THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

     This Third Amendment to Employment  Agreement (the "Third Amendment") dated
effective  May 1, 1998, is 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 Larry E. Thomas (the
"Executive").  Cinergy,  Cinergy  Services,  CG&E,  and PSI  will  sometimes  be
referred to in this Third Amendment collectively as the "Corporation".

     WHEREAS,  the Executive has been employed by the Corporation  since October
5, 1967;

     WHEREAS,  the Executive has been employed by the Corporation pursuant to an
Employment  Agreement  dated  effective as of October 24, 1994 (the  "Employment
Agreement"),  as amended by a First  Amendment  to  Employment  Agreement  dated
effective as of October 24, 1994 (the "First  Amendment") and a Second Amendment
to  Employment  Agreement  dated  effective  as of January 29, 1997 (the "Second
Amendment");

     WHEREAS,  the  parties  desire  to  amend  the  retirement  and  relocation
provisions of the Employment Agreement;

     NOW, THEREFORE,  the parties have agreed to enter into this Third Amendment
which amends the Employment Agreement, as previously amended, as follows:

1.   The  substantive  provisions of Section 3 (b) are deleted in their entirety
     and replaced with the following:

          "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


                                   Page 1 of 3









          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,  savings,  retirement and
          welfare plans,  practices,  policies and programs applicable generally
          to employees and/or other senior executives of the Corporation who are
          considered Tier II executives for  compensation  purposes,  including,
          but not  limited to, the Annual  Incentive  Plan,  the 1996  Long-Term
          Incentive Compensation Plan, the Executive Supplemental Life Insurance
          Program,  the Nonqualified  Deferred Incentive  Compensation Plan, the
          Excess 401(k) Plan, the NonUnion Employees' 401(k) Plan, the Non-Union
          Employees' Pension Plan and the Excess Benefit Plan, or any successors
          thereto, except with respect to any plan, practice,  policy or program
          to which the Executive has waived his rights in writing.

          With regard to the  Executive's  retirement  benefits,  the  Executive
          shall be entitled to a 'Contractual  Retirement Supplement' (paid from
          the Corporation's  general assets) which extends to the Executive upon
          retirement on or after age  fifty-five  (55) a  non-qualified  benefit
          that, when added to the Executive's benefit under the Pension Plan and
          the Excess Benefit Plan, or any successor thereto,  will provide total
          retirement  income  equivalent  to a full career  employee  with equal
          annual  earnings.  For  purposes of the  preceding  sentence,  a 'full
          career  employee'  shall mean an employee with  thirty-five  (35) full
          years of 'service' under the Pension Plan."

2.   The  substantive  provisions of Section 3 (e) are deleted in their entirety
     and replaced with the following:

          "e.   Relocation   Benefits.   The  Executive  shall  be  entitled  to
          reimbursement  from  the  Corporation  pursuant  to the  terms  of the
          Corporation's Relocation Program in


                                   Page 2 of 3






          effect as of the day and year first written  above,  as well as actual
          expenses for temporary  housing until such time as he has moved into a
          new  primary  residence  in the  general  area  of  the  Corporation's
          principal  corporate office located in Cincinnati,  Ohio. In addition,
          following  termination of the  Executive's  employment for any reason,
          the Corporation shall reimburse the Executive for the reasonable costs
          of  relocating  from  the  Cincinnati,  Ohio,  area  to a new  primary
          residence  in a  manner  that is  consistent  with  the  Corporation's
          Relocation Program in effect as of May 1, 1998. The expenses described
          in this  Section  shall be  'grossed-up'  to provide  for  adverse tax
          consequences to the Executive."

3.   All other  provisions of the Employment  Agreement,  First  Amendment,  and
     Second Amendment remain unchanged by this Third Amendment.

     IN WITNESS  WHEREOF,  the  Executive and the  Corporation  have caused this
Third Amendment to Employment  Agreement to be executed  effective 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
       Vice Chairman and
       Chief Executive Officer


         EXECUTIVE



- -----------------------------
       Larry E. Thomas

                                   Page 3 of 3