EMPLOYMENT AGREEMENT

2.  Position and Duties .

(a)  Duties . Subject to Section 2(e) below, the Employee shall be employed by Duke Energy as President and Chief Executive Officer in accordance with Sections 4.04 and 4.05 of the by-laws of Duke Energy as in effect at the Effective Date, as amended, and subject to Section 2(e) below the Employee shall continue to serve as Chairman of the Board. The Employee shall be responsible for the general management of the affairs of Duke Energy and shall perform all duties incidental to such positions which may be required by law and all such other duties as are properly required by the Board. The Employee shall report directly to the Board. For administrative purposes, Duke Energy may designate the Employee as being employed by one or more of its subsidiaries.

(b)  Engaging in Other Employment . While employed by Duke Energy, the Employee shall devote his full time and attention to Duke Energy and its subsidiaries and shall not be employed by any other person or entity. Subject to Section 9, the Employee may reasonably participate as a member in community, civic, or similar organizations and may pursue personal investments, so long as such activities do not interfere with the performance of the Employee’s responsibilities as an employee in accordance with this Agreement, provided that the Employee may serve on corporate boards (other than the Board) with the approval of the Board, which approval shall not be unreasonably withheld, and provided further that the Employee’s service described on Exhibit A hereto is hereby approved as of the Effective Date.

(c)  Loyal and Conscientious Performance . The Employee shall act at all times in compliance with the policies, rules and decisions adopted from time to time by Duke Energy, its Board and any employing subsidiaries and perform all the duties and obligations required of him by this Agreement in a loyal and conscientious manner.

(d)  Location . The Employee’s principal office shall be at the principal executive offices of Duke Energy in Charlotte, North Carolina. Except for required business travel to an extent substantially consistent with the business travel obligations of other senior Duke Energy executives, the Employee will not be required to relocate to a new principal place of business that is more than fifty (50) miles from such location.

(e)  Chairman and President Roles .  The Employee shall continue to serve as President of Duke Energy during the term of this Agreement (as set forth in Section 3 hereof) unless, at any time during such term, Duke Energy either eliminates such position or appoints another individual to serve in such position, in which case the Employee shall cease to serve as President upon the effective date of such action by Duke Energy.  During the term of this Agreement, Duke Energy shall use its best efforts to cause the Employee to be reelected as Chairman of the Board, unless, at any time during such term, Duke Energy adopts a policy that its Chief Executive Officer should not serve as Chairman of the Board, in which case the Employee shall cease to serve as Chairman of the Board upon the effective date of such action by Duke Energy.

3.  Term of Employment . The term of the Employee’s employment pursuant to this Agreement shall commence on the Effective Date and end on December 31, 2013, unless terminated earlier pursuant to the provisions of this Agreement.

4.  Salary; Bonus; Existing Compensation Awards . The Employee shall not be paid a base salary, nor shall the Employee participate in the Duke Energy Corporation Executive Short-Term

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Incentive Plan (as it may be amended, or any successor thereto) or any other annual cash bonus program. The Employee’s compensation will be primarily through the equity awards specified in Section 5 below. Notwithstanding the foregoing, the equity incentive compensation grants awarded under the Existing Employment Agreement, together with any outstanding awards that survived the adoption of the Existing Employment Agreement, shall remain outstanding (and be paid, as the case may be) in accordance with their existing terms.

5.  Equity Awards . Subject to the following sentence, for 2009 and each other calendar year commencing during the term of this Agreement (an “Award Year”), Duke Energy will cause equity awards (the “LTIP Awards”) to be made to the Employee as provided in this Section 5, to be evidenced by award agreements (each, an “Award Agreement”) with additional customary terms not otherwise inconsistent with the terms of this Section 5, unless otherwise required to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code” and such Section 409A, together with the applicable Treasury Regulations thereunder, “Section 409A), or an applicable exception thereto. The LTIP Awards with respect to each Award Year shall be made effective as of the date equity incentive compensation awards are generally granted to other senior employees of Duke Energy under its long-term incentive program but in any event on or before March 31 of such year (the “Grant Date”), provided that no LTIP Awards shall be made for any Award Year if the Employee’s employment has terminated on or before the Grant Date.

(a)  Options . Duke Energy will grant to the Employee a nonqualified stock option to purchase Duke Energy common stock in respect of each Award Year (each an “Option”), which Option shall have a value (as determined pursuant to the final sentence of this Section 5(a)) equal to $1,200,000 for 2009 and $1,600,000 for each other Award Year. The exercise price of each Option will be the closing price of Duke Energy common stock on the Grant Date. The normal expiration date of each Option will be the tenth anniversary of the Grant Date. The Options will not be vested at the respective Grant Date, but, except as otherwise provided herein, the Options will become ratably vested and exercisable on the three successive anniversaries of the commencement of the Award Year in respect of which it is granted and otherwise shall be granted on terms and conditions reasonably determined by the Compensation Committee. Except as otherwise provided herein or as may be permitted in an award agreement memorializing an Option, the Employee may not dispose of any shares of Duke Energy common stock acquired upon the exercise of an Option until the earlier of January 1, 2014, or the termination of the Employee’s employment with Duke Energy. Any required tax withholdings in respect of Options shall be satisfied by withholding from delivery upon exercise a number of shares of Duke Energy common stock with a fair market value as of the date of required withholding equal to the minimum tax withholding obligation unless Duke Energy in its discretion permits the Employee to satisfy such tax obligation by other payment to Duke Energy.  The number of shares of Duke Energy common stock subject to each Option shall be determined pursuant to a Black-Scholes option pricing model incorporating the same assumptions used for determining the number of stock options granted as of the Grant Date to other senior executives of Duke Energy (or, if there are no such grants, as reasonably determined by the Compensation Committee in its discretion).

(b)  Phantom Stock . Effective as of the Grant Date for each Award Year, Duke Energy will grant to the Employee an award of phantom stock units in respect of the Award Year (each a “Phantom Stock Unit”) with respect to a number of shares of Duke Energy common stock with a

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value (determined pursuant to the same methodology used for such purpose in respect of stock incentive grants made as of the Grant Date to other senior executives of Duke Energy or, if there are no such grants, as reasonably determined by the Compensation Committee in its discretion) equal to $1,500,000 for 2009 and $2,000,000 for each other Award Year.

(i) Except as otherwise provided herein, twenty-five percent (25%) of the Phantom Stock Units will vest quarterly commencing with the end of the first quarter of the applicable Award Year.

(ii) Vested Phantom Stock Units will be paid to the Employee in the form of shares of Duke Energy common stock (with each Phantom Stock Unit corresponding to one share of Duke Energy common stock).  Subject to paragraph (iv) below, payment in respect of vested Phantom Stock Units shall be made after the Phantom Stock Unit vests, as provided in the agreement memorializing the Phantom Stock Units, all in accordance with Section 409A.

(iii) Duke Energy shall pay to the Employee, within 60 days after each date on which a cash dividend is paid in respect of Duke Energy Common Stock, an amount equal to the dividend that would have been paid to the Employee in respect of each then outstanding unvested Phantom Stock Unit as if such Phantom Stock Unit constituted an actual outstanding share of Duke Energy common stock.

(iv) The Employee at his election may defer, under the Duke Energy Corporation Executive Savings Plan (“ESP”), delivery of shares of Duke Energy common stock in respect of vested Phantom Stock Units by making an election in accordance with procedures established by Duke Energy from time to time under the ESP.

(v) Any required income tax withholdings in respect of dividend equivalents attributable to Phantom Stock Units shall be satisfied by reducing the cash payment in respect of the required withholding amount and, in the case of Phantom Stock Units, by withholding from delivery a number of shares of Duke Energy common stock with a fair market value as of the date of required withholding equal to the minimum tax withholding obligation, in each case unless Duke Energy in its discretion requires the Employee to satisfy such tax obligation by other payment to Duke Energy.  The employee portion of any local income tax or employment tax (i.e., FICA) withholding required upon vesting of Phantom Stock Units shall be satisfied by withholding from delivery a number of shares of Duke Energy common stock with a fair market value as of the date of required withholding equal to the minimum tax withholding obligation or, in the case of shares whose delivery is deferred under the terms of the ESP, by crediting under the ESP a number of shares of Duke Energy common stock that is reduced by such number of shares, in each case unless Duke Energy in its discretion requires the Employee to satisfy such employment tax obligation by other payment to Duke Energy.

(c)  Performance Shares . Effective as of the Grant Date for each Award Year, Duke Energy will grant to the Employee two performance share awards in respect of the Award Year (each a “Performance Share Award”) with respect to a number of shares of Duke Energy common stock as described below.  Each performance share represents the right to receive, conditioned upon vesting, one share of Duke Energy common stock.  The Performance Share Awards shall consist of an “Annual PSA” as described in paragraph (i) below and a “Long-Term

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PSA” described in paragraph (ii) below.  Except as otherwise provided in Section 10 hereof, vesting of the Performance Share Awards is contingent upon the Employee’s continued employment with Duke Energy through the end of the applicable performance period described below.

(i) Duke Energy will grant to the Employee an Annual PSA in respect of each Award Year with respect to a number of shares of Duke Energy common stock with a value (determined pursuant to the same methodology used for such purpose in respect of stock incentive grants made as of the Grant Date to other senior executives of Duke Energy or, if there are no such grants, as reasonably determined by the Compensation Committee in its discretion) equal, at target, to $1,500,000 for 2009 and $2,000,000 for each other Award Year and equal, at maximum, to $2,850,000 for 2009 and $3,800,000 for each other Award Year.  The Compensation Committee and/or other appropriate committee of the Board shall establish performance goals (which shall be consistent with the short-term incentive performance goals established for other senior executive officers of Duke Energy in respect of such Award Year) for the Employee in respect of the Annual PSA based upon performance in respect of the Award Year, and, subject to the provisions of Section 10 hereof, the Annual PSA will vest only if and to the extent such goals are achieved (provided that vesting can occur at less than the target levels (but at not more than the maximum levels, except that such maximum levels may be increased by safety goals that are applicable generally to other executive officers) described in the preceding sentence as determined by the Compensation Committee and vesting shall be interpolated for performance above the threshold vesting level and below the maximum level described in the preceding sentence).

(ii) Duke Energy will grant to the Employee a Long-Term PSA in respect of each Award Year with respect to a number of shares of Duke Energy common stock with a value (determined pursuant to the same methodology used for such purpose in respect of stock incentive grants made as of the Grant Date to other senior executives of Duke Energy or, if there are no such grants, as reasonably determined by the Compensation Committee in its discretion) equal, at target, to $1,800,000 for 2009 and $2,400,000 for each other Award Year and equal, at maximum, to $2,700,000 for 2009 and $3,600,000 for each other Award Year.  The Compensation Committee and/or other appropriate committee of the Board shall establish performance goals (which shall be consistent with the long-term incentive corporate performance goals established for other senior executive officers of Duke Energy in respect of such Award Year) for the Employee in respect of the Long-Term PSA based upon performance in respect of the three-year period beginning with the commencement of the respective Award Year, and, subject to the provisions of Section 10 hereof, the Long-Term PSA will vest only if and to the extent such goals are achieved (provided that vesting can occur at less than the target levels (but at not more than the maximum levels) described in the preceding sentence as determined by the Compensation Committee and vesting shall be interpolated for performance above the threshold vesting level and below the maximum level described in the preceding sentence).

(iii) Vesting of Performance Share Awards will occur only once the Compensation Committee determines that the performance goals for the respective performance period have been met (provided that the determination of whether the performance goals in respect of any performance period have been met shall be made not later than the first March 15

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following the end of the performance period). To the extent the performance goals are not met, the Performance Share Award will be forfeited and will cease to be outstanding.

(iv) Vested Performance Share Awards will be paid to the Employee in the form of shares of Duke Energy common stock (with each Performance Share Award corresponding to one share of Duke Energy common stock) after the Performance Share Awards vest, as provided in the agreement memorializing the Performance Share Awards, all in accordance with Section 409A.

(v) Subject to paragraph (vi) below, Duke Energy shall pay to the Employee, as of the date of payment of each respective vested Performance Share Award, an amount equal to the dividends that would have been payable in respect of such vested Performance Share Award during the performance period applicable to such Performance Share Award as if such vested Performance Share Award constituted an actual outstanding share of Duke Energy Common Stock during such performance period.

(vi) The Employee at his election may defer, under the ESP, delivery of shares of Duke Energy common stock in respect of vested Performance Share Awards by making an election in accordance with procedures established by Duke Energy from time to time under the ESP.

(vii) Any required income tax withholdings shall be satisfied, in the case of dividend equivalents attributable to Performance Share Awards, by reducing the payment in respect of the required withholding amount and, in the case of Performance Share Awards, by withholding from delivery a number of shares of Duke Energy common stock with a fair market value as of the date of required withholding equal to the minimum tax withholding obligation, in each case unless Duke Energy in its discretion requires the Employee to satisfy such tax obligation by other payment to Duke Energy.  The employee portion of any local income tax or employment tax (i.e., FICA) withholding required upon vesting of Performance Share Awards shall be satisfied by withholding from delivery a number of shares of Duke Energy common stock with a fair market value as of the date of required withholding equal to the minimum tax withholding obligation or, in the case of shares whose delivery is deferred under the terms of the ESP, by crediting under the ESP a number of shares of Duke Energy common stock that is reduced by such number of shares, in each case unless Duke Energy in its discretion requires the Employee to satisfy such employment tax obligation by other payment to Duke Energy.

(d)  Shareholder Approved Share Limits . The number of shares of Duke Energy common stock to be granted or delivered under the LTIP Awards shall not exceed those that may be granted in accordance with the individual share award limits applicable under the Duke Energy Corporation 2006 Long-Term Incentive Plan or any other applicable plan.  If the number of shares of Duke Energy common stock to be granted or delivered under LTIP Awards otherwise would exceed such limits for any reason, the number of shares to be granted or delivered shall be adjusted by the Compensation Committee in its discretion to reflect appropriate compensation in light of such decline.

6.  Fringe Benefits . The Employee and his eligible dependents shall also be entitled to participate in Duke Energy’s or its affiliates’ medical and dental health care plans to the extent

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such plans are available generally to other similarly situated senior executives of Duke Energy and their eligible dependents (provided that the employee-paid portion of any premium contributions required of the Employee shall be made in any event on a post-tax rather than a pre-tax basis). The Employee shall also be entitled to, at the Employee’s election on an annual basis, either participation in Duke Energy’s Executive Physicals Program or an annual physical to be performed at the Mayo Clinic by a physician of the Employee’s choosing. Except for the foregoing, and except as expressly set forth elsewhere in this Agreement, the Employee will not be entitled to any other retirement, health, or welfare benefits, or to participation in, or the accrual of benefits under, any other retirement, health, or welfare benefit plan, practice, policy, or program of Duke Energy or any of its affiliates. Except as specifically set forth in this Agreement and except for participation in Duke Energy’s charitable matching gifts program, the Employee shall not be entitled to any perquisite or fringe benefit, such as company automobiles, automobile allowances, and club memberships. The Employee shall be reimbursed for ordinary and reasonable expenses specifically including but not limited to those associated with entertainment and travel in accordance with Duke Energy policies and procedures. To the extent the Employee incurs ordinary and reasonable expenses associated with his spouse accompanying him on business travel, and/or to the extent such travel is treated by the taxing authorities as a taxable personal benefit to the Employee or his spouse, Duke Energy will reimburse the Employee for those expenses and will also pay to the Employee a tax gross-up payment in an amount sufficient to hold him harmless from any federal, state and local income and employment taxes due in respect of such taxable personal benefit and related gross-up payment. Notwithstanding anything in this Section 6 to the contrary, Duke Energy acknowledges that the Employee has previously been employed by Cinergy Corp. or its predecessor or affiliated entities, and by virtue of such previous employment he is entitled to benefits under various plans and agreements of Cinergy or its affiliates. Duke Energy and the Employee agree that the Employee’s rights to such benefits will be unaffected — neither enhanced nor diminished — as a result of his employment by Duke Energy or its affiliates pursuant to this Agreement.

7.  Use of Duke Energy Aircraft . Duke Energy desires to provide for the security of the Employee during his travels, and accordingly, whenever feasible, Duke Energy will require the Employee to use Duke Energy aircraft for his business travel. The Employee will also be permitted to use Duke Energy aircraft for his personal travel within North America pursuant to Duke Energy’s standard policies as in effect from time to time and subject to availability in light of the use of Duke Energy aircraft for other Duke Energy business. The Employee shall reimburse Duke Energy for the cost of any such personal travel in accordance with Duke Energy’s standard rates and reimbursement policies as in effect from time to time, provided that no reimbursement shall be required in respect of (i) travel within the contiguous 48 United States to an annual physical as provided in Section 6 hereof or (ii) travel to meetings of the board of directors of other companies on whose board the Employee serves (further provided that, to the extent any such other company does or would reimburse the Employee for the cost of such travel, the Employee shall pay to Duke Energy within thirty (30) days of the date the reimbursement is (or would be) made the greater of the amount that is (or would be) reimbursed).  To the extent that the provision of aircraft usage is treated by the taxing authorities as a taxable personal benefit to the Employee, the Employee will be responsible for the payment of any taxes on such income, including making payments to Duke Energy to fund withholding obligations as described in Section 8 hereof.

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8.  Withholding . Duke Energy may effect withholdings, from the payments due to the Employee, for the payment of taxes and other lawful withholdings or required employee contributions, in accordance with applicable law. If circumstances arise in which such withholding or contributions are required on account of any compensation or benefits (including, without limitation, upon the payment or provision of any compensation or benefits pursuant to Sections 6 and 7), at a time when there are not cash payments being made to the Employee from which such withholding obligations can be satisfied, the Employee will deliver to Duke Energy amounts