Stock Fund. To the extent that a beneficial owner's account includes units of the CINergy stock fund as of the distribution valuation date, s/he may elect to receive cash in lieu of a CINergy stock certificate.26

c) Fidelity Funds. The beneficial owner can direct the trustee to transfer his or her Fidelity Equity Income, Intermediate Bond and/or Magellan funds, upon distribution, to an individual account27 at Fidelity by submitting an application to the Committee.

[This sub-section should be deleted effective 01-01-96.]

d) Fidelity Funds. The beneficial owner can direct the trustee to transfer his or her Fidelity Equity Income, Intermediate Bond and/or Magellan funds, upon distribution, to an individual account28 at Fidelity by informing the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E.

[This sub-section becomes effective on 01-01-96.]

8.12 Direct Rollovers to Other Plans.

a) Election.

1) Who May Elect. Participants, terminated participants, their beneficiaries who are surviving spouses, and alternate payees who are former spouses of participants, may elect to have any portion of an eligible rollover distribution paid directly to their designated eligible retirement plan.29 Those making this election must be entitled to distribution or withdrawal of their plan assets, under the terms of this plan. The only plan assets subject to direct rollover are those acquired by reason of being a participant, a surviving spouse or a former spouse alternate payee.

2) Manner of Election. This election must be made at the time and in the manner prescribed by the Committee.30

b) Distributions Eligible for Rollover. An eligible rollover distribution is any distribution or withdrawal, except as stated in 8.12c) below, of all or any portion of the account of one of the persons listed in 8.12a) above.

c) Distributions Not Eligible for Rollover.

1) Portions of Mandatory Distributions. The portion of a mandatory distribution under 8.6 which is required to be distributed under IRC 401(a)(9) is not eligible for direct rollover.

[This sub-section should be deleted effective 01-01-97 for all participants, except 5% owners.]

2) Portions of Mandatory Distributions. The portion of a mandatory distribution under 8.7 which is required to be distributed under IRC 401(a)(9) is not eligible for direct rollover.

[This sub-section becomes effective on 01-01-97 for all participants, except 5% owners.]

3) Portions Excluded from Gross Income. The portion of any distribution which is not able to be included in the gross income of the beneficial owner is not eligible for direct rollover. For this purpose, gross income can include any unrealized appreciation of CINergy stock.31

4) Optional Contributions. Optional contributions are not eligible for direct rollover. However, interest and earnings attributable to optional contributions are eligible for direct rollover.

5) Deemed Distributions. A deemed distribution which has occurred because of a participant's failure to make one or more loan payments is not eligible for direct rollover.32

6) Loan Offsets. The portion of a distribution due to termination of the participant's employment with CG&E which offsets the unpaid portion of a plan loan will not be eligible for direct rollover.33

7) Periodic Distributions.34 Any distribution that is one of a series of substantially equal periodic payments, made at least annually, to be paid over the life of the beneficial owner or the joint lives of the beneficial owner and his or her designated beneficiary, or to be paid for a specified period of at least 10 years is not eligible for direct rollover.

8) Other. Returns of elective deferrals and corrective distributions of excess contributions and attributable net income are not eligible for direct rollover.35 Returns of deferrals in excess of the IRC 402(g) limits or in excess of the 415 limits are not eligible for direct rollover.

d) Eligible Retirement Plan. The definition of an eligible retirement plan for the purpose of accepting direct rollovers varies with the class of the person electing the direct rollover. The eligible retirement plan must be willing to accept the rollover distribution.36

1) Participants and Former Spouse Alternate Payees. Participants and former spouse alternate payees may direct rollovers to an individual retirement account37, an individual retirement annuity38, an annuity plan39 or a qualified trust.40

2) Surviving Spouses. Surviving spouses may direct rollovers only to an individual retirement account, or an individual retirement annuity.41

8.13 Settlement Statement. The trustee shall furnish a settlement statement42 with every distribution.43

8.14 Distribution Upon Death of a Participant or Beneficiary. In the event that the participant dies with assets remaining in the plan, the assets will be distributed to the participant's beneficiary. If there is no beneficiary, the assets will be distributed to the participant's surviving spouse. If the participant has no beneficiary or surviving spouse at the time of the participant's death, assets will be distributed to the participant's estate. If the beneficiary of a deceased participant dies while assets remain in the plan, the assets will be distributed to the estate of the beneficiary. In the event an alternate payee dies with assets remaining in the plan, the assets will be paid to the estate of the alternate payee. In each case, the assets will be distributed no later than the close of the plan year which contains the fifth anniversary of the participant's death. If the spouse of a participant or terminated participant is the beneficiary of the plan account, the spouse may delay distribution until the end of the calendar year in which the participant or terminated participant would have attained age 65. See
Section 8.5e) and 8.5f).44

8.15 Plan Hierchary for Distributions. Any sale of a participant's plan assets, which is necessary to generate cash for the purpose of disbursing cash in the amount of after-tax contributions, will be made using the plan hierarchy.

WITHDRAWALS DURING EMPLOYMENT

ARTICLE 9: WITHDRAWALS DURING EMPLOYMENT

9.1 Withdrawal.1 A withdrawal is disbursement of any part of the vested assets of a participant to that participant. Distribution installments are not withdrawals. Only participants are eligible to take withdrawals. All other beneficial owners are eligible only for distributions.

9.2 Withdrawals from Company-Matched Sub-Accounts. A participant may not withdraw from the company-matched sub-account during the period s/he is employed2 by CG&E.

9.3 Withdrawals from Optional Sub-Accounts. Participants may withdraw from their optional sub-accounts plan by filing an application for withdrawal3 with the Committee. The trustee will disburse the withdrawal directly to the participant,4 or to another plan if the participant elects and the withdrawal qualifies for direct rollover. See 8.12.

[This section should be deleted effective 01-01-96.]

9.4 Withdrawals from Optional Sub-Accounts. Participants may withdraw from their optional sub-accounts by the voice or other electronic response system or other media authorized by CG&E. The trustee will disburse the withdrawal directly to the participant5, or to another plan if the participant elects and the withdrawal qualifies for direct rollover. See 8.12.

[This section becomes effective on 01-01-96.]

9.5 Amount Available for Optional Withdrawal. Participants may withdraw either a specific whole dollar amount or the entire balance from their optional sub-accounts. If the participant withdraws less than 100% of his or her optional sub-account balance and requests a second withdrawal within a 12 month period, s/he will be required to withdraw the remaining balance.

9.6 Plan Hierarchy For Withdrawals. If the portion of the participant's account which is to be withdrawn is invested in more than one fund, the withdrawal amount will be deducted from the investment funds using the plan hierarchy.6 Each fund will be exhausted before the withdrawal draws upon the next fund in the hierarchy.

9.7 Form of Withdrawals. Withdrawals generally consist of a CINergy stock certificate for the units of the CINergy stock fund in the sub-account as of the distribution valuation date, plus cash from the sale of all other plan investments and incidental cash from the CINergy stock fund.

9.8 Cash In Lieu of Stock. A participant may elect to receive cash in lieu of a CINergy stock certificate for his or her assets in the company stock fund.7

9.9 Hardship. A hardship is an immediate and heavy financial need of a participant which cannot be met except through a withdrawal from the participant's deferred compensation sub-account in the plan.

9.10 Hardship Withdrawals. A participant may apply to the Committee for a withdrawal of all or a portion of his or her deferred compensation sub-account. The Committee shall not grant the request unless it qualifies under the criteria listed in 9.13.

[This section should be deleted effective 01-01-96.]

9.11 Hardship Withdrawals. A participant may apply to the Benefits Manager for a withdrawal of all or a portion of his or her deferred compensation sub-account. The Benefits Manager shall not grant the request unless it qualifies under the criteria listed in 9.14.

[This section becomes effective on 01-01-96.]

9.12 Amount Available for Hardship Withdrawals. The amount available for a hardship withdrawal includes all deferred compensation contributions made in years prior to 1989, including any earnings and losses thereon, and de- ferred compensation contributions made on or after 01-01-89, excluding earnings and losses thereon. Hardship withdrawals are limited to the actual amount in the participant's account.

9.13 Criteria for Granting a Hardship Withdrawal.8 The Committee shall use the following criteria9 when considering an application for a hardship withdrawal:

a) Immediate and Heavy Financial Need.10 The request must be to satisfy an immediate and heavy financial need for one of the following reasons:

1) Medical Expenses. Unreimbursed medical expenses, as described in IRC 213(d), incurred by the participant, the participant's spouse, or any dependents of the participant, as defined in IRC 152, or necessary for those persons to obtain medical care as described in IRC 213(d).

2) Purchase of a Principal Residence. Purchase, excluding mortgage payments, of a principal residence of the participant.

3) Tuition. Payment of tuition, related educational fees, and room and board for the next 12 months11 of post-secondary education for the participant, the participant's spouse, children, or dependents.

4) Prevention of Foreclosure. Prevention of eviction from, or foreclosure of the mortgage upon, the principal residence of the participant.

5) Funeral Expenses. Payment of the funeral expenses of the participant's spouse, children or dependents.

6) Other Expenses. Any other expense identified by the Internal Revenue Commissioner12 as an immediate and heavy financial need.

b) Amount Necessary to Satisfy the Need. The hardship withdrawal is limited to the amount necessary to satisfy the need, plus any amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the hardship withdrawal. The participant must submit reasonable documentation of the existence and amount of the need. There must be no other resources reasonably available to satisfy the need. The participant must first take all available non-hardship distributions/loans from all of CG&E's other plans: RIP, DCIP, MRP13. This includes a withdrawal of available funds from the optional sub-account. If a plan loan is either unavailable to the participant, or the available loan is insufficient to meet the need of a participant, and the other criteria of this section are met, the Committee may grant a hardship withdrawal.

[This section should be deleted effective 01-01-96.]

9.14 Criteria for Granting a Hardship Withdrawal.14 The Benefits Manager shall use the following criteria15 when considering a request for a hardship withdrawal:

a) Immediate and Heavy Financial Need.16 The request must be to satisfy an immediate and heavy financial need for one of the following reasons:

1) Medical Expenses. Unreimbursed medical expenses, as described in IRC 213(d), incurred by the participant, the participant's spouse, or any dependents of the participant, as defined in IRC 152, or necessary for those persons to obtain medical care as described in IRC 213(d).

2) Purchase of a Principal Residence. Purchase, excluding mortgage payments, of a principal residence of the participant.

3) Tuition. Payment of tuition, related educational fees, and room and board for the next 12 months17 of post-secondary education for the participant, the participant's spouse, children, or dependents.

4) Prevention of Foreclosure. Prevention of eviction from, or foreclosure of the mortgage upon, the principal residence of the participant.

5) Funeral Expenses. Payment of the funeral expenses of the participant's spouse, children or dependents.

6) Other Expenses. Any other expense identified by the Internal Revenue Commissioner18 as an immediate and heavy financial need.

b) Amount Necessary to Satisfy the Need. The hardship withdrawal is limited to the amount necessary to satisfy the need, plus any amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the hardship withdrawal. The participant must submit reasonable documentation of the existence and amount of the need. There must be no other resources reasonably available to satisfy the need. The participant must first take all available non-hardship distributions/loans from all of CG&E's other plans: RIP, SIP, MRP19. This includes a withdrawal of available funds from the optional sub-account. If a plan loan is either unavailable to the participant, or the available loan is insufficient to meet the need of a participant, and the other criteria of this section are met, the Benefits Manager may grant a hardship withdrawal.

[This section becomes effective on 01-01-96.]

9.15 Required Documentation for Hardship Withdrawals. The participant must file the following documents with the Committee20 for consideration of a hardship withdrawal:

a) Application. The participant must complete an application for hardship withdrawal, including the spouse's signature acknowledging notice of the application, if the participant is married.

b) Documentation. The participant must attach photocopies of all papers which document the existence and the amount of the need.

c) Written Explanation. The participant must provide a clear and concise explanation, in his or her own words, of how the funds are to be used.

d) Quarterly Statement. The Committee21 will provide a copy of the participant's most recent quarterly statement indicating the amount of funds that are available to the participant.

e) Personal Financial Statement. A personal financial statement of the participant's assets and liabilities, including the spouse's notarized signature, if the participant is married.

[This section should be deleted effective 01-01-96.]

9.16 Required Substantiation for Hardship Withdrawals. The participant must provide the following information to the Benefits Manager for consideration of a hardship withdrawal:

a) Request. The participant must make a request to the Benefits Manager for a hardship withdrawal through the voice or other electronic response system or other media authorized by CG&E. If the participant is married, the participant must furnish the Benefits Manager with the signature of the participant's spouse acknowledging notice by the spouse of the request.

b) Documentation. The participant must furnish photocopies of all papers which document the existence and the amount of the need.

c) Explanation. The participant must provide a clear and concise explanation, in his or her own words, of how the funds are to be used through the voice or other electronic response system or other media authorized by CG&E.

d) Quarterly Statement. The Benefits Manager will provide a copy of the participant's most recent quarterly statement indicating the amount of funds that are available to the participant.

e) Personal Financial Statement. A personal financial statement of the participant's assets and liabilities, including the spouse's notarized signature, if the participant is married.

[This section becomes effective on 01-01-96.]

9.17 Disbursement of Hardship Withdrawals.22 The trustee will disburse23 a hardship withdrawal which has been accepted by the Committee directly to the participant.

[This section should be deleted effective 01-01-96.]

9.18 Disbursement of Hardship Withdrawals.24 The trustee will disburse25 a hardship withdrawal which has been accepted by the Benefits Manager directly to the participant.

[This section becomes effective on 01-01-96.]

9.19 Settlement Statement. The trustee shall furnish a settlement statement26 with every distribution.27

9.20 Suspension Following Withdrawal.

a) Optional Sub-Account Withdrawal. Participants who have withdrawn from their optional sub-accounts will not be permitted to make optional contributions to the plan until at least 12 months from the date of disbursement of the withdrawal.

b) Hardship Withdrawal. A participant who is granted a hardship withdrawal shall not be permitted to make deferred compensation or optional contributions28 to the plan until at least 12 months from the date of the hardship withdrawal disbursement. The IRC 402(g) limit on a participant's deferred compensation contributions for the taxable year of the participant following the taxable year in which the hardship withdrawal occurred shall be reduced by the amount of the participant's deferred compensation contributions during the taxable year in which the hardship withdrawal occurred.

LOANS

ARTICLE 10: LOANS

10.1 Eligibility for Loans1. Participants currently receiving pay from CG&E may apply for and receive a loan from their deferred compensation sub-accounts. No other beneficial owners are eligible for loans. Specifically, participants on leaves of absence,2 terminated participants, beneficiaries and alternate payees are not eligible to receive loans.3

10.2 Loan Requests. Participants may request loans through the current process established by the Committee.4 The participant must complete and return the promissory note to the trustee. Upon receipt of the completed promissory note, the trustee will send a check for the loan amount to the participant.

[This section should be deleted effective 01-01-96.]

10.3 Loan Requests. Participants may request loans through the current process established by the Committee.5 The participant must execute the promissory note. The promissory note, at the sole discretion of the Committee, may be provided on the back of the check which is issued to the participant for the loan amount. The promissory note will be properly executed and legally enforceable once the participant endorses the back of the check. The participant's endorsement evidences that s/he agrees to the repayment terms.

[This section becomes effective on 01-01-96.]

10.4 Limitation of Two Loans at any Given Time. A participant may apply for and obtain a second loan while the first loan remains outstanding. The second loan will be granted at the then prevailing rate of interest and for an entirely separate term of five years or less. The outstanding balance in the participant's loan account will reflect the total of the two loans, although the loans will remain separate and distinct on the trustee's records. The dollar limitation imposed by the plan for one loan will apply to the total outstanding balance for two loans for any given participant. A participant is limited to two outstanding loans at any given time.

10.5 Granting Loans. Loans will be granted from the plan for any reason.

10.6 Loan Amount.6

a) 50% of Vested Account Limited by Deferred Compensation Sub-Account. The loaned amount cannot exceed the lesser of $50,000 or 50% of the balance of the participant's vested accrued benefit (company-matched, deferred compensation and optional sub-accounts) and will be further limited by the actual amount in the deferred compensation contribution sub-account on the distribution valuation date for the loan.

[This sub-section should be deleted effective 01-01-96.]

b) 50% of Vested Account Limited by Deferred Compensation Sub-Account and Rollover Sub-Account. The loaned amount cannot exceed the lesser of $50,000 or 50% of the balance of the participant's vested accrued benefit (company-matched, deferred compensation, optional and rollover sub-accounts) and will be further limited by the actual amount in the deferred compensation contribution sub-account and rollover sub-account on the distribution valuation date for the loan.

[This sub-section becomes effective on 01-01-96.]

c) Reduction of $50,000 Maximum.7 The $50,000 maximum loan amount is reduced by the excess (if any) of the highest outstanding balance of loans to that participant during the one-year period ending on the day before the date the loan is made, over the outstanding balances of loans to that participant made under all qualified plans sponsored by CG&E on the date the loan is made.
10.7 Denial of Loans. The trustee shall not loan funds to a participant if granting the loan would result in a violation of any federal or state8 statute or regulation regarding loans.

10.8 Plan Hierarchy For Loans. If the participant's deferred compensation sub-account is invested in more than one fund, the loan amount will be deducted from the investments funds using the plan hierarchy.9 Each fund will be exhausted before the loan draws upon the next fund in the hierarchy.

[This section should be deleted effective 01-01-96.]

10.9 Pro-rata Liquidation for Loans. The trustee shall liquidate the participant's deferred compensation sub-account investments and rollover sub-account investments in the same proportion that each investment bears to the entire deferred compensation contribution sub-account and rollover sub-account except for the loan fund. The trustee will disburse the cash produced to the participant minus any administrative fee.

[This section becomes effective on 01-01-96.]

10.10 Valuing an Account For A Loan. The trustee shall use the value of the account as of the opening of the business day on which it writes the check for the loan to the participant to determine the amount available for the loan.

10.11 Collateral for Loans.

a) Assignment and Restriction of Withdrawals. The participant shall assign 50% of his or her vested accrued account, and shall sign a promissory note for the amount of the loan, including interest, payable to the order of the trustee. No collateral other than the participant's interest in the plan will be accepted as security for a plan loan. If a participant's optional sub-account becomes collateral for his or her loan, s/he will only be able to withdraw from the optional sub-account the difference between its total value and the portion of the balance of the optional sub-account necessary as collateral for the unpaid loan balance.

b) Effect of a DRO Upon Loan Collateral. If there are insufficient assets10 in the deferred compensation sub-account of a participant to satisfy the terms of a DRO because of one or more outstanding loans, the trustee will first take additional assets from the participant's optional sub-account, second from the company-matched sub-account, and finally from the loan account portion of the deferred compensation sub- account, in order to satisfy the DRO.

[This sub-section should be deleted effective 01-01-96.]

c) Effect of a DRO Upon Loan Collateral. If there are insufficient assets11 in the deferred compensation sub-account, or next in the rollover sub-account, if any, of a participant to satisfy the terms of a DRO because of one or more outstanding loans, the trustee will first take additional assets from the participant's optional sub-account, second from the company-matched sub-account, third, from the loan account portion of the deferred compensation sub- account, and finally from the loan account portion of the rollover sub-account, if any, in order to satisfy the DRO.

[This sub-section becomes effective on 01-01-96.]

10.12 Interest Rate for Loans. The rate of interest charged on loans will be 1/2 of 1%12 above the prime rate charged by the trustee in its banking business on the first business day of the month during which the application is received by the trustee.13

[This section should be deleted effective 01-01-96.]

10.13 Interest Rate for Loans. The rate of interest charged on loans will be a reasonable rate based on commercial standards in the lending industry.

[This section becomes effective on 01-01-96.]

10.14 Payment of Loans. A participant who applies for a loan must authorize CG&E to deduct loan payments from his or her pay.14 CG&E will remit loan deductions to the trustee concurrent with disbursements of the payroll.

10.15 Minimum and Maximum Term of Loans. The participant shall specify the number of months for payment of the loan, with 12 months being the minimum term, and 60 months the maximum term.15

[This section should be deleted effective 01-01-96.]

10.16 Minimum and Maximum Term of Loans. The participant shall specify the number of months for payment of the loan, with 12 months being the minimum term, and 54 months the maximum term.16

[This section becomes effective on 01-01-96.]

10.17 Investment of Loan Payments. The trustee will direct loan payments to the investment funds according to the participant's most recent allocation of future contributions form that is on file.

[This section should be deleted effective 01-01-96.]

10.18 Investment of Loan Payments. The trustee will direct loan payments to the investment funds according to the most recently provided directions given by the participant through the voice or other electronic response system or other media authorized by CG&E.

[This section becomes effective on 01-01-96.]

10.19 Outstanding Loans for Terminated Participants. Upon termination of employment, any outstanding loan of a terminated participant is due immediately or the outstanding amount of the loan will be in default pursuant to 10.22 or 10.23 and reclassified as a partial distribution.

[This section becomes effective on 01-01-96.]

10.20 Outstanding Loans for Participants on Military Leave. Subject to the Committee's approval of such a policy, loan repayments will be suspended under this plan as permitted under IRC 414(u)(4).

10.21 Prepayment of Loans. A participant may pay the remaining loan balance at any time without any pre-payment penalties by check or money order made payable to the trustee. The prepayment should be sent or delivered to the Committee.17

10.22 Loan Default. A participant's loan will go into default upon failure to make one or more payments during a calendar year, violation of any term of the promissory note signed by the participant, or upon declaration of the Committee at its discretion18 under the terms of the promissory note.

[This section should be deleted effective .]

10.23 Loan Default. A participant's loan will go into default upon failure to timely make any payment during a calendar year or violation of any term of the promissory note signed by the participant.19

[This section becomes effective on __________.]

10.24 Tax Effects of Loan Default. The participant shall pay the tax incurred for any events which arise out of any loan transaction with the plan or any failure20 to make payments under plan and promissory note requirements.

10.25 Curing Loan Default. A participant who has missed one or more loan payments during a plan year may make those payments up by direct payment to the Committee with a check or money order made payable to the order of the trustee in the amount of the payment, plus interest, on or before the final valuation date of the plan year to cure the default without tax or recharacterization consequences.21

[This section should be deleted effective ____________.]

10.26 Curing Loan Default. A participant who misses any loan payment may make up the missed payment by direct payment to the Committee with a check or money order made payable to the order of the trustee in the amount of the payment, plus interest, on or before the last day of the calendar quarter following the calendar quarter in which the required payment was due to cure the default without tax consequences.22

[This section becomes effective on __________.]

10.27 Reamortization of Loans. A participant may reamortize a loan so long as the total time for repayment of the loan does not exceed 60 months. Loan reamortizations will be under the plan terms and conditions in effect at the time of the reamortization.

[This section should be deleted effective 01-01-96.]

10.28 Reamortization of Loans. A participant who is on a leave of absence (other than military leave) for not longer than one year may reamortize a loan so long as the total time for repayment of the loan does not exceed 54 months and the loan payments due after the leave expires (or, if earlier, after the first year of the leave) are not less than those required under the original terms of the loan. Loan reamortizations will be under the plan terms and conditions in effect at the time of the reamortization.23

[This section becomes effective on 01-01-96.]

10.29 Recharacterization of Sub-accounts24. Effective as of the final valuation date of each plan year, the trustee shall recharacterize all or any portion of the optional and/or company-matched sub-accounts of a participant who has failed to make any loan payment(s) during the year, if those missed payments are still outstanding at the final valuation date. The amount recharacterized shall be limited to the amount of the missed payments. The amount recharacterized will be credited to the participant's deferred compensation sub-account as a loan payment. The trustee will notify the participant of the taxable amount of the distribution. The Committee does not waive its ability to determine that a loan is in default, or to foreclose upon a loan, by exercising its right to recharacterize the participant's sub-accounts under this provision.

[This section should be deleted effective ___________.]

10.30 Loan Fund Administration

a) Single Loans. The promissory notes securing payment of loans from plan assets will be reflected on participants' quarterly statements under the loan fund assets. When participants receive plan loans, their investment allocations will reflect credits to their loan funds in an amount equal to the principal amount of the loan. Their other sub-accounts will reflect a total reduction in value equivalent to the principal amount of the loan. As participants make loan payments, the value of the participants' loan funds will be reduced by the amount of the payments attributable to the principal of the loans. Principal and interest, as they are paid, will be allocated to investments per the most recent directions given by the participant. Once the loan is completely repaid, the participant's quarterly statement will reflect no investment in the loan fund.

b) Multiple Loans. The trustee shall maintain separate records of principal, interest, and payment schedule for each loan that a participant has outstanding at any given time. The participant's statement will not reflect each separate loan. The loan fund segment of the quarterly statements distributed to participants will reflect the total of all current loans outstanding to the participant.

c) Loans and DROs. The trustee will allocate as much of the participant's loan fund to the alternate payee as is necessary to satisfy the terms of the DRO if there are insufficient other assets in the participant's account due to the amount of the participant's assets on loan. To the extent possible, loans extended prior to the Committee's receipt of the DRO will be allocated to the alternate payee. However, loans extended after receipt of the DRO will be allocated, if necessary to meet the terms of the DRO. The participant will remain solely responsible for loan payments, even if some portion of a loan or loans has been allocated to an alternate payee to satisfy the terms of a DRO.

DOMESTIC RELATIONS ORDERS
AND ALTERNATE PAYEES

ARTICLE 11: DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES

11.1 Domestic Relations Order (DRO). A domestic relations order is any judgment, decree or order, made pursuant to a state domestic relations law, which provides that child support, alimony, maintenance payments or marital property allocation will be made from the plan assets of a participant. A domestic relations order is referred to as a DRO throughout the plan.

11.2 General Rule. The benefits due or to become due to any participant are subject to a domestic relations order accepted by the Committee.

11.3 Qualification and Acceptance of a DRO.

a) Initial Order. The DRO must meet the requirements of IRC 414(p) and use the sample DRO language that has been approved by the Committee1 to be considered as qualified and to be accepted by the plan. The Committee2 shall determine whether or not a DRO is qualified. A court order which contains language presuming that it is qualified shall not be binding upon the plan.

b) Amended Orders. A DRO which modifies the terms of a previously qualified DRO may be accepted by the Committee. The amended DRO must meet the qualifications of 11.3a) above, and must be filed with the Committee before any irrevocable action has been taken on execution of the initial DRO. Irrevocable actions include executed cash-outs and any transaction which the Committee decides is impossible or impractical to attempt to reverse.

11.4 Special Conditions Applicable to DROs.

a) Prohibition of Allocating Identical Assets Multiple Times. No DRO may allocate benefits which have been allocated by a previously qualified and accepted DRO. However, an amended DRO which is accepted by the plan may reallocate benefits previously allocated without violating this provision.

b) Applicable Plan(s). The nature of benefits allocated to an alternate payee will be determined in accord with the terms of the plan in effect on the date the DRO is entered onto the records of the issuing court.

11.5 Alternate Payee. An alternate payee is a participant's child, spouse, former spouse or other dependent who is designated to receive benefits under the plan by a DRO. The Committee may rely upon the determination of the court which issues the DRO that the designated alternate payee in the order is entitled, under the law of the appropriate state, to be so named.

11.6 Acknowledgment and Acceptance or Rejection of a DRO. As soon as practical after the Committee receives a DRO, it will send the participant and designated alternate payee an acknowledgment of receipt, notice of acceptance or rejection and a copy of the plan procedures for acceptance or rejection of DROs.3 The Committee will send a copy of the DRO and notice of acceptance or rejection to the trustee. The Committee shall accept or reject a DRO within 18 months of receiving it.

11.7 Division of Assets By the Trustee.

a) On Receipt of a DRO. The trustee shall freeze the account of the participant upon receiving notice from any plan agent that an Order purporting to be a DRO has been received. Participants with frozen accounts may not obtain loans or withdrawals from the plan, and may not reallocate among funds. Distributions on frozen accounts are subject to delay, pending acceptance of a DRO.

b) On Rejection of a DRO. If the order is rejected, the trustee shall keep the account of the participant frozen for a reasonable period of time, pending receipt of an amended DRO which is accepted by the Committee, or direction from the Committee that the participant's account may become active.

c) On Acceptance of a DRO. The trustee shall segregate the plan assets into two or more accounts as directed by the order as soon as it receives notification that an order is accepted. The trustee shall set up new accounts in the name of each alternate payee under the order.4 The assets in the sub-accounts of the alternate payees shall be allocated among the investment funds in the same proportions as allocated in the sub-accounts of the participant from which they originated.

d) Participant with Outstanding Loans. If a participant has one or more loans outstanding and insufficient liquid deferred compensation sub-account assets to satisfy the terms of an accepted DRO, the trustee shall avoid allocating loan investment assets if possible. The trustee shall first take the necessary additional assets from the optional sub-account until it is exhausted. Second, the trustee shall take the necessary additional assets from the company-matched sub-account until it is exhausted. Finally, the trustee shall allocate the remaining funds necessary to satisfy the DRO from the loan investment portion of the deferred sub-account. (See 10.11b)).

[This sub-section should be deleted effective 01-01-96.]

e) Participant with Outstanding Loans. If a participant has one or more loans outstanding and insufficient liquid deferred compensation sub-account assets, or next rollover sub-account assets, if any, to satisfy the terms of an accepted DRO, the trustee shall avoid allocating loan investment assets if possible. The trustee shall first take the necessary additional assets from the optional sub-account until it is exhausted. Second, the trustee shall take the necessary additional assets from the company-matched sub-account until it is exhausted. Third, the trustee shall take the necessary additional assets from the loan investment portion of the deferred sub-account. Finally, the trustee shall allocate the remaining funds necessary to satisfy the DRO from the loan investment portion of the rollover sub-account. (See 10.11c)).

[This sub-section becomes effective on 01-01-96.]

f) Denial of DRO within 18 Months. If within 18 months of the original receipt of a DRO it, or a successor DRO, is determined to be not qualified, and no amended DRO acceptable to the plan has been submitted to the Committee, the assets in the alternate payees' sub-accounts will be restored to the sub-accounts of the participant. The trustee shall restore the participant's account to active status.

11.8 Participatory Functions of Alternate Payees. Alternate payees may not withdraw from any sub-account, contribute to any sub-account, apply for loans, apply for hardship withdrawals, or elect an installment distribution. An alternate payee may not change his or her investment direction of sub-accounts, except in conjunction with a distribution. The rights of an alternate payee are limited to: receipt of a quarterly statement of his or her account, receipt of the account proceeds in accord with the terms of the DRO or the plan, a change in the allocation of past contributions in conjunction with a distribution5, the right to all claims procedures mandated by ERISA and the right to obtain copies of the plan document and summary plan description as mandated by ERISA. None of these rights under the plan will be in effect until the Committee certifies the pertinent DRO as qualified and so notifies the alternate payee.

11.9 Distribution of Assets Valued at $3,500 or Less. The Committee shall distribute any alternate payee's account assets valued at $3,500 or less at any valuation date. Upon the determination of the value of the account, the alternate payee must file an application for distribution. The Committee shall file an application for distribution on behalf of the alternate payee if s/he does not do so within 60 days of the determination of the value of the account pursuant to 8.5a)6. If insufficient cash assets are available to distribute because of loans allocated to the account of the alternate payee, this mandatory distribution will be delayed until there are sufficient cash assets in the account.

[This section should be deleted effective 01-01-96.]

11.10 Distribution of Assets Valued at $3,500 or Less. The Benefits Manager shall distribute any alternate payee's account assets valued at $3,500 or less at any valuation date. Upon the determination of the value of the account, the alternate payee must apply for distribution through the voice or other electronic response system or other media authorized by CG&E. The Benefits Manager shall apply for distribution on behalf of the alternate payee if s/he does not do so within 60 days of the determination of the value of the account pursuant to 8.5b)7. If insufficient cash assets are available to distribute because of loans allocated to the account of the alternate payee, this mandatory distribution will be delayed until there are sufficient cash assets in the account.

[This section becomes effective on 01-01-96.]

11.11 Distribution of Assets Valued Over $3,500. If an alternate payee's assets in the plan are valued over $3,500, s/he is not eligible to receive a lump sum distribution8 until the participant from whom the account was derived reaches age 50,9 terminates employment, or dies. An alternate payee who becomes eligible for a distribution must file an application for a lump sum distribution with the Committee no later than the 90 days before the end of the year in which the participant from whom the account was derived becomes age 65. If the alternate payee does not file the application for distribution in a timely manner, the Committee shall file the application on his or her behalf pursuant to 8.5c).

[This section should be deleted effective 01-01-96.]
11.12 Distribution of Assets Valued Over $3,500. If an alternate payee's assets in the plan are valued over $3,500, s/he is not eligible to receive a lump sum distribution10 until the participant from whom the account was derived reaches age 50,11 terminates employment, or dies. An alternate payee who becomes eligible for a distribution must apply for a lump sum distribution with the Benefits Manager through the voice or other electronic response system or other media authorized by CG&E no later than the 90 days before the end of the year in which the participant from whom the account was derived becomes age
65. If the alternate payee does not apply for distribution in a timely manner, the Benefits Manager shall apply on his or her behalf pursuant to 8.5d).

[This section becomes effective on 01-01-96.]

11.13 Window Cashouts for Alternate Payees.

a) Effective Date. Alternate payees who have been awarded benefits from this plan shall be given a one-time opportunity to receive a lump sum payment of all their plan interest, regardless of the amount of the present value of the benefit.12

b) Retroactivity of Provision. Alternate payees who had been awarded plan benefits prior to the effective date of this provision (April 1, 1991) shall also be given this one-time opportunity to receive their total plan benefit.

c) Notification to Alternate Payees. Notification to the alternate payee of this offer shall allow a minimum of 30 days and a maximum of 90 days to make the irrevocable election to receive the lump sum benefit.

d) Timing of Notification. The Committee shall notify the alternate payee of the availability of the window cashout as soon as practical after the assets have been allocated to the account of the alternate payee. Notice of the window distribution shall be sent to alternate payee with an account containing loan fund assets, but shall indicate the delay in availability. See 11.16.

e) Effect of Failure to Elect Window Cashout. The plan assets of an alternate payee who does not elect a cashout under this section shall be governed by the other plan rules regarding distributions to alternate payees.

11.14 Death. In the event of an alternate payee's death, his or her remaining plan assets will be distributed to his or her estate.

11.15 Alternate Payees' Responsibilities. Alternate payees must notify the Committee in writing of any address changes, or the name and address of a designated representative. The notification should be signed and dated by the alternate payee and should reference this plan, and the name of the participant from whom the account derives.

11.16 Limitation on Distribution to Alternate Payees. An alternate payee may not receive any mandatory or elective distribution until the alternate payee's account no longer includes loan fund assets,13 unless the mandatory distribution is required by the IRC or ERISA. An alternate payee may not receive any elective distribution until all assets allocated to the account of the alternate payee have become vested.

FIDUCIARIES:
AUTHORITY & RESPONSIBILITY

ARTICLE 12: FIDUCIARIES: AUTHORITY & RESPONSIBILITY

12.1 Fiduciary. Any person who exercises any discretionary authority or discretionary control respecting management or administration of the plan or the trust pursuant to the provisions of ERISA.

12.2 Fiduciaries. The following are named as fiduciaries:

a) the members of the Committee, and

b) the trustee.

12.3 Trustee.

a) Appointment. The board of directors shall appoint a trustee for the plan. All assets of the plan shall be held for use in accordance with the plan in providing the benefits payable under the plan and for such investment expenses as may properly be incurred by the trustee.

b) Amendment. The trust agreement may be amended and the trustee changed in the manner provided in the trust agreement.

c) Responsibility. The responsibility for the reten- tion of the trust shall lie with the trustee and not with the Committee.

d) Voting. The trustee shall vote the shares of CINergy stock credited to the accounts of beneficial owners in accordance with the instructions given by the beneficial owner. If the instructions are not received by the trustee by the date it has designated prior to any annual or special meeting of shareholders of CINergy, the trustee shall vote the uninstructed shares at its discretion. The trustee shall also vote at its discretion the shares of CINergy stock held in the company stock fund that have not been allocated to participants' accounts as of the record date of any annual or special meeting of shareholders of CINergy.

12.4 Establishment of the Committee. The Committee is the plan administrator, commonly referred to as the SIP Committee other than in this plan document. The Committee shall consist of not more than five nor less than three members, who shall be appointed by, and serve at the pleasure of, the board of directors. Members of the Committee may resign by delivering written resignation to the board of directors. Resignations shall become effective at delivery or at any later date specified within the written statement.

12.5 Organization of the Committee. The Committee shall elect a chairperson from their number, and a secretary and such other officers as the Committee may designate, who may, but need not, be members of the Committee, to serve at the pleasure of the Committee. No member of the Committee who is also an employee shall receive any compensation for services as such member.

12.6 Powers of the Committee. The powers of the Committee shall include, but not be limited to, the following:

a) Appoint Committees. The Committee may appoint committees with any powers it deems necessary, including an executive committee to exercise all powers of the Committee between meetings of the Committee.1

b) Set Meetings. The Committee may determine the times and places for holding meetings of the Committee, and the notice to be given of the meetings.

c) Establish a Quorum. The Committee shall determine the number of members of the Committee necessary to constitute a quorum for the transaction of business. A quorum must be at least a majority of the committee members.
d) Engage Assistants. The Committee may engage agents and assistants, counsel, clerical, medical, vocational, and accounting services as required to carry out the provisions of the plan.

e) Establish an Agent. The Committee may authorize one or more of their members or any employee as its agent to make any payment, or to execute or deliver any instrument on behalf of the Committee or to perform any other function of the Committee.

[This sub-section should be deleted effective 01-01-96.]

f) Establish an Agent. The Committee may authorize one or more of their members or any employee as its agent to make any payment, or to execute or deliver any instrument on behalf of the Committee or to perform any other function of the Committee. The Benefits Manager and the General Manager of Human Resources Services shall serve as agents of the Committee with respect to the duties assigned to these persons under the plan.

[This sub-section becomes effective on 01-01-96.]

g) Select Investment Funds. The Committee shall establish, and change as appropriate, an overall plan for providing a diversified group of investments for the trust assets. The Committee shall also select, and change as appropriate, the various investment funds.

h) Litigate on Behalf of the Plan. The Committee shall commence or defend litigation on behalf of the plan and represent the plan in all such proceedings before any court or other tribunal.

i) Interpret the Plan. The Committee shall interpret the plan, resolve any ambiguities in the plan and establish provisions for any circumstances not provided for in the plan, in a manner fair to plan participants in similar circumstances and consistent with other plan provisions.

j) Determine Eligibility for Benefits. The Committee shall determine eligibility for benefits under the plan, including claims to determine a participant's rights to benefits under any former plan provision.

[This sub-section should be deleted effective 01-01-96.]

k) Determine Eligibility for Benefits. The Benefits Manager, the General Manager of Human Resources Services and the Committee shall determine eligibility for benefits under the plan, including claims to determine a participant's rights to benefits under any former plan provision.

[This sub-section becomes effective on 01-01-96.]

l) Approve or Deny Requests for Hardship Withdrawals. The Committee shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan.

[This sub-section should be deleted effective 10-17-95.]

m) Approve or Deny Requests for Hardship Withdrawals. The Senior Manager of Human Resource Strategy shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan.

[This sub-section becomes effective on 10-17-95 and should be deleted effective 01-01-96.]

n) Approve or Deny Requests for Hardship Withdrawals. The Benefits Manager shall approve or deny requests for hardship withdrawals, subject to the availability of monies, under the provisions of the plan. If a request for a hardship withdrawal is denied or a participant does not receive a response within 30 days from the day the request was made to the Benefits Manager, then the participant may make a request to the General Manager of Human Resources Services for a hardship withdrawal. If a participant's request is denied by the General Manager of Human Resources Services, or a participant does not receive a response within 60 days from the day the request was made to the General Manager of Human Resources Services, then the participant may petition the Committee to receive a hardship withdrawal. The Committee's decision as to a participant's hardship withdrawal request shall be final. See 13.3.

[This sub-section becomes effective on 01-01-96.]

o) Accept or Reject DROs2. The Committee shall determine if a DRO which directs allocation of plan benefits to one or more alternate payees is qualified.3

p) Adopt Procedures. The Committee may establish rules, regulations and procedures4 necessary for the administration of the plan and the transaction of its business.

q) Amend the Plan. The Committee may adopt any amendment to ensure the continued qualification of the plan and trust under IRC 401(a) and 501(a), to comply with the provisions of any federal statute5 or regulation impacting pension plans, to enhance the delivery of benefits to participants and beneficia- ries, to ease plan administration, or to respond to the withdrawal of CG&E or any of its subsidiaries from the plan. No amendment shall substantially increase the cost of the plan without the consent of the board of directors.

r) Require Accounting. The Committee may request accounting and other information from the trustee.

s) Direct the Trustee. The Committee may direct the trustee, by written instrument, to take action consistent with plan administration and the trust agreement.

t) Approve or Deny Requests for Rollover Contributions. The Committee shall approve or deny requests for rollover contributions to the plan.

[This sub-section becomes effective on 01-01-96.]

12.7 Committee Actions. All resolutions or other actions taken by the Committee at any meeting shall be by the vote of a majority of the members of the Committee attending the meeting. Any decision or determination reduced to writing and signed by a majority of the members of the Committee shall be as fully effective as if it had been made by a majority vote at a meeting.

12.8 Accounts and Reports. The Committee shall maintain records of its actions and other data necessary for the administration of the plan. The Committee shall prepare and file any reports required by ERISA or the IRC. A copy of these reports shall be maintained in the office of the secretary of the Committee.

12.9 Action Taken in Good Faith. CG&E, the board of directors, officers and employees of CG&E shall be entitled to rely upon all information furnished by the accountant, trustee, and all opinions given by legal counsel. CG&E, the board of directors, officers and employees of CG&E, and any person acting as a fiduciary under the plan shall be fully protected from liability for any action taken, or permitted by them in good faith, in reliance upon any such information furnished by the accountant, trustee, or legal counsel.

12.10 Decisions Final and Binding. The decisions of the Committee on any matter within its authority shall be made in the sole discretion of the Committee and shall be final and binding on all parties, including, but not limited to, CG&E, participants, terminated participants, beneficiaries and alternate payees.

12.11 Insurance. CG&E may purchase insurance to cover liability of one or more persons who serve in a fiduciary capacity with regard to this plan.
12.12 Trust. The fund established under the trust agreement to which all deferred contributions, optional contributions, company-matched contributions, and company-matched stock incentive contributions are made and from which benefits are solely paid under the terms of the plan. Neither CG&E nor its subsidiaries shall be required to make direct payment of any benefit under the plan.

[This section should be deleted effective 01-01-96.]

12.13 Trust. The fund established under the trust agreement to which all deferred contributions, optional contributions, company-matched contributions, company- matched stock incentive contributions, and rollover contributions are made and from which benefits are solely paid under the terms of the plan. Neither CG&E nor its subsidiaries shall be required to make direct payment of any benefit under the plan.

[This section becomes effective on 01-01-96.]

12.14 Trust Agreement. The trust agreement is the contract between CG&E's board of directors and the trustee governing the duties and rights of the trustee with regard to plan funds. In accordance with the trust agreement, the trustee shall invest all deferred contributions, optional contributions, company-matched contributions, and company-matched stock incentive contributions, and earnings thereon, in the various investment funds.

[This section should be deleted effective 01-01-96.]

12.15 Trust Agreement. The trust agreement is the contract between CG&E's board of directors and the trustee governing the duties and rights of the trustee with regard to plan funds. In accordance with the trust agreement, the trustee shall invest all deferred contributions, optional contributions, company-matched contributions, company-matched stock incentive contributions, and rollover contributions, and earnings thereon, in the various investment funds.

[This section becomes effective on 01-01-96.]

12.16 Plan and Employer Identification Numbers. The three-digit plan identification number is 002. CG&E's employer identification number is 31-0240030. The Committee's employer identification number is 31-0910812.

ADMINISTRATIVE PROVISIONS

ARTICLE 13: ADMINISTRATIVE PROVISIONS

13.1 Filing Documents with the Plan.

a) Filing Date. Generally, documents addressed to the Committee or forms prepared for use by plan participants will be considered to be filed with the Committee or the plan on the day when they are received by any employee benefits coordinator within CG&E's Human Resources Department or the monthly payroll administrator.

b) DROs. On the day a DRO is received by CG&E's Legal Department, Human Resources Department, or the secretary of the Committee, it will be considered to be filed with the Committee.

c) Forms. Forms prepared under the aegis of the DCIP Committee or the Committee for the plan will be accepted for use under the plan unless the particular form is inappropriate for use under this plan or has been supplanted by a revised form.

13.2 Benefit Claims Process.

a) Written Request. Any person who claims a benefit under this plan must file the request in writing with the Committee.

b) Denial of a Claim. If the Committee denies the benefit in full or in part, it will send a detailed written reply to the claimant within 90 days after the claim was filed. The written reply will include the following:

1) the specific reason(s) for the denial, referencing any specific plan provisions upon which the decision depends; and

2) a request for any additional information available to the claimant in support of his or her position and an explanation, if any, of why it would be of assistance in resolving the claim; and

3) the procedures available for a further review of the claim.

c) Automatic Denial. If the Committee has not responded in writing to the participant within 90 days of the filing of the benefit claim, the participant may consider the claim to have been denied and pursue the request for reconsideration.

d) Acceptance of a Claim. If the Committee grants the claim, payment will commence within 90 days of receipt of the claim, or a notice of acceptance will be sent to the claimant if commencement of payment is not feasible within that time frame.

e) Reconsideration of Denial. The claimant may apply in writing to the Committee for reconsideration of the claim. The claimant must file for reconsideration within 60 days of receiving the notice of denial. The claimant or his or her authorized representative may request the opportunity to review pertinent plan documents and submit a written statement of issues and comments, in conjunction with the request for reconsideration.

f) Time-frame for Reconsideration. The Committee will render a decision within 60 days after it receives the request for reconsideration. If special circumstances require extension of time for processing the request, the decision by the Committee will be issued within 120 days after it receives the request for reconsideration.

g) Claimant's Representative. A claimant for plan benefits may act on his or her own behalf, or may use a representative who is authorized to act on behalf of the claimant, throughout the administrative claim process.

h) Exhaustion of Administrative Remedies. If the claim for benefits is denied or ignored in full or in part, the claimant may file suit in federal court to pursue the claim.

[This section should be deleted effective 01-01-96.]

13.3 Benefit Claims Process.

a) Written Request. Any person who claims a benefit under this plan must file the request in writing with the Benefits Manager.

b) Denial of a Claim or Failure to Respond by Benefits Manager. If the Benefits Manager denies the benefit in full or in part or fails to respond within 30 days from the day a claimant files his or her written request, then the claimant may petition the General Manager of Human Resources Services to review the claim.

c) Denial of a Claim by the General Manager of Human Resources Services. If the General Manager of Human Resources Services denies the benefit in full or in part, he or she will send a detailed written reply to the claimant within 60 days after the claim was filed with the General Manager of Human Resources Services. The written reply will include the following:

1) the specific reason(s) for the denial, referencing any specific plan provisions upon which the decision depends; and

2) a request for any additional information available to the claimant in support of his or her position and an explanation, if any, of why it would be of assistance in resolving the claim; and
3) the procedures available for a further review of the claim by the Committee.

d) Automatic Denial. If the General Manager of Human Resources Services has not responded in writing to the claimant within 60 days of the filing of the benefit claim with the General Manager of Human Resources Services, the claimant may consider the claim to have been denied and pursue the request for reconsideration with the Committee.

e) Acceptance of a Claim. If the General Manager of Human Resources Services grants the claim, payment will commence within 60 days of receipt of the claim by the General Manager of Human Resources Services, or a notice of acceptance will be sent to the claimant if commencement of payment is not feasible within that time frame.

f) Reconsideration of Denial by the Committee. The claimant may apply in writing to the Committee for reconsideration of the claim. The claimant must file for reconsideration within 60 days of receiving the notice of denial from the General Manager of Human Resources Services. The claimant or his or her authorized representative may request the opportunity to review pertinent plan documents and submit a written statement of issues and comments, in conjunction with the request for reconsideration.

g) Time-frame for Reconsideration. The Committee will render a decision within 60 days after it re- ceives the request for reconsideration. If special circumstances require extension of time for processing the request, the decision by the Committee will be issued within 120 days after it receives the request for reconsideration.

h) Claimant's Representative. A claimant for plan benefits may act on his or her own behalf, or may use a representative who is authorized to act on behalf of the claimant, throughout the administrative claim process.

i) Exhaustion of Administrative Remedies. If the claim for benefits is denied or ignored in full or in part upon reconsideration by the Committee, the claimant may file suit in federal court to pursue the claim.

[This section becomes effective on 01-01-96.]

13.4 Uniform Administration. Decisions or actions of the Committee with respect to the eligibility for or nature of benefits to be provided under this plan shall be uniformly applied to all persons similarly situated.

[This section should be deleted effective 01-01-96.]

13.5 Uniform Administration. Decisions or actions of the Benefits Manager, the General Manager of Human Resources Services, and the Committee with respect to the eligibility for or nature of benefits to be provided under this plan shall be uniformly applied to all persons similarly situated.

[This section becomes effective on 01-01-96.]

13.6 Statutory Construction. The plan shall be construed, enforced, and administered according to the laws of the State of Ohio as to any matter not preempted by ERISA. In any case that a provision of the plan is held illegal or invalid for any reason, it shall not affect the remaining provisions of the plan. However, the plan shall be construed, enforced, and administered as if the illegal provision had not been included in the plan.

13.7 Limitation of Rights of the Employee. The plan is strictly a voluntary undertaking on the part of CG&E. The plan is not a contract between CG&E and any employee. The plan does not constitute consideration for, or an inducement or condition of, the employment of any employee. Nothing contained in the plan gives any employee the right to be retained in the service of CG&E or to interfere with the right of CG&E to discharge any employee at any time. A participant does not have any right or claim to a benefit under the plan except upon fulfilling all of the conditions of eligibility and qualification. The participant's right to receive the benefit must have become fixed under the terms of the plan and there must be funds available in the trust sufficient to pay the benefit.

13.8 Alienation of Benefits. Benefits under the plan shall not be subject in any manner to alienation or assignment. Any attempt to assign or alienate plan benefits shall be void, whether such sums remain with the trustee or are in the course of transmission to the person entitled to them. However, benefits are subject to DROs accepted by the Committee.

13.9 Response to Attempted Alienation. If any participant, pensioner, beneficiary, or alternate payee under the plan becomes bankrupt or attempts to alienate or assign any benefit under the plan, except as specifically provided in the plan or by law, then his or her benefit shall terminate. In that event the Committee shall hold the assets of the affected participant, pensioner, beneficiary, or alternate payee for his or her benefit.

13.10 Correction of Inadvertent Error. The Committee may, in its discretion, recoup any benefit payment, or correct any loan, withdrawal, or other error made in contravention of any plan provision, whether by mistake, inadvertence or misrepresentation. Recovery of overpayment may be accomplished by withholding from future benefits due the individual who was enriched by the overpayment, or may be pursued by any other feasible and appropriate manner of collection. Other corrections shall be made in the manner deemed most feasible by the Committee.

13.11 Information from Beneficial Owners.

a) Each beneficial owner shall be required to furnish the Committee, in the form prescribed by it, such personal data, affidavits, authorization to obtain information, and other information as the Committee may deem appropriate for the proper operation and administration of the plan.

b) Misrepresentations of fact by a beneficial owner to the extent that affects their participation or benefits hereunder shall be handled in accordance with the rules of the Committee. In no event shall CG&E, the Committee, or the trustee have an obligation to provide such a beneficial owner with benefits in excess of those which would have been provided under the plan if there had been no misstatement or misrepresentation.

13.12 Facility of Payment. If the Committee determines from evidence that a claimant entitled to receive benefits under this plan is (at the time the benefit is payable) physically, mentally, or legally incompetent to receive such benefit and give valid receipt therefore, and that another person or an institution is then maintaining or has custody of such incompetent individual, and that no guardian, custodian or other representative of the estate of such incompetent individual has been appointed, the Committee may cause payment to be made to that person or institution having custody or maintaining the participant, former participant or beneficiary. The payment, to the extent made, shall operate as a complete discharge of the Committee, CG&E, and the trustee.

[This section should be deleted effective 01-01-96.]

13.13 Facility of Payment. If the Benefits Manager determines from evidence that a claimant entitled to receive benefits under this plan is (at the time the benefit is payable) physically, mentally, or legally incompetent to receive such benefit and give valid receipt therefore, and that another person or an institution is then maintaining or has custody of such incompetent individual, and that no guardian, custodian or other representative of the estate of such incompetent individual has been appointed, the Benefits Manager may cause payment to be made to that person or institution having custody or maintaining the participant, former participant or beneficiary. The payment, to the extent made, shall operate as a complete discharge of the Committee, CG&E, and the trustee.

[This section becomes effective on 01-01-96.]

13.14 Lost Beneficial Owner. Any benefit payment under the plan shall be forfeited if the Committee, after reasonable effort, is unable to locate the person to whom payment is due. However, any forfeited benefit shall be restored if a valid claim is made for the forfeited benefit; first from forfeitures, and then from company-matched contributions and company-matched stock incentive contributions.

[This section should be deleted effective 01-01-96.]

13.15 Lost Beneficial Owner. Any benefit payment under the plan shall be forfeited if the Benefits Manager, after reasonable effort, is unable to locate the person to whom payment is due. However, any forfeited benefit shall be restored if a valid claim is made for the forfeited benefit; first from forfeitures, and then from company-matched contributions and company-matched stock incentive contributions.

[This section becomes effective on 01-01-96.]

13.16 Vested Right. No person shall have any vested rights under the plan except to the extent that vested rights may accrue to him or her as provided under the plan. Furthermore, any person with vested rights under the plan shall look solely to the assets of the plan for satisfaction of his or her vested rights.

13.17 Satisfaction of Claims. Any payment to any beneficial owner in accordance with the terms of the plan shall, to the extent thereof, be in full satisfaction of all claims hereunder, whether they be against CG&E, the Committee, or the trustee, any of whom may require the beneficial owner or his or her legal representative, as a condition precedent to any payment, to execute a release and receipt therefore.

13.18 Plan Amendment Procedure.1 This plan may be amended from time to time as necessary for compliance with laws or regulations, as negotiated with one or more unions, or to meet the needs of covered employees or the plan sponsor. The board of directors, Committee members, human resources personnel, trustee and/or record keeper personnel, plan accountants, actuaries and attorneys, and plan participants or beneficial owners may propose or recommend amendments. Proposed amendments will be discussed and adopted or rejected at Committee meetings. Those proposing amendments are not entitled to attend the meetings when the amendments are considered. In general the Committee has the authority to adopt amendments, but the board of directors reserves the authority to adopt amendments which have a significant effect upon the funding or cost of the plan. Amendments adopted will be reflected in the appropriate meeting minutes. Plan attorneys will incorporate adopted amendments into the plan document. Material modifications will be included in the summary of material modifications sent to participants periodically for attachment to the summary plan description of this plan, and eventually incorporated into the summary plan description itself.

MISCELLANEOUS PROVISIONS

ARTICLE 14: MISCELLANEOUS PROVISIONS

14.1 Expenses. The operating expenses of the plan, including fees paid to a servicing organization and fees for professional services and technical or clerical assistance, are generally paid by CG&E with some charges specifically allocated to participants by plan terms. CG&E reserves the right to shift some or all of the expenses it pays to the investment funds and/or to the individual beneficial owners.

14.2 Number. Any use of the singular shall be interpreted to include the plural and the plural the singular.

14.3 Plan Procedures.

a) Conflicts between Plan and Procedures. Procedures must be in accordance with the plan as it is then being administered. Any conflict between written procedures and written plan terms, or plan terms required by law, adopted by the board of directors, or the Committee pursuant to the authority delegated to it, shall be resolved in favor of the plan terms, as administered.

b) Sunset Provision. Any procedure, if not examined and re-authorized by the Committee, shall automatical- ly expire on the date 5 years from its date of publication.

c) Expired Procedures. Any expired procedure may be consulted for its historical value in relation to plan administration, but it shall not be dispositive of the administrative decision.

14.4 Titles and Headings. The names of articles, table of contents, section and sub-section headings, and the index of the plan have been inserted for convenience of reference. In the event of any conflict, the text of the plan, rather than titles, headings, etc., shall control.

14.5 Merger, Consolidation, and Transfer of Assets. Before this plan can be merged or consolidated with any other plan, or its assets or liabilities transferred to another plan, each participant in the plan must be entitled to receive a benefit immediately after the merger, transfer, or consolidation (as if the plan had then terminated) which is equal to or greater than the benefit he/she would have been entitled to receive immediately before the merger, consolidation or transfer (as if the plan had then terminated). This plan will accept the transfer of funds from the DCIP in accordance with 3.20a). As a general rule, this plan will not accept a transfer of assets from any other plan for any reason, including rollovers and mergers.

[This section should be deleted effective 01-01-96.]

14.6 Merger, Consolidation, and Transfer of Assets. Before this plan can be merged or consolidated with any other plan, or its assets or liabilities transferred to another plan, each participant in the plan must be entitled to receive a benefit immediately after the merger, transfer, or consolidation (as if the plan had then terminated) which is equal to or greater than the benefit he/she would have been entitled to receive immediately before the merger, consolidation or transfer (as if the plan had then terminated). This plan will accept the transfer of funds from the DCIP in accordance with 3.20a). This plan will accept rollovers from other qualified retirement plans.

[This section becomes effective on 01-01-96.]

14.7 Transfer of ESOP Funds. The plan will accept a one-time transfer of assets, at the election of partici- pants in the CG&E Employee Stock Ownership Plan (ESOP), from the terminated ESOP at the time the ESOP assets are disbursed directly from the ESOP Plan Trustee to the Trustee of this plan.

14.8 Service of Process. The secretary of the Committee shall be the designated agent of the plan for the service of process in connection with all matters affecting the plan.
14.9 Warranties. Neither CG&E nor the Committee nor the trustee warrant against any loss or diminution in the value of accounts.

14.10 Adoption of the Plan by Subsidiaries. Any subsidiary of CG&E may participate in the plan by indicating its intention to that effect in writing and delivering a copy of the instrument to the board of directors and the trustee for acceptance in writing. Upon acceptance by the board and the trustee, the subsidiary will be bound by the terms of the plan and the trust agreement, and all subsequent plan amendments. Plan amendments are not subject to review or approval by any subsidiary which has elected to participate in the plan. A subsidiary may withdraw from plan participation at any time by delivery of its written intent to withdraw at least 60 days in advance of the effective date of the withdrawal.

DISCRIMINATION TESTING

ARTICLE 15: DISCRIMINATION TESTING

15.1 Definitions. The following terms are defined for the purpose of this Article only.

a) Average Contribution Percentage (ACP). The ACP is the average of the ratios, calculated separately for each eligible employee [see 3.2a)and 3.2b)], of the sum of1 the eligible employee's optional contributions, company-matched contributions, company- matched stock incentive contributions which are fully vested or are for participants who actually make deferred compensation or optional contributions for the plan year, and any recharacterized deferred compensation contributions, to the eligible employee's compensation for the plan year.

[This sub-section should be deleted effective 01-01-97.]

b) Average Contribution Percentage (ACP). The ACP is the average of the ratios, calculated separately for each eligible employee [see 3.2a)and 3.2b)], of the sum of2 the eligible employee's optional contributions, company-matched contributions, company- matched stock incentive contributions which are fully vested or are for participants who actually make deferred compensation contributions for the plan year, and any recharacterized deferred compensation contributions, to the eligible employee's compensation for the plan year.

[This sub-section becomes effective on 01-01-97.]

c) Actual Deferral Percentage (ADP). The ADP is the average of the ratios, calculated separately for each eligible employee, of the amount of3 deferred compensation contributions made on behalf of the eligible employee for the plan year, to the eligible employee's compensation for that plan year.

d) Compensation. Compensation is the total wages earned and other compensation including amounts paid for sick pay, moving expense payments and reimbursements that are not deductible under IRC
217.4 Compensation also includes employer contributions under this plan and Code Section 125 plans which are not currently taxable to the employee. Premiums for group term life insurance that exceed the IRC 79(a) limits are also included in compensation.5 Compensation is limited to $150,000 as adjusted6 by the Internal Revenue Commissioner for increases in the cost of living in accordance with IRC 401(a)(17)(B) in the same manner as base pay is limited.

e) Excess Aggregate Contributions. A participant's excess aggregate contribution for any year is the excess of

1) The total amount of the 7contributions8 taken into account in computing the numerator of the ACP for a plan year for that participant over

2) the maximum amount of that participant's contributions permitted by the ACP test.

f) Excess Contributions. A participant's excess contribution for any year is the excess of

1) The total amount of his or her contributions taken into account in computing the numerator of the ADP for a plan year over

2) the maximum amount of his or her contributions permitted by the ADP test.

g) Highly Compensated Employee.9

1) A highly compensated employee is any employee who, during the plan year or the preceding plan year, (A) was at any time a 5% owner, (B) received compensation in excess of $75,000 (or such larger amount as may be determined by the Secretary of Treasury pursuant to IRC 415(d)), (C) received compensation in excess of $50,000 (or such larger amount as may be determined by the Secretary of Treasury pursuant to IRC 415(d) and was in the top-paid group of employees for such plan year, or (D) was at any time an officer and received compensation greater than 50% of the amount in effect under IRC 415(b)(1)(A) for such plan year. Provided, sub-sections (B) through (D) shall apply to an employee meeting such criteria in the plan year only if such employee is also one of the 100 employees who received the most compensation from CG&E during the plan year. For purposes of this sub-section 15.1g)1), "compensation" shall include compensation from CG&E and any employer required to be aggregated with CG&E under IRC 414(b), (c), (m) or (o).

2) A highly compensated employee is any employee who (A) separated from service with CG&E, or is deemed to have separated from service, prior to the plan year, (B) performs no service for CG&E during the plan year, and was a highly compensated employee during either the plan year in which such separation from service occurred or in any plan year ending on or after the employee's 55th birthday.

3) The maximum number of officers which will be considered highly compensated employees for a plan year or preceding plan year pursuant to 1)D) above is the lesser of (A) 50 or (B) the greater of three employees or 10% of CG&E's employees. If no officer of CG&E received compensation greater than 50% of the amount in effect under IRC 415(b)(1)(A) for the plan year or the preceding plan year, the highest paid officer for such plan year shall be treated as a highly compensated employee.

4) For purposes of 15.1g)1)(C) above, an employee shall be considered a member of the "top paid group" for any year if such employee is in the group consisting of the top 20% of the employees of CG&E when ranked on the basis of compensation paid during the year, pursuant to IRC 414(q)(4).

5) If an employee is a "family member" of a highly compensated employee who is a 5% owner (or an employee who was a highly compensated employee by reason of being a 5% owner during the plan year in which the employee separated from service with CG&E or any plan year ending on or after the employee's 55th birthday) during the plan year or the preceding plan year, or a family member of one of the 10 most highly compensated employees of CG&E ranked on the basis of compensation paid by CG&E during the plan year, then the family member and the highly compensated employee shall be aggregated. In such case, the family member and highly compensated employee shall be treated as a single employee receiving compensation and contributions equal to the sum of the compensation and contributions of the family member and highly compensated employee. For purposes of 15.1g), the term "family member" shall include the spouse, lineal ascendants and descendants of an employee or former employee and the spouses of such lineal ascendants and descendants.

6) For purposes of determining whether an employee is a highly compensated employee, the provisions of IRC 414(q), and the regulations thereunder, shall apply.

[This sub-section should be deleted effective 01-01-97.]

h) Highly Compensated Employee.10

1) A highly compensated employee is any employee who (A) was at any time a 5% owner during the plan year or the preceding plan year, or (B) received compensation for the preceding plan year in excess of $80,000 (or such larger amount as may be deter- mined by the Secretary of Treasury pursuant to IRC
415(d)) and if CG&E elects, was in the top-paid group of employees for such preceding plan year.

2) A highly compensated employee is any employee who (A) separated from service with CG&E, or is deemed to have separated from service, prior to the plan year, (B) performs no service for CG&E during the plan year, and was a highly compensated employee during either the plan year in which such separation from service occurred or in any plan year ending on or after the employee's 55th birthday.

3) For purposes of 15.1h)1)(B) above, an employee shall be considered a member of the "top paid group" for any year if such employee is in the group consisting of the top 20% of the employees of CG&E when ranked on the basis of compensation paid during the preceding plan year, pursuant to IRC 414(q)(4).

4) For purposes of determining whether an employee is a highly compensated employee, the provisions of IRC 414(q), and the regulations thereunder, shall apply.

[This sub-section becomes effective on 01-01-97.]

15.2 ADP Testing. The ADP for highly compensated eligible employees for each plan year must satisfy one of the following tests11:

a) The ADP Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the ADP for non-highly compensated eligible employees for the plan year, multiplied by 1.25.

b) The ADP Alternative Limitation Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the lesser of

1) 2 times the ADP for non-highly compensated eligible employees for the plan year or,

2) 2 percentage points, plus the ADP, for non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

15.3 ADP Testing. The ADP for highly compensated eligible employees for each plan year must satisfy one of the following tests12:

a) The ADP Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the ADP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), multiplied by 1.25.

b) The ADP Alternative Limitation Test. The ADP for highly compensated eligible employees for the plan year shall not exceed the lesser of

1) 2 times the ADP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages) or,

2) 2 percentage points, plus the ADP, for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages).

[This section becomes effective on 01-01-97.]

15.4 ACP Testing. The ACP test will be performed following any recharacterization of deferred contributions required by 15.6. The ACP for highly compensated eligible employees for each plan year must satisfy one of the following tests13:

a) The ACP Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the ACP for non-highly compensated eligible employees for the plan year, multiplied by 1.25.

b) The ACP Alternative Limitation Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the lesser of

1) 2 times the ACP for non-highly compensated eligible employees for the plan year or,

2) 2 percentage points, plus the ACP, for non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

15.5 ACP Testing. The ACP test will be performed following any recharacterization of deferred contributions required by 15.7. The ACP for highly compensated eligible employees for each plan year must satisfy one of the following tests14:

a) The ACP Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), multiplied by 1.25.

b) The ACP Alternative Limitation Test. The ACP for highly compensated eligible employees for the plan year shall not exceed the lesser of

1) 2 times the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages) or,

2) 2 percentage points, plus the ACP, for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan percentages).

[This section becomes effective on 01-01-97.]
15.6 Multiple Use of Alternative Limitation. If neither the ADP nor the ACP for highly compensated employees meets the tests in 15.2a) and 15.4a)15, the multiple use test of the alternative limitation must be satisfied for the plan year. In order to satisfy the multiple use test of the alternative limitation, the sum of the ACP for highly compensated employees and the ADP for highly compensated employees may not exceed the greater of the following16:

a) the sum of:

1) 1.25 times the greater of the ADP or the ACP for non-highly compensated eligible employees, and

2) the lesser of:

A) 2 percentage points plus the lesser of the ADP or ACP for the non-highly compensated eligible employees, or

B) 2 times the lesser of the ADP or ACP of the non-highly compensated eligible employees; or

b) the sum of:

1) 1.25 times the lesser of the ADP or the ACP for non-highly compensated eligible employees, and

2) the lesser of:

A) 2 percentage points plus the greater of the ADP or ACP of non-highly compensated eligible employees, or

B) 2 times the greater of the ADP or ACP of non-highly compensated eligible employees.

[This section should be deleted effective 01-01-97.]

15.7 Multiple Use of Alternative Limitation. If neither the ADP nor the ACP for highly compensated employees meets the tests in 15.3a) and 15.5a)17, the multiple use test of the alternative limitation must be satisfied for the plan year. In order to satisfy the multiple use test of the alternative limitation, the sum of the ACP for highly compensated employees and the ADP for highly compensated employees may not exceed the greater of the following18:

a) the sum of:

1) 1.25 times the greater of the ADP or the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), and

2) the lesser of:

A) 2 percentage points plus the lesser of the ADP or ACP for the non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), or

B) 2 times the lesser of the ADP or ACP of the non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages); or

b) the sum of:

1) 1.25 times the lesser of the ADP or the ACP for non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), and

2) the lesser of:

A) 2 percentage points plus the greater of the ADP or ACP of non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages), or

B) 2 times the greater of the ADP or ACP of non-highly compensated eligible employees for the preceding plan year (unless CG&E elects to use current plan year percentages).

[This section becomes effective on 01-01-97.]

15.8 Corrective Procedure If ADP Limitation Exceeded. If the plan fails the ADP test provided for in this Article, the following procedure will be followed:

a) Reduction of Highly Compensated Participants' ADP. The ADP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ADP test. In determining the amount of excess contributions for each highly compensated participant, the highest ratio will be reduced to the next highest ratio until the maximum allowed percentage is reached19.

[This sub-section should be deleted effective 01-01-97.]

b) Reduction of Highly Compensated Participants' ADP. The ADP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ADP test. Excess contributions will be returned to the highly compensated participants who contributed the largest dollar amounts until the maximum allowed percentage is reached20.

[This sub-section becomes effective on 01-01-97.]

c) Recharacterization of Excess Contributions. The amount resulting from a reduction in a participant's deferred compensation contributions in 15.8a) or 15.8b) above shall be recharacterized as optional contributions and treated as taxable income to the participant in the tax year in which the participant would have received them if he or she had originally elected to receive them in cash. This recharacterization normally will be made within 2 1/2 months after the close of the plan year21.
15.9 Corrective Procedure if ACP Limitation Exceeded. If the plan fails the ACP test, the following procedure will be followed, after recharacterizing any deferred compensation contributions required under 15.6 or 15.7:

a) Reduction of Highly Compensated Participants' ACP. The ACP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ACP test. In determining the amount of excess aggregate contributions for each highly compensated participant, the highest ratio will be reduced to the next highest ratio until the maximum allowed percentage is reached.

[This sub-section should be deleted effective 01-01-97.]

b) Reduction of Highly Compensated Participants' ACP. The ACP for highly compensated participants shall be reduced to the maximum acceptable level determined by the ACP test. Excess aggregate contributions will be returned to the highly compensated participants who contributed the largest dollar amounts until the maximum allowed percentage is reached.

[This sub-section becomes effective on 01-01-97.]

c) Disposition of Excess Aggregate Contributions. The aggregate excess contributions resulting from a reduction in a highly compensated participant's ACP ratio in 15.9a) or 15.9b) shall be disposed of as follows:

1) Excess Optional Contributions. Any excess optional contributions, plus the net of any income or loss attributable to optional contributions as of the last day of the plan year,22 normally will be distributed to the participant within 2 1/2 months after the end of the plan year.23 However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.24

2) Excess Company-Matched Contributions. Any excess company-matched contributions which are not vested will be treated as forfeitures under 7.6c). Any excess vested company-matched contributions25 plus the net of any income or loss attributable to the excess company-matched contributions as of the end of the plan year,26 shall normally be distributed to the participant within 2 1/2 months after the end of the plan year.27 However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.28

3) Excess Company-Matched Stock Incentive Contributions. Any excess company-matched stock incentive contributions which are not vested will be treated as forfeitures under 7.6c). Any excess vested company-matched stock incentive contributions29 plus the net of any income or loss attributable to the excess company-matched stock incentive contributions as of the end of the plan year,30 shall normally be distributed to the participant within 2 1/2 months after the end of the plan year.31 However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.32

15.10 Corrective Procedure if the Test for the Multiple Use of Alternative Limitation is Exceeded.

If the plan fails the test for the multiple use of the alternative limitation, the following procedure will be followed:

a) Simultaneous Reduction of the ADP and ACP of Highly Compensated Participants. After determining the amount of excess contributions and excess aggregate contributions for each highly compensated participant, the participants with the highest individual ADP and ACP ratios will have their ratios reduced to the next highest ADP and ACP ratio, until the maximum multiple use limit is reached.

[This sub-section should be deleted effective 01-01-97.]

b) Simultaneous Reduction of the ADP and ACP of Highly Compensated Participants. After determining the amount of excess contributions and excess aggregate contributions for each highly compensated participant, the participants who contributed the largest dollar amounts will have their contributions returned, until the maximum multiple use limit is reached.

[This sub-section becomes effective on 01-01-97.]

c) Disposition of Excess Contributions and Excess Optional Contributions and Excess Vested Company-Matched Contributions and Excess Vested Company-Matched Stock Incentive Contributions. Any excess contributions, optional contributions, vested company-matched contributions, and vested company- matched stock incentive contributions which are determined by the application of 15.10a) or 15.10b), plus the net of any income or loss attributable to the excess contributions, optional contributions, vested company-matched contributions, and vested company- matched stock incentive contributions as of the last day of the plan year, shall normally be distributed to the participant within 2 1/2 months after the end of the plan year.33 However, if distributions are not made by that time, distributions shall be made within 12 months after the close of the plan year.34

LIMITATION ON ANNUAL ADDITIONS

ARTICLE 16: LIMITATION ON ANNUAL ADDITIONS

16.1 Definitions.

The following terms are defined solely for purposes of this Article:

a) Annual Addition.1 A participant's annual addition is the sum of the following amounts credited to the participant's account for a plan year:

1) deferred compensation contributions;

2) company-matched contributions;

3) company-matched stock incentive contributions;

4) optional contributions; and

5) forfeitures.

b) Compensation.2 A participant's compensation for any plan year consists of his or her total wages earned and other compensation including amounts paid for sick pay, moving expense payments and reimbursements that are not deductible under IRC 217, and premiums for group term life insurance that exceed IRC 79(a) limits. Compensation also includes any distribution from any non-qualified deferred compensation plan paid to the participant while s/he remains employed. Compensation does not include employer contributions under this plan or any IRC 125 plan which are not currently taxable to the employee or any distributions from a qualified deferred compensation plan, regardless of whether such amounts are includable in the employee's gross income when distributed.3

c) Defined Benefit Fraction.4 The defined benefit plan fraction applicable to a participant for any plan year is a fraction: 1) the numerator of which is the participant's projected annual benefit5 (determined as of the close of the plan year) under the RIP; and 2) the denominator of which is the lesser of 1.25 multiplied by the dollar limitation under IRC 415 for defined benefit plans for such year, or 1.4 multiplied by the participant's average compensation for the 3 consecutive calendar years aggregating the greatest compensation from CG&E during which s/he participated in the plan.

d) Defined Benefit Plan. A qualified plan as defined in IRC 414(j).

e) Defined Contribution Fraction6. The defined contribution fraction applicable to a participant for any plan year is a fraction: 1) the numerator of which is the sum of annual additions to the participant's account under the plan as of the close of the limitation year; and 2) the denominator of which is the sum of the lesser of the following amounts determined for such year and for each prior year of service with CG&E:

1) the product of 1.25 multiplied by the dollar limitation under IRC 415(c)(1)(A) for defined contribution plans for such year,7 or

2) the product of 1.4 multiplied by 25% of the participant's compensation for such year.

f) Defined Contribution Plan. A qualified plan as defined in IRC 414(i).

g) Company. The employer that adopts this plan, and all members of a controlled group of corporations, all commonly controlled trades or businesses or affiliated service groups of which the adopting employer is a part, and any other entity required to be aggregated with the employer pursuant to IRC 414(o) regulations.8

h) Excess Amount. The excess of the participant's annual additions for the plan year over the maximum annual additions permitted under this Article for the plan year.

i) Projected Annual Benefit.9 A participant's projected annual benefit is an amount equal to the annual benefit that the participant would be entitled to receive under the terms of the defined benefit plan in which he is a participant, assuming that:

1) the participant continues employment until his or her normal retirement age;

2) that his or her compensation continues at the same rate as in effect in the plan year under consideration; and

3) that all relevant factors used to determine benefits under such plan remain constant.

Projected annual benefit is a benefit expressed in the form of a single life annuity disregarding any ancillary benefits or benefits attributable to a rollover contribution.

16.2 General Limitations. Notwithstanding any other provisions of this plan, the maximum annual addition credited to the account of a participant for any plan year10 shall not exceed the lesser of:

a) $30,000, or

b) 25% of the participant's compensation for that plan year.

16.3 Estimation of Compensation. Prior to the determination of a participant's actual compensation for a plan year, the maximum annual addition for a participant may be computed using a reasonable estimation of the participant's compensation for a plan year.

16.4 Disposition of Excess Amount. In the event the limitations of this Article are exceeded because of an allocation of forfeitures, a reasonable error in estimating a participant's compensation or other reasonable circumstances, the excess amount shall be disposed of as follows11:

a) First, any optional contributions that are not eligible for company-matched contributions and company-matched stock incentive contributions will be returned to the participant to the extent that the return would reduce the excess amount.

[This sub-section should be deleted effective 01-01-97.]

b) First, any optional contributions will be returned to the participant to the extent that the return would reduce the excess amount.

[This sub-section becomes effective on 01-01-97.]

c) Second, any deferred compensation that are not eligible for company-matched contributions and company-matched stock incentive contributions will be returned to the participant to the extent that the return will reduce the excess amount.

d) Third, any company-matched contributions, made on behalf of a participant under this plan shall be reduced to the extent that the reduction will reduce the excess amount. Such reduction in company-matched contributions shall be treated as a forfeiture in accordance with 7.6.12

e) Fourth, any company-matched stock incentive contributions, made on behalf of a participant under this plan shall be reduced by the amount needed to eliminate the excess amount. Such reduction in company-matched stock incentive contributions shall be treated as a forfeiture in accordance with 7.6.13

16.5 Aggregation of Plans of CG&E.

a) For purposes of applying the limitation of this Article, all defined benefit plans (whether or not terminated) of CG&E shall be treated as one defined benefit plan and all defined contribution plans (whether or not terminated) shall be treated as one defined contribution plan.14

b) If an excess amount results from the aggregation of annual additions under this plan with annual additions under another defined contribution plan:

1) the excess amount shall be first attributable to this plan; and

2) such excess amount shall be treated in accordance with 16.1h).

c) Where a participant is a participant at any time in both a defined contribution plan and a defined benefit plan sponsored by CG&E, the sum of the defined benefit fraction and the defined contribution fraction for any plan year shall not exceed 1.0. Should this limita- tion be exceeded in any plan year, the participant's benefits under the RIP shall be appropriately reduced so that the defined benefit fraction is equal to the difference between 1.0 and the defined contribution fraction.

AMENDMENT AND TERMINATION OF THE PLAN

ARTICLE 17: AMENDMENT AND TERMINATION OF THE PLAN

17.1 Amendment of the Plan.

a) Reservation of Right. CG&E expects to continue the plan indefinitely, but as future conditions cannot be foreseen, the board of directors reserves the right to amend or terminate the plan at any time.

b) Effect on Participants. No amendment shall retroactively reduce the rights or benefits of participants1 or permit the return to CG&E of the CINergy stock, other securities, obligations, deposits, or cash held by the trustee, or permit their use or diversion for any purpose other than for the exclusive benefits of the participants or their bene- ficiaries. In addition, no amendment shall eliminate an optional form of benefit or eliminate or reduce an early retirement option with respect to benefits attributable to service before this amendment.

c) Discontinuance of Contributions. In the event of a complete discontinuance of company-matched contributions or company-matched stock incentive contributions, the company-matched sub-account will be immediately vested.

17.2 Plan Termination.

If the plan is terminated all contributions will cease. The Committee shall direct the trustee to determine the value of each beneficial owner's account as of the date of termination. The value of any unallocated plan assets shall be allocated to the beneficial owners. Each beneficial owner shall become fully vested in the total value of his or her account. Each beneficial owner's balance shall be segregated by the trustee pending disposition. Distribution shall be made, in a single payment, to each beneficial owner as soon as practicable following the date of plan termination.2 No amendment shall deprive the beneficial owners of their vested rights upon termination of the plan.

17.3 Partial Termination.

If the plan is partially terminated, all contributions to the accounts of all affected participants will cease. The Committee shall direct the trustee to determine the value of each affected beneficial owner's account as of the date of the partial termination. The value of any unallocated plan assets shall be allocated to beneficial owners. Each affected beneficial owner shall become fully vested in his or her account. Distribution shall be made, in a single payment, to each beneficial owner as soon as practical following the date of partial plan termination. However, no distribution from a participant's deferred compensation contribution sub-account shall be made at a time not otherwise permitted under the plan. No amendment shall deprive the affected beneficial owners of their vested rights upon partial termination of the plan.

17.4 Liquidation of the Investment Funds.

The trust and the investment funds shall continue in existence after the termination of the plan for such period of time as may be required to complete the liquidation thereof in accordance with the terms of this Article.

INDEX

This index references the root of hyphenated words as if they were single words, e.g. "account" will also reference the occurrence of "sub-account".

This index also references words and phrases in the text and the endnotes. Endnote references reflect the text page where the endnote occurs, not the page where the endnote itself is printed.

Adopted by the Cinergy Corp.
Board of Directors on January 25, 1996

JANUARY 1, 1996 AMENDMENT TO THE
CINERGY CORP. ANNUAL INCENTIVE PLAN

The Cinergy Corp. Annual Incentive Plan, as adopted effective October 24, 1994, is hereby amended, effective as of January 1, 1996, with respect to certain provisions of the Plan pertaining to distribution of awards and the maximum amount of award available to executive officers.

(1) Explanation of Amendment.

On January 25, 1996, the Compensation Committee of the board of directors of Cinergy Corp. recommended that the board adopt the Cinergy Corp. Nonqualified Deferred Compensation Plan which will permit the Compensation Committee to allow participants to defer the receipt of awards otherwise payable under Cinergy Corp.'s various incentive compensation plans, including its Annual Incentive Plan. The proposed amendment to Article 9 of the Plan provides that, unless the Participant defers receipt of an award under the Plan in accordance with the provisions of the Cinergy Corp. Nonqualified Deferred Compensation Plan, the award will be payable to the Participant on the first business day of March of the year following the year in which the award was earned. The proposed amendment to Article 1 defines the Cinergy Corp. Nonqualified Deferred Compensation Plan.

On December 20, 1995, the Internal Revenue Service promulgated final regulations relating to the disallowance of deductions for employee remuneration in excess of one million dollars. Consistent with the final regulations, the proposed amendment to Article 20 states as to objective corporate and objective individual goals the maximum dollar amount of compensation that can be paid to a "covered employee" under the Plan. Previously, the maximum award was expressed as a percentage of annual base salary. The term "covered employee" includes the chief executive officer and the four highest compensated officers for the applicable year.

(2) Article 9, As Amended.

Article 9, as hereby amended, reads as follows:

"Article 9

Distribution

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

(3) Section 1.30, As Added.

Section 1.30, as added, hereby reads as follows:

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

(4) Article 20, As Amended.

Article 20, as hereby amended, reads as follows:

"ARTICLE 20

EXECUTIVE OFFICERS

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

(a) With respect to Executive Officers, the Plan shall be administered by a committee (the "AIP Committee") consisting of two or more persons each of whom is an "outside director" for purposes of Code Subsection 162(m). The AIP Committee and CINergy's Committee may be the same committee provided that the membership of CINergy's Committee satisfies the conditions set forth in the preceding sentence.

(b) With respect to Participants who are Executive Officers as of the beginning of a Performance Period, the AIP Committee shall establish the Corporate Target Goals and Individual Goals for each Performance Period within the time necessary to satisfy the requirements of Code Subsection 162(m). Corporate Target Goals shall be based on objective performance criteria pertaining to an Employer's performance, efficiency, or profitability including, but without limitation, stock price, total shareholder return, market share, sales, earnings per share, costs, net operating incomes, cash flow, fuel cost per million BTU, costs per kilowatt hour, retained earnings, or return on equity. Individual Goals shall be based on objective or, with respect to separate awards under the Plan, subjective performance criteria pertaining to an Executive Officer's individual effort as to enhancement of either individual performance or achievement or attainment of Corporate Target Goals or other Individual Goals. Further, in the case of Participants who are Covered Employees as of the end of the Performance Period, unless otherwise determined by the AIP Committee, or unless otherwise designated as separate awards based on subjective performance criteria, payments shall be made only after achievement of the applicable performance goals has been certified by the AIP Committee. In no event shall payment in respect of Annual Performance Awards based on Corporate Target Goals and objective Individual Goals granted for a Performance Period be made to a Participant who is a Covered Employee as of the end of a Performance Period in an amount that exceeds one million dollars."

IN WITNESS WHEREOF, Cinergy Corp. has caused this document to be executed and approved by its duly authorized officers, effective as of January 1, 1996.

By:             JAMES E. ROGERS
                James E. Rogers
          Vice Chairman, President and
              Chief Executive Officer

Dated:           October 25, 1996

Approved:

By: JEROME A. VENNEMANN
Jerome A. Vennemann
Associate General Counsel and
Assistant Corporate Secretary

Dated: October 25, 1996

CINERGY CORP. 401(k) EXCESS PLAN

ARTICLE I
NATURE AND PURPOSE OF PLAN

1.1 Type of Plan. The name of this Plan is the Cinergy Corp. 401(k) Excess Plan, effective January 1, 1997. The Plan is maintained by the Company as an unfunded, non- qualified deferred compensation plan for a select group of the Employer's management or highly-compensated employees.

1.2 Purpose of Plan. The purpose of the Plan is to provide a means for the payment of deferred compensation to a select group of key senior management employees of the Employer, in recognition of their substantial contributions to the operation of the Employer, and to provide those individuals with additional financial security as an inducement to them to remain in employment with the Employer.

ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION

2.1 Definitions. As used in the Plan, the following words and phrases, when capitalized, have the following meanings except when used in a context that plainly requires a different meaning:

(a) "Account" means the record of a Participant's total interest in the Plan.

(b) "Beneficiary" means, with respect to a Participant, the person or persons designated pursuant to Section 5.5 (Designation of Beneficiary) to receive benefits under the Plan in the event of the Participant's death.

(c) "Board of Directors" means the duly constituted board of directors of the Company on the applicable date.

(d) "Change in Control" means an event described in Subsection 5.2(b) (Distribution Upon a Change in Control).

(e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and interpretive rules and regulations.

(f) "Committee" means a committee composed of those members of the Compensation Committee of the Board of Directors who are not Participants in the Plan.

(g) "Company" means Cinergy Corp., a Delaware Corporation, and any corporation that shall succeed to its business and adopt the Plan.
(h) "Compensation" means, with respect to a Participant for a Plan Year, the annual base salary paid to the Participant by the Employer for services, including elective contributions made by the Employer on behalf of the Employee during the Plan Year that are not includable in gross income under Code Section 125, Paragraph 402(a)(8), Subsection 402(h) or Subsection
403(b). "Compensation" does not include amounts deferred under other deferral arrangements, bonuses, annual or long-term incentive pay, moving allowances, living and similar allowances and imputed income.

(i) "Deferral Account" means, with respect to a Participant, the bookkeeping account that serves as a record of the deferrals and earnings and losses on those deferrals credited to the Participant under the terms of this Plan.

(j) "Deferral Agreement" means the written agreement entered into between an Eligible Employee and the Employer pursuant to which the Eligible Employee elects to make deferrals under the Plan.

(k) "Effective Date" means January 1, 1997.

(l) "Eligible Employee" means a key management Employee who is selected by the Committee as an individual who has the opportunity to impact significantly the annual operating success of the Employer.

(m) "Employee" means any person employed by the Employer on a full-time salaried basis, including officers of the Company or a Related Employer.

(n) "Employer" means the Company and any Related Employer.

(o) "Employer Base Matching Contribution" means, with respect to a Participant, the contribution made by the Employer on behalf of a Participant pursuant to Section
3.3 (Employer Base Matching Contributions).

(p) "Employer Incentive Matching Contribution" means, with respect to a Participant, the contribution made by the Employer on behalf of a Participant pursuant to
Section 3.4 (Employer Incentive Matching Contributions).

(q) "401(k) Plan" means The Cincinnati Gas & Electric Company Deferred Compensation and Investment Plan or the PSI Energy, Inc. Employees' 401(k) Savings Plan, whichever is applicable to a Participant.

(r) "Insolvent" means, with respect to the Company, the Company being unable to pay its debts as they are due, or the Company being subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

(s) "Investment Options" means, with respect to any Plan Year, the investment options that the Committee makes available to Participants under the Plan from among the investment options available under the 401(k) Plan as of the first day of the Plan Year.

(t) "Matching Account" means, with respect to a Participant, the bookkeeping account that serves as a record of the Employer Base Matching Contributions, the Employer Incentive Matching Contributions and earnings and losses on those contributions credited to the Participant under the terms of this Plan.

(u) "Participant" means an Eligible Employee or former Eligible Employee who has an interest in the Plan pursuant to Section 3.2 (Election to Defer), 3.3 (Employer Base Matching Contributions) or 3.4 (Employer Incentive Matching Contributions).

(v) "Plan" means this instrument, as amended from time to time, and the non-qualified deferred compensation plan so established.

(w) "Plan Year" means a calendar year commencing on or after January 1, 1997.

(x) "Rabbi Trust" means the grantor trust that the Company, in its sole discretion, may establish pursuant to Subsection 4.4(b) (Accounts Unfunded) for the deposit of funds to be used for the exclusive purpose of paying benefits accrued under the Plan, subject to the claims of the Company's general creditors in the event the Company becomes Insolvent.

(y) "Related Employer" means any Employer that, together with the Company, is under common control or a member of an affiliated service group, as determined under Code Subsections 414(b), (c), (m), and (o).

(z) "Termination of Employment" means, with respect to a Participant, the cessation of the relationship of Employer and Employee between the Participant and the Employer for any reason other than the Participant's death. A Participant shall not be treated as having incurred a Termination of Employment until the employment relationship between the Participant and all Related Employers has terminated.

(aa) "Trustee" means the trustee of the Rabbi Trust that the Company, in its sole discretion, may establish pursuant to Subsection 4.4(b) (Accounts Unfunded).

(bb) "Unforeseeable Emergency" means, for the purpose of Subsection 3.2(d) (Suspension or Cessation of Deferrals) and Section 5.3 (Distribution Upon Financial Emergency), with respect to a Participant or Beneficiary, a severe financial hardship to the Participant or Beneficiary resulting from a sudden and unexpected illness or accident of the Participant, Beneficiary, or his or her dependents; loss of the Participant's or Beneficiary's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's or Beneficiary's control.

2.2 Rules of Construction. The following rules of construction shall govern in interpreting the Plan:

(a) The provisions of this Plan shall be construed and governed in all respects under and by the internal laws of the State of Ohio, to the extent not preempted by federal law.

(b) Words used in the masculine gender shall be construed to include the feminine gender, where appropriate, and vice versa.

(c) Words used in the singular shall be construed to include the plural, where appropriate, and vice versa.

(d) The headings and subheadings in the Plan are inserted for convenience of reference only and are not to be considered in the construction of any provision of the Plan.

(e) If any provision of the Plan shall be held to be illegal or invalid for any reason, that provision shall be deemed to be null and void, but the invalidation of that provision shall not otherwise impair or affect the Plan.

ARTICLE III
ELIGIBILITY AND PARTICIPATION

3.1 Eligibility. Participation in the Plan is limited to Eligible Employees.

3.2 Election to Defer.

(a) Election Procedure. Within a reasonable time before the beginning of each Plan Year, the Committee shall provide each Eligible Employee with a Deferral Agreement. An Eligible Employee may elect to defer his or her compensation to the Plan by delivering a completed Deferral Agreement to the Committee or its designate prior to the first day of the Plan Year. On the Deferral Agreement, the Eligible Employee shall indicate the amount or percentage of his Compensation to be deferred under the Plan for the Plan Year as an elective contribution, subject to the provisions of Subsection (b). The Eligible Employee also shall indicate whether to contribute to the 401(k) Plan that portion of his Compensation deferred pursuant to the preceding sentence that he can contribute to the 401(k) Plan for the Plan Year without exceeding the limitations of Code Subsection 402(g), Paragraph 401(k)(3) and 401(a)(17) for the Plan Year. Subject to Subsection (c), an election made under this Section shall be effective as of the first day of the Plan Year, and subject to Subsection (d), the election for any Plan Year shall be irrevocable.

(b) Maximum Amount of Deferrals. For each Plan Year beginning on or after the Effective Date, each Eligible Employee may elect to defer under the Plan up to 100% of his Compensation.

(c) New Participant Deferrals. The Committee, in its sole discretion, may permit a new Eligible Employee to enroll in the Plan during a Plan Year and, no later than 30 days after becoming an Eligible Employee, make an irrevocable prospective election to defer a portion of his Compensation for the remainder of the Plan Year.

(d) Suspension or Cessation of Deferrals. With the written consent of the Committee, a Participant may suspend or cease deferrals, in whole or in part, during the course of a Plan Year, due to an Unforeseeable Emergency. Suspension or cessation of deferrals shall not in any way affect a Participant's rights or benefits with respect to amounts already deferred under the Plan. In the event a Participant suspends or ceases deferrals pursuant to this Subsection, the Participant shall not be permitted to resume deferrals before the first day of the following Plan Year or such later date as specified by the Committee.

3.3 Employer Base Matching Contributions. If an Eligible Employee is entitled to an employer base matching contribution under his or her 401(k) Plan, the Employer shall make an Employer Base Matching Contribution to the Participant's Matching Account equal to the amount of the Participant's employer base matching contribution computed in accordance with the 401(k) Plan (prior to the limitation of Code Paragraph 401(m)(2)), but using the Participant's Compensation as defined in this Plan.

3.4 Employer Incentive Matching Contributions. If an Eligible Employee is entitled to an employer incentive matching contribution under his or her 401(k) Plan, the Employer shall make an Employer Incentive Matching Contribution to the Participant's Matching Account equal to the amount of the Participant's employer incentive matching contribution computed in accordance with the 401(k) Plan (prior to the limitation of Code Paragraph 401(m)(2)), but using the Participant's Compensation as defined in this Plan.

3.5 Cessation of Participation. Any Participant who ceases to be an Eligible Employee, but continues to be an Employee, shall cease to be eligible to make deferrals or receive contributions under this Article but shall continue to have a Deferral Account and a Matching Account, shall continue to be credited with earnings and losses on his Accounts under
Section 4.2 (Earnings and Losses) (until those Accounts are fully distributed pursuant to Article V (Distribution of Benefits)) and shall be entitled to receive benefits under Article V (Distribution of Benefits).

ARTICLE IV
PARTICIPANTS' ACCOUNTS

4.1 Establishment of Accounts. The Committee shall create and maintain adequate records to disclose the interest in the Plan of each Participant and Beneficiary. Records shall be in the form of individual bookkeeping accounts, which shall be credited with deferrals and contributions pursuant to Sections 3.2 (Election to Defer), 3.3 (Employer Base Matching Contributions), and 3.4 (Employer Incentive Matching Contributions) and earnings and losses pursuant to
Section 4.2 (Earnings and Losses), and debited with any contributions to a 401(k) Plan pursuant to Section 4.7 (Determination and Treatment of Amounts Contributable to the
401(k) Plan) and any payments pursuant to Article V (Distribution of Benefits). Each Participant shall have a separate Deferral Account and Matching Account. The Participant's interest in his Accounts shall be fully vested at all times. Notwithstanding the preceding sentence, the Participant's interest in his Accounts shall be subject to the claims of the Company's general creditors in the event the Company becomes Insolvent.

4.2 Earnings and Losses.

(a) Deemed Investment of Accounts. During each Plan Year, a Participant's Accounts shall be credited with investment earnings and losses as though they are invested, in accordance with the Participant's elections pursuant to Subsection (b), in one or more of the Investment Options. The deemed investment of a Participant's Accounts among the Investment Options in accordance with the Participant's elections, is solely the measure of the investment performance of the Deferral Account and Matching Account. It does not give the Participant any ownership interest in any Investment Option, nor does it bind the Company, the Committee, or the Trustee as to the investment of any Rabbi Trust or any other amounts represented by the Deferral Accounts or Matching Accounts.

(b) Election Procedure. Each Participant, upon first becoming an Eligible Employee, may make initial elections, on a form provided by the Committee, to allocate his Deferral Account and his Matching Account among the Investment Options. The Participant may make separate elections with respect to each of his Accounts. If the Participant fails to make an initial election with respect to an Account, he shall be deemed to have elected to allocate that Account to the Fidelity Retirement Money Market Fund Investment Option for that Plan Year. A Participant may change his Investment Option designations (for his future deferrals and contributions, his existing Accounts, or both) once each Plan Year, as of the first day of the Plan Year, by filing an appropriate election form with the Committee by the prior December 31. Until a Participant timely files a new investment election form, his prior Investment Option designations shall control.

4.3 Credits to Accounts.

(a) A Participant's deferrals pursuant to
Section 3.2 (Election to Defer) shall be credited to his Deferral Account in terms of cash as of the date(s) on which the deferred amount would otherwise have been paid to the Participant or credited to his accounts under the 401(k) Plan.

(b) The Employer Base Matching Contribution shall be credited to a Participant's Matching Account in terms of cash on the same date(s) as employer base matching contributions are credited to participants' accounts under the 401(k) Plan. An Eligible Employee does not need to make deferrals pursuant to Section 3.2 (Election to Defer) of this Plan to receive Employer Base Matching Contributions.

(c) The Employer Incentive Matching Contribution shall be credited to a Participant's Matching Account in terms of cash on the same date(s) as employer incentive matching contributions are credited to participants' accounts under the 401(k) Plan. An Eligible Employee does not need to make deferrals pursuant to Section 3.2 (Election to Defer) of this Plan to receive Employer Incentive Matching Contributions.

(d) Earnings and losses on the deemed investment of the Participant's Deferral Account and Matching Account under Section 4.2 (Earnings and Losses) shall be credited monthly, on the last day of each month, based on the value of the Participant's Deferral Account and Matching Account as of the first day of the month.

4.4 Accounts Unfunded.

(a) Accounts shall be accounting accruals, in the names of Participants, on the Employer's books. Accounts shall be unfunded, so that the Employer's obligation to pay benefits under the Plan is merely a contractual duty to make payments when due under the Plan. The Employer's promise to pay benefits under the Plan shall not be secured in any way, and except as provided in Subsection (b), the Company shall not set aside or segregate assets for the purpose of paying amounts credited to Participants' Deferral Accounts or Matching Accounts.

(b) Notwithstanding the provisions of Subsection (a), the Company, in its sole discretion, may establish a Rabbi Trust. The Employer, in its sole discretion, may make such contributions to the Rabbi Trust as the Committee determines are appropriate to enable the Employer to pay benefits under the Plan. Any Rabbi Trust established under this Section shall be created pursuant to a written trust document that conforms to the model form of rabbi trust agreement approved by the Internal Revenue Service in Revenue Procedure 92-64 (as amended from time to time).
4.5 Valuation of Deferral Accounts.

(a) Deferral Account. The value of a Participant's Deferral Account as of any date shall equal the dollar amount of any deferrals credited to the Deferral Account pursuant to Section 3.2 (Election to Defer), increased or decreased by the earnings and losses deemed to be credited to the Deferral Account in accordance with Section 4.2 (Earnings and Losses), and decreased by the amount of any contributions made or to be made from the Deferral Account to the 401(k) Plan pursuant to Section 4.7(a) (Deferrals) and any payments made from the Deferral Account to the Participant or his Beneficiary pursuant to Article V (Distribution of Benefits).

(b) Matching Account. The value of a Participant's Matching Account as of any date shall equal the dollar amount of any contributions credited to the Matching Account pursuant to Sections 3.3 (Employer Base Matching Contributions) or 3.4 (Employer Incentive Matching Contributions), increased or decreased by the earnings and losses deemed to be credited to the Matching Account in accordance with
Section 4.2 (Earnings and Losses), and decreased by the amount of any contributions made or to be made from the Matching Account to the 401(k) Plan pursuant to Section
4.7(b) (Matching Contributions) and any payments made from the Matching Account to the Participant or his Beneficiary pursuant to Article V (Distribution of Benefits).

4.6 Annual Report. Within 120 days following the end of each Plan Year, the Committee shall provide to each Participant a written statement of the amount standing to his credit in his Accounts as of the end of that Plan Year.

4.7 Determination and Treatment of Amounts Contributable to the 401(k) Plan.

(a) Deferrals. As soon as administratively feasible for each Plan Year, the Committee shall determine the amount that each Eligible Employee electing deferrals pursuant to Section 3.2 (Employer Base Matching Contributions) can contribute to the
401(k) Plan for the same Plan Year without exceeding the limitations of Code Subsection 402(g) and Code Paragraphs 401(k)(3) and 401(a)(17) for the Plan Year. If an Eligible Employee elected to contribute to the
401(k) Plan that portion of his deferrals that did not exceed the determined amount, that portion shall be transferred directly to the 401(k) Plan no later than March 15 of the following Plan Year. Alternatively, if the Eligible Employee elected to receive a lump sum distribution of that portion of his deferrals that did not exceed the determined amount, that portion shall be distributed to him no later than March 15 of the following Plan Year. The earnings and losses credited to the transferred or distributed portion pursuant to
Section 4.3 (Credits to Accounts) shall remain in the Eligible Employee's Deferral Account until distributed pursuant to Article V (Distribution of Benefits).

(b) Matching Contributions. As soon as administratively feasible for each Plan Year, the Committee shall determine the amount that the Employer can contribute as employer base matching contributions and employer incentive matching contributions to the
401(k) Plan for the same Plan Year without exceeding the limitations of Code Paragraph 401(m)(2) and its interpretive regulations and Code Paragraph 401(a)(17) for the Plan Year. If an Eligible Employee elected to contribute to the 401(k) Plan that portion of his Employer Base Matching Contributions and Employer Incentive Matching Contributions that did not exceed the determined amount, that portion shall be transferred directly to the 401(k) Plan no later than March 15 of the following Plan Year. Alternatively, if the Eligible Employee elected to receive a lump sum distribution of that portion of his Employer Base Matching Contributions and Employer Incentive Matching Contributions that did not exceed the determined amount, that portion shall be distributed to him no later than March 15 of the following Plan Year. The earnings and losses credited to the transferred or distributed portion pursuant to Section 4.3 (Credits to Accounts) shall remain in the Eligible Employee's Matching Account until distributed pursuant to Article V (Distribution of Benefits).

ARTICLE V
DISTRIBUTION OF BENEFITS

5.1 General Distribution Rules.

(a) General Provisions. Except as otherwise provided in Sections 5.2 (Distribution Upon a Change in Control), Section 5.3 (Distribution Upon Financial Emergency), and Section 5.4 (Death Benefits), a Participant's Accounts shall be distributed to the Participant (or to his Beneficiary in the event of his death) as provided in this Section.

(b) Participant's Election. For each Plan Year, a Participant may select, on a form provided by the Committee and from among the options described in this Section, the form for the payment of his deferrals and contributions for the Plan Year (and any investment earnings attributable to those deferrals and contributions). A Participant's election for each Plan Year shall be irrevocable, but the Participant may make a new election for each Plan Year's deferrals and contributions.

(1) Form of Distribution. A Participant may elect to have his deferrals and contributions (and attributable earnings) for a Plan Year distributed in one of the following forms:

(A) A lump sum payment; or

(B) Substantially equal annual installments over a specified
number of two to ten years.

(2) Time of Distribution. Distribution of a Participant's interest in his Accounts shall commence no later than 30 days after the earlier of the Participant's death or his Termination of Employment. Subsequent installments shall be payable on or as soon as administratively feasible following the first business day of each succeeding year.

(c) Default Procedure. If a Participant fails to make an election pursuant to this Section, then, except as otherwise provided in Section 5.2 (Distribution Upon a Change in Control, Section 5.3 (Distribution Upon Financial Emergency), and Section 5.4 (Death Benefits), the Participant's Accounts (and attributable earnings) shall be distributed in five substantially equal annual installments commencing no later than 30 days after the earlier of the Participant's death or his Termination of Employment.

5.2 Distribution Upon a Change in Control.

(a) Notwithstanding any other Section, if a Change in Control occurs, the Committee in its sole discretion may elect to accelerate the distribution of a Participant's Accounts so that a Participant's Accounts shall be distributed to the Participant (or, in the event of his death, to his Beneficiary) in a single lump sum payment no later than 30 days after the Change in Control occurs.

(b) As used in this Plan, a "Change in Control" of the Company shall occur if (1) any "person" or "group" (within the meaning of Subsection 13(d) and Paragraph 14(d)(2) of the 1934 Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of more than 50 percent of the then outstanding voting stock of the Company, otherwise than through a transaction arranged by, or consummated with the prior approval of, the Board of Directors; (2) the Company's shareholders approve a definitive agreement to merge or consolidate the Company with or into another corporation in a transaction in which neither the Company nor any of its subsidiaries or affiliates will be the surviving corporation, or to sell or otherwise dispose of all or substantially all of the Company's asset to any person or group other than the Company or any of its subsidiaries or affiliates, other than a merger or a sale which will result in the voting securities of the Company outstanding prior to the merger or sale continuing to represent at least 50 percent of the combined voting power of the voting securities of the corporation surviving the merger or purchasing the assets; or (3) during any period of two consecutive years, individuals who at the beginning of that period constitute the Board of Directors (and any new Director whose election by the Board of Directors or whose nomination for election by the Company's shareholders was approved by a vote of at least two- thirds of the Directors then still in office who either were Directors at the beginning of that period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors.

5.3 Distribution Upon Financial Emergency. A Participant or Beneficiary, upon written petition to the Committee, may withdraw some or all of the balance of the Participant's Deferral Account or Matching Account if the Committee, in its sole discretion, determines that the requested withdrawal is on account of an Unforeseeable Emergency and that the amount to be withdrawn does not exceed the amount necessary to satisfy the Unforeseeable Emergency. The balance of the Participant's Deferral Account or Matching Account available for withdrawal shall not include any amount that the Participant elected to contribute to the
401(k) Plan but that has not yet been transferred to the
401(k) Plan pursuant to Section 4.7 (Determination and Treatment of Amounts Contributable to the 401(k) Plan). Withdrawals under this Section shall not be permitted to the extent that the Unforeseeable Emergency may reasonably be relieved through (a) reimbursement or compensation by insurance or otherwise, (b) liquidation of the Participant's or Beneficiary's assets (to the extent liquidation would not itself cause a financial hardship), or (c) suspension or cessation of elective deferrals under this Plan or the
401(k) Plan.

5.4 Death Benefits. In the event that a Participant dies before his Accounts are completely distributed, his Beneficiary shall be entitled to a death benefit equal to the amount credited to the Participant's Accounts immediately before his death. The form and timing of the payment of the death benefit shall be determined pursuant to
Section 5.1 (General Distribution Rules).

5.5 Designation of Beneficiary. A Participant's Beneficiary shall be the person or persons, including a trustee, designated by the Participant in writing pursuant to the practices of, or rules prescribed by, the Committee, as the recipient of any benefits payable under the Plan following the Participant's death. To be effective, a Beneficiary designation must be filed with the Committee during the Participant's life on a form prescribed by the Committee; provided, however, that finalized divorce or marriage (other than a common law marriage) shall automatically revoke a previously filed Beneficiary designation, unless in the case of divorce the former spouse was not designated as the Beneficiary or in the case of marriage the Participant's new spouse is already the designated Beneficiary. If the Participant designates more than one Beneficiary, any payments under this Article to each Beneficiary shall be made in equal shares unless the Participant has designated otherwise, in which case the payments shall be made in the shares designated by the Participant. If no person has been designated as the Participant's Beneficiary, if a Participant's Beneficiary designation has been revoked by marriage or divorce, or if no person designated as Beneficiary survives the Participant, the Participant's estate shall be his Beneficiary.

ARTICLE VI
ADMINISTRATION

6.1 Administrator. The Committee shall be the Administrator of the Plan. All decisions of the Committee shall be by a vote of a majority of its members and shall be final and binding.

6.2 Notices. Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if it is in writing or hand delivered, or sent by registered or certified mail, to any member of the Committee or its designate. The notice or filing shall be deemed made as of the date of delivery, or if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

6.3 Powers and Duties of the Committee. Subject to the specific limitations stated in this Plan, the Committee shall have the following powers, duties, and responsibilities:

(a) To carry out the general administration of the Plan;

(b) To cause to be prepared all forms necessary or appropriate for the administration of the Plan;

(c) To keep appropriate books and records;

(d) To determine amounts to be distributed to Participants and Beneficiaries under the provisions of the Plan;

(e) To determine, consistent with the provisions of this instrument, all questions of eligibility, rights, and status of Participants and Beneficiaries under the Plan;

(f) To issue, amend, and rescind rules relating to the administration of the Plan, to the extent those rules are consistent with the provisions of this document;

(g) To exercise all other powers and duties specifically conferred upon the Committee elsewhere in this document; and

(h) To interpret, with discretionary authority, the provisions of this Plan and to resolve, with discretionary authority, all disputed questions of Plan interpretation and benefit eligibility.

ARTICLE VII
AMENDMENT AND TERMINATION

7.1 Amendment. The Company reserves the right to amend the Plan at any time by action of the Board of Directors or the Committee, with written notice given to each Participant in the Plan. The Company, however, may not make any amendment that reduces a Participant's benefits accrued as of the date of the amendment unless the Participant consents in writing to the amendment. Notwithstanding the foregoing, the Company may not amend any of the provisions of Section 5.2 (Distribution Upon a Change in Control) within three years of a Change in Control.

7.2 Termination. The Company reserves the right to terminate the Plan, by action of the Board of Directors or the Committee, at any time it deems appropriate. Upon termination of the Plan, no further contribution shall be made to the Plan. Subject to Section 5.2 (Distribution Upon a Change in Control), distribution following termination of the Plan shall be made at the time and under the terms and conditions as the Company, in its sole discretion, shall determine, which shall commence no later than the earlier of a Participant's death or Termination of Employment.

ARTICLE VIII
MISCELLANEOUS

8.1 Relationship. Notwithstanding any other provision of this Plan, this Plan and action taken pursuant to it shall not be deemed or construed to establish a trust or fiduciary relationship of any kind between or among the Company, Participants, Beneficiaries or any other persons. The Plan is intended to be unfunded for purposes of the Code and the Employee Retirement Income Security Act of 1974, as amended. The rights of Participants and Beneficiaries to receive payment of deferred compensation under the Plan is strictly a contractual right of payment, and this Plan does not grant, nor shall it be deemed to grant Participants, Beneficiaries, or any other person any interest or right to any of the funds, property, or assets of the Employer other than as an unsecured general creditor of the Employer.

8.2 Other Benefits and Plans. Nothing in this Plan shall be deemed to prevent Participants from receiving, in addition to the benefits provided for under this Plan, any funds that may be distributable to them at any time under any other present or future retirement or incentive plan of the Employer.

8.3 Anticipation of Benefits. Neither Participants nor Beneficiaries shall have the power to transfer, assign, anticipate, pledge, alienate, or otherwise encumber in advance any of the payments that may become due under this Plan, and any attempt to do so shall be void. Any payments that may become due under this Plan shall not be subject to attachment, garnishment, execution, or be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise.
8.4 No Guarantee of Continued Employment. Nothing contained in this Plan or any action taken under the Plan shall be construed as a contract of employment or as giving any Participant any right to be retained in employment with the Employer. The Employer specifically reserves the right to terminate any Participant's employment at any time with or without cause, and with or without notice or assigning a reason, subject to the terms of any written employment agreement between the Participant and the Employer.

8.5 Waiver of Breach. The Company's or the Committee's waiver of any Plan provision shall not operate or be construed as a waiver of any subsequent breach by the Participant.

8.6 Protective Provisions. Each Participant shall cooperate with the Company and the Committee by furnishing any and all information requested by the Company or the Committee in order to facilitate the payment of benefits under the Plan, and by taking any other relevant action as may be requested by the Company or the Committee. If any Participant refuses so to cooperate, the Company shall have no further obligation to the Participant or his Beneficiary under this Plan, other than to distribute to the Participant the cumulative deferrals he has already made, and the cumulative contributions that have been made on his behalf, pursuant to the Plan; provided, however, that the Committee may determine that benefits may be payable in an amount reduced to compensate the Company for any loss, cost, damage, or expense suffered or incurred by the Company as a result in any way of the Participant's action or failure to act.

8.7 Benefit. This Plan shall be binding upon and inure to the benefit of the Employer and its successors and assigns.

8.8 Responsibility for Legal Effect. Neither the Committee nor the Company makes any recommendations or warranties, express or implied, or assumes any responsibility concerning the legal context or other implications or effects of this Plan.

8.9 Tax Withholding. The Employer shall withhold from any deferrals or from any payment made under the Plan such amount or amounts as may be required by applicable federal, State, or local laws.

Cinergy Corp. has caused this document to be executed by its duly authorized officers, as of the ____ day of _________________, 1996.

By:                JAMES E. ROGERS
                     James E. Rogers
           Vice Chairman, President and
                Chief Executive Officer

Dated:             December 30, 1996

APPROVED:

By:             CHERYL M. FOLEY
                   Cheryl M. Foley
           Vice President, General Counsel
             and Corporate Secretary

Dated:         December 30, 1996

CINERGY CORP. NONQUALIFIED
DEFERRED INCENTIVE COMPENSATION PLAN

ARTICLE I
NATURE AND PURPOSE OF PLAN

1.1 History of Plan. This document is a continuation and complete restatement, effective December 1, 1996, of the Cinergy Corp. Nonqualified Deferred Compensation Plan, which was approved by the Board of Directors on January 25, 1996. Effective December 1, 1996, the Plan is renamed the Cinergy Corp. Nonqualified Deferred Incentive Compensation Plan.

1.2 Type of Plan. The Plan is maintained by the Company as an unfunded, nonqualified deferred compensation plan for a select group of the Employer's management or highly- compensated employees.

1.3 Purpose of Plan. The purpose of the Plan is to provide a means for the payment of deferred incentive compensation to a select group of key senior management employees of the Employer, in recognition of their substantial contributions to the operation of the Employer, and to provide those individuals with additional financial security as an inducement to them to remain in employment with the Employer.

ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION

2.1 Definitions. As used in the Plan, the following words and phrases, when capitalized, have the following meanings except when used in a context that plainly requires a different meaning:

(a) "Account" means the record of a Participant's interest in the Plan.

(b) "Beneficiary" means, with respect to a Participant, the person or persons designated pursuant to Section 5.5 (Designation of Beneficiary) to receive benefits under the Plan in the event of the Participant's death.

(c) "Board of Directors" means the duly constituted board of directors of the Company on the applicable date.

(d) "Change in Control" means an event described in Subsection 5.2(b) (Distribution Upon a Change in Control).

(e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and interpretive rules and regulations.

(f) "Committee" means a committee composed of those members of the Compensation Committee of the Board of Directors who are not Participants in the Plan.

(g) "Company" means Cinergy Corp., a Delaware Corporation, and any corporation that shall succeed to its business and adopt the Plan.

(h) "Compensation" means, with respect to a Participant for a Plan Year, the award or bonus payable to the Participant for the Plan Year under any of the Company's annual or long-term incentive plans or programs determined by the Committee as awards or bonuses to be eligible for deferral under this Plan.

(i) "Deferral Agreement" means the written agreement entered into between an Eligible Employee and the Employer pursuant to which the Eligible Employee elects to make deferrals under the Plan.

(j) "Eligible Employee" means a key management Employee who is selected by the Committee as an individual who has the opportunity to impact significantly the annual operating success of the Employer.

(k) "Employee" means any person employed by the Employer on a full-time salaried basis, including officers of the Company or a Related Employer.

(l) "Employer" means the Company and any Related Employer.

(m) "Insolvent" means, with respect to the Company, the Company being unable to pay its debts as they are due, or the Company being subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

(n) "Investment Options" means, with respect to any Plan Year, the investment options designated by the Committee as available measures of investment earnings under the Plan for the Plan Year.

(o) "Participant" means an Eligible Employee or former Eligible Employee who has an interest in the Plan pursuant to Section 3.2 (Election to Defer).

(p) "Plan" means this document, as amended from time to time, and the nonqualified deferred compensation plan so established.

(q) "Plan Year" means a calendar year commencing on or after January 1, 1997.

(r) "Rabbi Trust" means the grantor trust that the Company, in its sole discretion, may establish pursuant to Subsection 4.4(b) (Accounts Unfunded) for the deposit of funds to be used for the exclusive purpose of paying benefits accrued under the Plan, subject to the claims of the Company's general creditors in the event the Company becomes Insolvent.

(s) "Related Employer" means any Employer that, together with the Company, is under common control or a member of an affiliated service group, as determined under Code Subsections 414(b), (c), (m), and (o).

(t) "Termination of Employment" means, with respect to a Participant, the cessation of the relationship of Employer and Employee between the Participant and the Employer for any reason other than the Participant's death. A Participant shall not be treated as having incurred a Termination of Employment until the employment relationship between the Participant and all Related Employers has terminated.

(u) "Trustee" means the trustee of the Rabbi Trust that the Company, in its sole discretion, may establish pursuant to Subsection 4.4(b) (Accounts Unfunded).

(v) "Unforeseeable Emergency" means, for the purpose of Subsection 3.2(d) (Suspension or Cessation of Deferrals) and Section 5.3 (Distribution Upon Financial Emergency), with respect to a Participant or Beneficiary, a severe financial hardship to the Participant or Beneficiary resulting from a sudden and unexpected illness or accident of the Participant, Beneficiary, or his or her dependents; loss of the Participant's or Beneficiary's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's or Beneficiary's control.

2.2 Rules of Construction. The following rules of construction shall govern in interpreting the Plan:

(a) The provisions of this Plan shall be construed and governed in all respects under and by the internal laws of the State of Ohio, to the extent not preempted by federal law.

(b) Words used in the masculine gender shall be construed to include the feminine gender, where appropriate, and vice versa.

(c) Words used in the singular shall be construed to include the plural, where appropriate, and vice versa.

(d) The headings and subheadings in the Plan are inserted for convenience of reference only and are not to be considered in the construction of any provision of the Plan.
(e) If any provision of the Plan shall be held to be illegal or invalid for any reason, that provision shall be deemed to be null and void, but the invalidation of that provision shall not otherwise impair or affect the Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION

3.1 Eligibility. Participation in the Plan is limited to Eligible Employees.

3.2 Election to Defer.

(a) Incentive Plans Subject to the Plan. For each Plan Year the Committee shall designate which, if any, incentive compensation plans and programs of the Employers are subject to the provisions of the Plan for that Plan Year.

(b) Election Procedure. Within a reasonable time before the beginning of each Plan Year, the Committee shall provide each Eligible Employee with a Deferral Agreement. An Eligible Employee may elect to defer all or a specified portion of his Compensation under the Plan by delivering a completed Deferral Agreement to the Committee or its designate prior to the first day of the Plan Year. On the Deferral Agreement, the Eligible Employee shall indicate the amount or percentage of his Compensation to be deferred under the Plan for the Plan Year, subject to the provisions of Subsection (b). Subject to Subsection (c), an election made under this Section shall be effective as of the first day of the Plan Year, and subject to Subsection
(d), the election for any Plan Year shall be irrevocable.

(c) Maximum Amount of Deferrals. For each Plan Year beginning on or after the Effective Date, each Eligible Employee may elect to defer under the Plan up to 100% of his Compensation.

(d) New Participant Deferrals. The Committee, in its sole discretion, may permit a new Eligible Employee to enroll in the Plan during a Plan Year and, no later than 30 days after becoming an Eligible Employee, make an irrevocable prospective election to defer a portion of his Compensation for the remainder of the Plan Year.

(e) Suspension or Cessation of Deferrals. With the written consent of the Committee, a Participant may suspend or cease deferrals, in whole or in part, during the course of a Plan Year, due to an Unforeseeable Emergency. Suspension or cessation of deferrals shall not in any way affect a Participant's rights or benefits with respect to amounts already deferred under the Plan. In the event a Participant suspends or ceases deferrals pursuant to this Subsection, the Participant shall not be permitted to resume deferrals before the first day of the following Plan Year or such later date as specified by the Committee.

3.3 Cessation of Participation. Any Participant who ceases to be an Eligible Employee, but continues to be an Employee, shall cease to be eligible to make deferrals under this Article but shall continue to have an Account, shall continue to be credited with earnings and losses on his Account under Section 4.2 (Earnings and Losses) until those Accounts are fully distributed pursuant to Article V (Distribution of Benefits), and shall be entitled to receive benefits under Article V (Distribution of Benefits).

ARTICLE IV
PARTICIPANTS' ACCOUNTS

4.1 Establishment of Accounts. The Committee shall create and maintain adequate records to disclose the interest in the Plan of each Participant and Beneficiary. Records shall be in the form of individual bookkeeping accounts, which shall be credited with deferrals and contributions pursuant to Sections 3.2 (Election to Defer), and earnings and losses pursuant to Section 4.2 (Earnings and Losses), and debited with any payments pursuant to Article V (Distribution of Benefits). Each Participant shall have a separate Account. The Participant's interest in his Account shall be fully vested at all times. Notwithstanding the preceding sentence, the Participant's interest in his Account shall be subject to the claims of the Company's general creditors in the event the Company becomes Insolvent.

4.2 Earnings and Losses.

(a) Deemed Investment of Accounts. During each Plan Year, a Participant's Account shall be credited with investment earnings and losses as though it is invested, in accordance with the Participant's election pursuant to Subsection (b), in one or more of the Investment Options. The deemed investment of a Participant's Account among the Investment Options in accordance with the Participant's election is solely the measure of the investment performance of the Account. It does not give the Participant any ownership interest in any Investment Option, nor does it bind the Company, the Committee, or the Trustee as to the investment of any Rabbi Trust or any other amounts represented by the Accounts.

(b) Election Procedure. Each Participant, upon first becoming an Eligible Employee, may make an initial election, on a form provided by the Committee, to allocate his Account among the Investment Options. If the Participant fails to make an initial election, he shall be deemed to have elected to allocate his Account to the Fidelity Retirement Money Market Fund Investment Option for that Plan Year. A Participant may change his Investment Option designations (for his future deferrals, his existing Account, or both) once each Plan Year, as of the first day of the Plan Year, by filing an appropriate election form with the Committee by the prior December 31. Until a Participant timely files a new investment election form, his prior Investment Option designation shall control.

4.3 Credits to Accounts.

(a) A Participant's deferrals pursuant to Section 3.2 (Election to Defer) shall be credited to his Account in terms of cash as of the date(s) on which the deferred amount would otherwise have been paid to the Participant.

(b) Earnings and losses on the deemed investment of the Participant's Account under Section 4.2 (Earnings and Losses) shall be credited monthly, on the last day of each month, based on the value of the Participant's Account as of the first day of the month.

4.4 Accounts Unfunded.

(a) Accounts shall be accounting accruals, in the names of Participants, on the Employer's books. Accounts shall be unfunded, so that the Employer's obligation to pay benefits under the Plan is merely a contractual duty to make payments when due under the Plan. The Employer's promise to pay benefits under the Plan shall not be secured in any way, and except as provided in Subsection (b), the Company shall not set aside or segregate assets for the purpose of paying amounts credited to Participants' Accounts.

(b) Notwithstanding the provisions of Subsection (a), the Company, in its sole discretion, may establish a Rabbi Trust. The Employer, in its sole discretion, may make such contributions to the Rabbi Trust as the Committee determines are appropriate to enable the Employer to pay benefits under the Plan. Any Rabbi Trust established under this Section shall be created pursuant to a written trust document that conforms to the model form of rabbi trust agreement approved by the Internal Revenue Service in Revenue Procedure 92-64 (as amended from time to time).

4.5 Valuation of Accounts. The value of a Participant's Account as of any date shall equal the dollar amount of any deferrals credited to the Account pursuant to Section 3.2 (Election to Defer), increased or decreased by the earnings and losses deemed to be credited to the Account in accordance with Section 4.2 (Earnings and Losses), and decreased by the amount of any payments made from the Account to the Participant or his Beneficiary pursuant to Article V (Distribution of Benefits).

4.6 Annual Report. Within 120 days following the end of each Plan Year, the Committee shall provide to each Participant a written statement of the amount standing to his credit in his Account as of the end of that Plan Year.

ARTICLE V
DISTRIBUTION OF BENEFITS

5.1 General Distribution Rules.

(a) General Provisions. Except as otherwise provided in Sections 5.2 (Distribution Upon a Change in Control), Section 5.3 (Distribution Upon Financial Emergency), and Section 5.4 (Death Benefits), a Participant's Account shall be distributed to the Participant (or to his Beneficiary in the event of his death) as provided in this Section.

(b) Participant's Election. For each Plan Year, a Participant may select, on a form provided by the Committee and from among the options described in this Section, the form for the payment of his deferrals for the Plan Year (and any investment earnings attributable to those deferrals). A Participant's election for each Plan Year shall be irrevocable, but the Participant may make a new election for each Plan Year's deferrals.

(1) Form of Distribution. A Participant may elect to have his deferrals (and attributable earnings) for a Plan Year distributed in one of the following forms:

(A) A lump sum payment; or

(B) Substantially equal annual installments over a specified
number of two to ten years.

(2) Time of Distribution. Distribution of a Participant's interest in his Account shall commence no later than 30 days after the earlier of the Participant's death or his Termination of Employment. Subsequent installments shall be payable on or as soon as administratively feasible following the first business day of each succeeding year.

(c) Default Procedure. If a Participant fails to make an election pursuant to this Section, then, except as otherwise provided in Section 5.2 (Distribution Upon a Change in Control, Section 5.3 (Distribution Upon Financial Emergency), and Section 5.4 (Death Benefits), the Participant's Account (and attributable earnings) shall be distributed in five substantially equal annual installments commencing no later than 30 days after the earlier of the Participant's death or his Termination of Employment.

5.2 Distribution Upon a Change in Control.

(a) Notwithstanding any other Section, if a Change in Control occurs, the Committee in its sole discretion may elect to accelerate the distribution of a Participant's Account so that a Participant's Account shall be distributed to the Participant (or, in the event of his death, to his Beneficiary) in a single lump sum payment no later than 30 days after the Change in Control occurs.

(b) As used in this Plan, a "Change in Control" of the Company shall occur if (1) any "person" or "group" (within the meaning of Subsection 13(d) and Paragraph 14(d)(2) of the 1934 Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of more than 50 percent of the then outstanding voting stock of the Company, otherwise than through a transaction arranged by, or consummated with the prior approval of, the Board of Directors; (2) the Company's shareholders approve a definitive agreement to merge or consolidate the Company with or into another corporation in a transaction in which neither the Company nor any of its subsidiaries or affiliates will be the surviving corporation, or to sell or otherwise dispose of all or substantially all of the Company's asset to any person or group other than the Company or any of its subsidiaries or affiliates, other than a merger or a sale which will result in the voting securities of the Company outstanding prior to the merger or sale continuing to represent at least 50 percent of the combined voting power of the voting securities of the corporation surviving the merger or purchasing the assets; or (3) during any period of two consecutive years, individuals who at the beginning of that period constitute the Board of Directors (and any new Director whose election by the Board of Directors or whose nomination for election by the Company's shareholders was approved by a vote of at least two- thirds of the Directors then still in office who either were Directors at the beginning of that period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors.

5.3 Distribution Upon Financial Emergency. A Participant or Beneficiary, upon written petition to the Committee, may withdraw some or all of the balance of the Participant's Account if the Committee, in its sole discretion, determines that the requested withdrawal is on account of an Unforeseeable Emergency and that the amount to be withdrawn does not exceed the amount necessary to satisfy the Unforeseeable Emergency. Withdrawals under this Section shall not be permitted to the extent that the Unforeseeable Emergency may reasonably be relieved through (a) reimbursement or compensation by insurance or otherwise, (b) liquidation of the Participant's or Beneficiary's assets (to the extent liquidation would not itself cause a financial hardship), or (c) suspension or cessation of elective deferrals under this Plan.

5.4 Death Benefits. In the event that a Participant dies before his Account is completely distributed, his Beneficiary shall be entitled to a death benefit equal to the amount credited to the Participant's Account immediately before his death. The form and timing of the payment of the death benefit shall be determined pursuant to Section 5.1 (General Distribution Rules).

5.5 Designation of Beneficiary. A Participant's Beneficiary shall be the person or persons, including a trustee, designated by the Participant in writing pursuant to the practices of, or rules prescribed by, the Committee, as the recipient of any benefits payable under the Plan following the Participant's death. To be effective, a Beneficiary designation must be filed with the Committee during the Participant's life on a form prescribed by the Committee; provided, however, that finalized divorce or marriage (other than a common law marriage) shall automatically revoke a previously filed Beneficiary designation, unless in the case of divorce the former spouse was not designated as the Beneficiary or in the case of marriage the Participant's new spouse is already the designated Beneficiary. If the Participant designates more than one Beneficiary, any payments under this Article to each Beneficiary shall be made in equal shares unless the Participant has designated otherwise, in which case the payments shall be made in the shares designated by the Participant. If no person has been designated as the Participant's Beneficiary, if a Participant's Beneficiary designation has been revoked by marriage or divorce, or if no person designated as Beneficiary survives the Participant, the Participant's estate shall be his Beneficiary.

ARTICLE VI
ADMINISTRATION

6.1 Administrator. The Committee shall be the Administrator of the Plan. All decisions of the Committee shall be by a vote of a majority of its members and shall be final and binding.

6.2 Notices. Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if it is in writing or hand delivered, or sent by registered or certified mail, to any member of the Committee or its designate. The notice or filing shall be deemed made as of the date of delivery, or if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

6.3 Powers and Duties of the Committee. Subject to the specific limitations stated in this Plan, the Committee shall have the following powers, duties, and responsibilities:

(a) To carry out the general administration of the Plan;

(b) To cause to be prepared all forms necessary or appropriate for the administration of the Plan;

(c) To keep appropriate books and records;

(d) To determine amounts to be distributed to Participants and Beneficiaries under the provisions of the Plan;

(e) To determine, consistent with the provisions of this instrument, all questions of eligibility, rights, and status of Participants and Beneficiaries under the Plan;

(f) To issue, amend, and rescind rules relating to the administration of the Plan, to the extent those rules are consistent with the provisions of this document;

(g) To exercise all other powers and duties specifically conferred upon the Committee elsewhere in this document; and

(h) To interpret, with discretionary authority, the provisions of this Plan and to resolve, with discretionary authority, all disputed questions of Plan interpretation and benefit eligibility.

ARTICLE VII
AMENDMENT AND TERMINATION

7.1 Amendment. The Company reserves the right to amend the Plan at any time by action of the Board of Directors or the Committee, with written notice given to each Participant in the Plan. The Company, however, may not make any amendment that reduces a Participant's benefits accrued as of the date of the amendment unless the Participant consents in writing to the amendment. Notwithstanding the foregoing, the Company may not amend any of the provisions of Section 5.2 (Distribution Upon a Change in Control) within three years of a Change in Control.

7.2 Termination. The Company reserves the right to terminate the Plan, by action of the Board of Directors or the Committee, at any time it deems appropriate. Upon termination of the Plan, no further contribution shall be made to the Plan. Subject to Section 5.2 (Distribution Upon a Change in Control), distribution following termination of the Plan shall be made at the time and under the terms and conditions as the Company, in its sole discretion, shall determine, which shall commence no later than the earlier of a Participant's death or Termination of Employment.
ARTICLE VIII
MISCELLANEOUS

8.1 Relationship. Notwithstanding any other provision of this Plan, this Plan and action taken pursuant to it shall not be deemed or construed to establish a trust or fiduciary relationship of any kind between or among the Company, Participants, Beneficiaries or any other persons. The Plan is intended to be unfunded for purposes of the Code and the Employee Retirement Income Security Act of 1974, as amended. The rights of Participants and Beneficiaries to receive payment of deferred compensation under the Plan is strictly a contractual right of payment, and this Plan does not grant, nor shall it be deemed to grant Participants, Beneficiaries, or any other person any interest or right to any of the funds, property, or assets of the Employer other than as an unsecured general creditor of the Employer.

8.2 Other Benefits and Plans. Nothing in this Plan shall be deemed to prevent Participants from receiving, in addition to the benefits provided for under this Plan, any funds that may be distributable to them at any time under any other present or future retirement or incentive plan of the Employer.

8.3 Anticipation of Benefits. Neither Participants nor Beneficiaries shall have the power to transfer, assign, anticipate, pledge, alienate, or otherwise encumber in advance any of the payments that may become due under this Plan, and any attempt to do so shall be void. Any payments that may become due under this Plan shall not be subject to attachment, garnishment, execution, or be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise.

8.4 No Guarantee of Continued Employment. Nothing contained in this Plan or any action taken under the Plan shall be construed as a contract of employment or as giving any Participant any right to be retained in employment with the Employer. The Employer specifically reserves the right to terminate any Participant's employment at any time with or without cause, and with or without notice or assigning a reason, subject to the terms of any written employment agreement between the Participant and the Employer.

8.5 Waiver of Breach. The Company's or the Committee's waiver of any Plan provision shall not operate or be construed as a waiver of any subsequent breach by the Participant.

8.6 Protective Provisions. Each Participant shall cooperate with the Company and the Committee by furnishing any and all information requested by the Company or the Committee in order to facilitate the payment of benefits under the Plan, and by taking any other relevant action as may be requested by the Company or the Committee. If any Participant refuses to so cooperate, the Company shall have no further obligation to the Participant or his Beneficiary under this Plan, other than to distribute to the Participant the cumulative deferrals he has already made, and the cumulative contributions that have been made on his behalf, pursuant to the Plan; provided, however, that the Committee may determine that benefits may be payable in an amount reduced to compensate the Company for any loss, cost, damage, or expense suffered or incurred by the Company as a result in any way of the Participant's action or failure to act.

8.7 Benefit. This Plan shall be binding upon and inure to the benefit of the Employer and its successors and assigns.

8.8 Responsibility for Legal Effect. Neither the Committee nor the Company makes any recommendations or warranties, express or implied, or assumes any responsibility concerning the legal context or other implications or effects of this Plan.

8.9 Tax Withholding. The Employer shall withhold from any deferrals or from any payment made under the Plan such amount or amounts as may be required by applicable federal, State, or local laws.

Cinergy Corp. has caused this document to be executed by its duly authorized officers, as of December 1, 1996.

By:             CHERYL M. FOLEY
                   Cheryl M. Foley
        Vice President, General Counsel
               and Corporate Secretary

Dated:          December 30, 1996