<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant / /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
PSI RESOURCES, INC.
(Name of Registrant as Specified in Its Charter)
PSI RESOURCES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: 1
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of
its filing.
(1) Amount previously paid:
(2) Form schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
PSI RESOURCES, INC.
1000 East Main Street
Plainfield, Indiana 46168
March 9, 1994
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders on
Wednesday, April 20, 1994, to be held at 10:00 a.m., local time, at 1000 East
Main Street, Plainfield, Indiana. Whether or not you plan to attend, we will
greatly appreciate your giving prompt attention to the attached materials. At
the meeting, the shareholders will elect three Class III directors and transact
such other business as may legally come before the meeting, or any adjournment
thereof.
It is important to your interests that all shareholders, regardless of the
number of shares owned, participate in the affairs of the Company. Last year,
over 82% of the common shares were represented in person or by proxy at the
annual meeting. Even if you plan to attend the meeting, we urge you to mark,
sign and date the enclosed proxy and return it promptly. You have the option to
revoke it at any time, or to vote your shares personally on request if you
attend the meeting.
Sincerely yours,
/s/ JAMES E. ROGERS
James E. Rogers
Chairman and Chief Executive Officer
P.S. If you plan to attend the 1994 Annual Meeting, please let us know by
checking the box on the proxy form.
<PAGE> 3
PSI RESOURCES, INC.
1000 East Main Street
Plainfield, Indiana 46168
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 20, 1994
TO THE SHAREHOLDERS OF
PSI RESOURCES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PSI
Resources, Inc. (hereinafter called the "Company") will be held at 1000 East
Main Street, Plainfield, Indiana, on Wednesday, April 20, 1994, at 10:00 a.m.,
local time, for the purposes of:
(1) the election of three Class III directors; and
(2) transacting such other business as may legally come before the meeting.
The transfer books of the Company will not be closed. Only shareholders of
record at the close of business on Tuesday, February 22, 1994, will be entitled
to vote at the meeting and at any adjournment thereof. It is important that
your stock be represented at this meeting in order that the presence of a
quorum may be assured. Shareholders, whether or not they now expect to be
present at the meeting, are requested to mark, date and sign the enclosed
proxy, and return it promptly. An addressed envelope, on which no postage stamp
is necessary if mailed in the United States, is enclosed for use in returning
the proxy. A shareholder executing and delivering the enclosed proxy has the
power to revoke the same at any time before the authority granted by the proxy
is exercised.
A copy of the Company's Annual Report to Shareholders, including financial
statements, for the year ended December 31, 1993, was mailed to shareholders
concurrently with or prior to the mailing of this proxy statement.
PSI Resources, Inc.
By Cheryl M. Foley, Secretary
Dated March 9, 1994
<PAGE> 4
PSI RESOURCES, INC.
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is first being mailed on or about March 16, 1994, to
holders of the common stock of PSI Resources, Inc., an Indiana corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors (the "Board") of the Company for use at the Annual Meeting of
Shareholders to be held on April 20, 1994, and any adjournment of such meeting
(the "Annual Meeting").
RECORD DATE; VOTES REQUIRED; VOTING SECURITIES; PRINCIPAL SHAREHOLDERS
Only holders of record of the Company common stock at the close of business
on February 22, 1994, (the "Record Date") will be entitled to vote at the
Annual Meeting. The number of shares of the Company common stock outstanding as
of such date was 57,114,573. Each share of common stock entitles its owner to
one vote upon each matter to come before the meeting. A plurality vote is
required to elect directors. In tabulating the vote, abstentions and broker
non-votes, if any, will be disregarded and have no effect on the outcome of the
vote.
The only persons or groups known by management of the Company to be the
beneficial owners of more than 5% of any class of the Company's stock are
listed in the following table. This information is based on the most recently
available reports filed with the Securities and Exchange Commission pursuant to
the requirements of Section 13(d) of the Securities and Exchange Act of 1934.
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT (IN THOUSANDS OF SHARES) AND
NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------
DISPOSITIVE POWERS VOTING POWERS
NAME AND ADDRESS TOTAL SHARES PERCENT ------------------ -------------
OF BENEFICIAL OWNER HELD OF CLASS SHARED SOLE SHARED SOLE
- --------------------------------- ----------- --------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
The Prudential Insurance Company
of America 3,873(1) 6.80% 3,409 464 3,358 464
Prudential Plaza
Newark, New Jersey 07101-3777
FMR Corp. 3,404(2) 5.98% - 3,404 - 254
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
(1) As set forth in an Amendment to the Schedule 13G filed by The Prudential
Insurance Company of America with the SEC on February 7, 1994.
(2) As set forth in an Amendment to the Schedule 13G filed by FMR Corp.
with the SEC on February 11, 1994.
At a Special Meeting of the Company's shareholders, held on November 9,
1993, the shareholders voted in favor of a proposal to approve an Amended and
Restated Agreement and Plan of Reorganization (the "Merger Agreement") among
the Company, PSI Energy, Inc. and The Cincinnati Gas & Electric Company
("CG&E") into CINergy Corp. ("CINergy") and CINergy Sub, Inc. ("CINergy Sub")
(the "CINergy Merger"). This transaction may be deemed to be a change in
control.
SECURITY OWNERSHIP OF MANAGEMENT
The following sets forth the beneficial ownership of the Company's common
stock by the executive officers named in the compensation tables set forth
below as of December 31, 1993:
<TABLE>
<CAPTION>
COMMON STOCK(1)
---------------
<S> <C>
James E. Rogers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,196
Jon D. Noland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,542
J. Wayne Leonard . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,812
Larry E. Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,396
Cheryl M. Foley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,912
</TABLE>
1 Pursuant to Rule 13d-3 under the 1934 Act, these amounts include (i) with
respect to Mr. Rogers, 175,000 shares which Mr. Rogers has the right to
acquire within 60 days pursuant to the exercise of stock options and (ii)
with respect to each of Messrs. Noland, Leonard, Thomas and Ms. Foley,
50,000 shares which each of such individuals has the right to acquire within
60 days pursuant to the exercise of stock options. These amounts also
include shares held for the account of the named executive officers in the
PSI Energy Employees' 401(k) Savings Plan consisting of 1,452 shares for
Mr. Rogers, 1,761 shares for Mr. Noland, 1,862 shares for Mr. Leonard and
2,040 shares for Mr. Thomas.
3
<PAGE> 6
The beneficial ownership of the Company's common stock by the Board, and
of theoretical "units" equal to one share of the Company's common stock paid as
compensation to the Board, as of December 31, 1993 is set forth below.
<TABLE>
<CAPTION>
NAME COMMON STOCK (2) UNITS(3)
<S> <C> <C>
Michael G. Browning . . . . . . . . . . . . . . . . . . . . . . . 18,413 142
J. Wayne Leonard . . . . . . . . . . . . . . . . . . . . . . . . 56,812
John A. Hillenbrand, II . . . . . . . . . . . . . . . . . . . . . 27,625 94
Emerson Kampen . . . . . . . . . . . . . . . . . . . . . . . . . 15,500
Van P. Smith . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000
John M. Mutz . . . . . . . . . . . . . . . . . . . . . . . . . . 12,731
James E. Rogers . . . . . . . . . . . . . . . . . . . . . . . . . 198,196
Robert L. Thompson . . . . . . . . . . . . . . . . . . . . . . . 12,500
James K. Baker . . . . . . . . . . . . . . . . . . . . . . . . . 13,300
Hugh A. Barker . . . . . . . . . . . . . . . . . . . . . . . . . 37,162 85
Kenneth M. Duberstein . . . . . . . . . . . . . . . . . . . . . . 12,700
Melvin Perelman . . . . . . . . . . . . . . . . . . . . . . . . . 22,425 142
- -----------------------
</TABLE>
2 Pursuant to Rule 13d-3 of the 1934 Act, amounts set forth include shares
which the directors have the right to acquire within 60 days pursuant to the
exercise of stock options. Such shares, with respect to each director,
equal: Mr. Browning-12,500; Mr. Leonard-50,000; Mr. Hillenbrand-12,500; Mr.
Kampen-12,500; Mr. Smith-12,500; Mr. Mutz-12,500; Mr. Rogers-175,000; Mr.
Thompson-6,500; Mr. Baker-12,500; Mr. Barker-12,500; Mr. Duberstein-12,500
and Mr. Perelman-12,500. With respect to Mr. Barker and Mr. Mutz, their
shares also include 3,043 and 31 shares held for their account in the PSI
Energy Employees' 401(k) Savings Plan respectively.
3 "Units" in the above listing of directors refers to theoretical units equal
to one share of the Company's common stock credited to the account of the
respective directors as of December 31, 1993, under the Company's Deferred
Compensation Plan for Directors. For a summary of the plan, see "Directors'
Compensation" below.
As of December 31, 1993, all directors and executive officers as a group
beneficially owned 683,306 shares of the Company's common stock, or less than
2% of the class.
PROXIES
The enclosed proxy is solicited by the Board of the Company. Shares of the
Company common stock represented by properly executed proxies received at or
prior to the Annual Meeting will be voted in accordance with the instructions
thereon. If no instructions are indicated, proxies solicited by the Board will
be voted FOR the election to the Board of the nominees listed below. It is not
anticipated that any other matters will be brought before the Annual Meeting.
However, the enclosed proxy gives discretionary authority to the proxy holders
named therein should any other matters be presented at the Annual Meeting, and
it is the intention of such proxy holders to take such action in connection
therewith as shall be in accordance with their best judgment.
4
<PAGE> 7
Execution of a proxy will not prevent a shareholder from attending the
Annual Meeting and voting in person. Any shareholder giving a proxy may revoke
it at any time before it is voted by delivering to the Secretary of the Company
written notice of revocation bearing a later date than the proxy, by delivering
a duly executed proxy bearing a later date or by voting in person at the Annual
Meeting.
The Company will bear the cost of the solicitation of proxies by the Board.
The Company has engaged Morrow & Co., Inc. to assist in the solicitation of
proxies. It is anticipated that fees and expenses of approximately $5,500 will
be incurred. Proxies will be solicited by mail. In addition, officers and
regular employees of the Company may solicit proxies personally or by telephone
or telegraph. Such persons who are officers or regular employees of the Company
will receive no additional compensation for such services.
The Company has requested that brokerage houses and other custodians,
nominees and fiduciaries forward solicitation materials to the beneficial
owners of shares of the Company Common Stock held of record by such persons and
will reimburse such brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred in connection therewith.
DIRECTORS AND NOMINEES
ELECTION OF CLASS III DIRECTORS
The Board of the Company is divided into three classes with one-third of the
directors standing for election each year. Messrs. John M. Mutz, James E.
Rogers and Robert L. Thompson have been nominated for reelection as Class III
directors at the Annual Meeting for terms of three years each and until their
successors are duly elected and qualified.
Proxies representing shares held on the Record Date which are returned duly
executed will be voted, unless otherwise specified, in favor of the nominees
for the Board named below. All such nominees are members of the Company's
present Board. All nominees have consented to serve if elected, but if any
becomes unavailable to serve, the persons named as proxies may exercise their
discretion to vote for a substitute nominee.
Except as otherwise noted, the principal occupation or employment of each
individual set forth in the following tables has been such individual's
principal occupation or employment for the past five years and no such
individual holds another position or office with the Company. None of the
business organizations, other than PSI Energy, Inc. (Energy), PSI Investments,
Inc., PSI Argentina, Inc., PSI Recycling, Inc. and PSI Foundation, Inc. wholly
owned subsidiaries of the Company, with which the named individuals maintain
their principal occupation or employment is a parent, subsidiary or affiliate
of the Company.
5
<PAGE> 8
NAMES, AGES, PRINCIPAL OCCUPATIONS AND SELECTED INFORMATION
CLASS III DIRECTOR NOMINEES FOR TERMS TO EXPIRE IN 1997
JOHN M. MUTZ President of the Company
Director since 1991. Age 58 October 1993 to present.
Mr. Mutz is a director of PSI Energy, PSI Investments, Inc., PSI Argentina,
Inc., PSI Foundation, Inc. and PSI Recycling, Inc. He is also a director of
National City Bank, Indiana, CCP Insurance, Inc. and ADESA Corporation. Mr.
Mutz previously served as lieutenant governor of the State of Indiana from
1981 to 1988. While in office, he was president of the Indiana Senate,
headed up the Department of Commerce and the Department of Employment and
Training Services, and served as Commissioner of Agriculture.
JAMES E. ROGERS Chairman and Chief Executive
Director since 1988. Age 46 Officer of the Company and
Chairman-Executive Committee Chairman, President and Chief
Executive Officer of PSI Energy,
October 1988 to present.
Mr. Rogers is a director of PSI Energy, PSI Investments, Inc., PSI
Argentina, Inc., PSI Foundation, Inc., PSI Recycling, Inc., NBD Bank, N.A.,
Bankers Life Holding Corporation and of the U.S., Indiana and Indianapolis
Chambers of Commerce. He is also a director of numerous industry, civic,
academic and community organizations. Prior to joining the Company, Mr.
Rogers held various executive positions with several gas pipeline
subsidiaries of Enron Corp., Houston, Texas, from 1985 to 1988. PSI Energy
has established individual lines of credit with various banks, one of which
is NBD Bank, N.A., with a commitment of $5 million. As of December 31, 1993,
PSI Energy had borrowings of $5 million from NBD Bank, N.A.
ROBERT L. THOMPSON, PH.D. President and Chief Executive
Director since 1987. Age 48 Officer, Winrock International,
Member-Audit Committee Nonprofit Institution,
Morrilton, Arkansas
Dr. Thompson is a director of PSI Energy, the Vigoro Corporation,
Chicago, IL and the National Cooperative Bank, Washington, D.C. He is also a
member of the International Policy Council on Agriculture and Trade. Dr.
Thompson served as Dean of Agriculture at Purdue University from March 1987
to July 1993, as Assistant Secretary for Economics, U.S. Department of
Agriculture, from May 1985 to February 1987, and as Senior Staff Economist on
the President's Council of Economic Advisers from August 1983 to May 1985.
6
<PAGE> 9
NAMES, AGES, PRINCIPAL OCCUPATIONS AND SELECTED INFORMATION
CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1996
MICHAEL G. BROWNING Chairman and President,
Director since 1990. Age 47 Browning Investments, Inc.
Member-Compensation and Nominating Real Estate Ventures,
Committee and Public Policy Committee Carmel, Indiana
Mr. Browning is also president of Browning Real Estate, Inc., the general
partner of various real estate investment partnerships. Mr. Browning is a
director of PSI Energy, PSI Investments, Inc., PSI Argentina, Inc., Conseco,
Inc., and Sunshine Group, Inc. Mr. Browning is involved as a director or
trustee of various community organizations. Mr. Browning was formerly the
chairman and president of Fidelity Corp., an Indiana one-bank holding
company.
J. WAYNE LEONARD Senior Vice President and
Director since 1993. Age 43 Chief Financial Officer of the
Company and Senior Vice
President and Chief Financial
Officer of PSI Energy,
1989 to present.
Mr. Leonard is a director of PSI Energy, PSI Foundation, Inc., PSI
Argentina, Inc. and PSI Investments, Inc. Mr. Leonard joined the Company in
1973 and held various financial positions before being promoted to Chief
Financial Officer of the Company in March 1989.
JOHN A. HILLENBRAND, II Chairman, President and
Director since 1985. Age 62 Chief Executive Officer,
Chairman-Public Policy Committee Glynnadam, Inc., Personal
Member-Executive Committee Investment Holding Company,
Batesville, Indiana
Mr. Hillenbrand is also the chairman of Able Body Corporation and Nambe'
Mills, Inc. and the vice chairman of Pri-Pak, Inc. Mr. Hillenbrand is a
director of PSI Energy, Hillenbrand Industries, Inc., Hillenbrand
Foundation, National City Trust Company and National City Bank, Indiana. He
is also co-chairman of the Indiana Economic Development Council, a director
of the Indiana Chamber of Commerce, and Chairman of the Natural Resource
Foundation.
7
<PAGE> 10
NAMES, AGES, PRINCIPAL OCCUPATIONS AND SELECTED INFORMATION
EMERSON KAMPEN Chairman, President and
Director since 1986. Age 66 Chief Executive Officer, Great
Chairman-Audit Committee Lakes Chemical Corporation,
Member-Executive Committee Industrial and Specialty Chemicals,
West Lafayette, Indiana
Dr. Kampen is a director of PSI Energy, Great Lakes Chemical Corporation and
its subsidiaries, Inland Steel Industries, Inc., NBD Bank, N.A., Lafayette
Life Insurance Company and the Indiana University Foundation. Dr. Kampen is
a trustee of Purdue University and a director and the vice chairman of the
Indiana Chapter of the Newcomen Society of the United States. He is active
in civic and community affairs both at the state and local levels. PSI
Energy has established individual lines of credit with various banks, one of
which is NBD Bank, N.A. with a commitment of $5 million. As of December 31,
1993, PSI Energy had borrowings of $5 million from NBD Bank, N.A.
CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 1995
JAMES K. BAKER Chairman and Director,
Director since 1986. Age 62 Arvin Industries, Inc.,
Chairman-Finance Committee Automotive Parts Mfg.
Member-Executive Committee Columbus, Indiana
Mr. Baker is a director of PSI Energy, NBD Bancorp, Inc., Space Industries
International, Tokheim, Geon Company and Amcast Industrial Corp. He is
chairman of the board of trustees of DePauw University and is active in
various civic organizations. During 1990-1991, Mr. Baker served as chairman
of the U.S. Chamber of Commerce. PSI Energy has established individual lines
of credit with various banks, one of which is NBD Bank, N.A., with a
commitment of $5 million. As of December 31, 1993, PSI Energy had borrowings
of $5 million from NBD Bank, N.A.
HUGH A. BARKER Retired President of the Company
Director since 1968. Age 68 and Retired Chairman of
Member-Finance Committee PSI Energy
and Audit Committee
Mr. Barker is a director of PSI Energy, Bank One, Indianapolis, N.A. and the
Indiana Chamber of Commerce. PSI Energy has established individual lines of
credit with various banks, one of which is Bank One, with a commitment of $5
million. As of December 31, 1993, PSI Energy had no borrowings under the
Bank One line of credit.
8
<PAGE> 11
NAMES, AGES, PRINCIPAL OCCUPATIONS AND SELECTED INFORMATION
VAN P. SMITH Chairman and President,
Director since 1986. Age 65 Ontario Corporation,
Chairman-Compensation and Aircraft Engine Components,
Nominating Committee; Muncie, Indiana
Member-Executive Committee
Mr. Smith is a director of PSI Energy, each of the subsidiaries of Ontario
Corporation, Lilly Industries, Inc., Meridian Insurance Group, Inc.,
Meridian Mutual Insurance Co. and the American Automobile Association. He is
chairman of the board of trustees of Colgate University and a trustee of
Catholic University of America. He is a director of the Indiana Chamber of
Commerce and former chairman of the board of the U.S. Chamber of Commerce.
KENNETH M. DUBERSTEIN Chairman and Chief Executive
Director since 1990. Age 49 Officer, The Duberstein Group,
Member-Compensation and Nominating Inc., Planning and Consulting
Committee and Public Policy Committee Services, Washington, D.C.
Mr. Duberstein is a director of PSI Energy, PSI Foundation,Inc., McDonnell
Douglas Corporation, the Kennedy Center for the Performing Arts and the
Ford's Theatre. He is a member of the Board of Governors of the American
Stock Exchange, a trustee of Franklin and Marshall College and active in
various civic organizations. He held key positions in the Reagan
Administration, including Chief of Staff.
MELVIN PERELMAN, PH.D. Retired Executive Vice President,
Director since 1980. Age 63 Eli Lilly and Company,
Member-Compensation and Pharmaceuticals,
Nominating Committee Indianapolis, Indiana
and Finance Committee
Dr. Perelman was executive vice president of Eli Lilly and Company, an
Indianapolis pharmaceuticals manufacturer, until his retirement in 1993. He
was also president of Lilly Research Laboratories. He is a director of PSI
Energy and PSI Argentina, Inc.
9
<PAGE> 12
MEETINGS AND COMMITTEES OF THE BOARD
During the year ended December 31, 1993, the Board held 16 meetings. All
directors attended at least 84% of the aggregate Board meetings and meetings of
committees on which they serve with the exception of Mrs. Shirley Shideler who
attended 41% of Board meetings. Mrs. Shideler was excused from attending
meetings that discussed the IPALCO Enterpries, Inc. ("IPALCO") hostile takeover
attempt due to a conflict of interest that arose from her employment with
Barnes & Thornburg and such firm's representation of IPALCO. Committees of the
Board are as follows:
AUDIT COMMITTEE: Two meetings were held in 1993. Its principal functions are as
follows:
--Recommending the independent public accountants to the Board;
--Reviewing the scope and results of audits with the independent public
accountants;
--Reviewing the Company's accounting principles and its accounting and
financial reporting policies and practices with the independent public
accountants and management;
--Reviewing the Company's internal controls and accounting procedures with
the independent public accountants and the internal auditors;
--Reviewing annual financial reports with management and the independent
public accountants prior to release by the Company; and
--Reviewing the Company's internal auditing program.
COMPENSATION AND NOMINATING COMMITTEE: Seven meetings were held in 1993. Its
principal functions are as follows:
--Making recommendations to the Board as to compensation to be received
by the executive officers and the fees of directors of the Company;
--Establishing qualifications desired in prospective nominees to the
Board; and
--Making recommendations to the Board of persons to fill vacancies on
the Board.
The Compensation and Nominating Committee will consider nominations for
directors submitted by shareholders. Each recommendation should be accompanied
by biographical information as to age, education and business experience of the
proposed nominee. See "Proposals by Shareholders" below.
Other regular committees of the Board include the Executive Committee,
the Finance Committee and the Public Policy Committee.
The Company would like to acknowledge three members of the Board: Mr. Stuart
Eizenstat, who resigned in September to become U.S. Ambassador to the European
Community, and Mr. Shelton Hannig and Mrs. Shirley Shideler, who retired at
year-end. Their advice and support have been sincerely appreciated.
10
<PAGE> 13
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Nominating Committee (the "Committee") of the Board, in
addition to its responsibility to nominate officers and directors for the
Company, formulates and administers the Company's compensation and benefit
policies and makes recommendations to the full Board regarding the Company's
short-term and long-term incentive plans. The Committee is composed entirely of
independent outside (non-employee) directors.
COMPENSATION PHILOSOPHY
The Company's fundamental compensation philosophy is to provide a total
compensation program that will attract, retain, and motivate the high quality
employees needed to provide superior service to our customers and maximize
returns to our shareholders. Over the last few years, the Committee has
redesigned the Company's Executive Compensation Program to link executive and
shareholder interests through equity-based and incentive-based plans, which
reward both corporate and individual performance and balance short-term and
long-term considerations.
A long term corporate strategic plan was developed in 1990 and is reviewed
and updated annually. The philosophy of the strategic plan is that the
interests of shareholders, customers and employees are intertwined and optimal
value for the whole is created by maximizing value for each stakeholder group.
Factors such as low rates, satisfied customers, close and responsive community
relationships, excellence in overall service, environmental stewardship, and a
well-trained, highly-motivated and innovative team of employees have been
identified as factors critical to the Company's success and are incorporated as
specific elements of the strategic plan. These factors form the basis for goals
and objectives that are developed on a yearly basis for both the Company as a
whole and for individual executives. The Executive Compensation Program then
incorporates these goals and objectives into performance measures, against
which each executive officer is evaluated and upon which his or her incentive
compensation is determined. In 1993, the Company performance measures were
based on operating income and fuel cost per million Btu. (See Annual Cash
Incentive Plan on page 13 for more details.) The individual goals are described
below.
With passage of the Energy Policy Act in 1992, competition within the
utility industry is upon us. These competitive forces require a set of
management skills that is broader and more diversified than was previously
required in the utility industry. The Company must follow the compensation
practices and trends of general industry companies so that it can attract and
retain superior performers. Accordingly, the Committee researches and takes
into account both utility-specific and general industry data in setting
compensation levels and benefit programs.
Within this context, it is the Committee's goal to provide the opportunity
for the Company's executive officers, including its CEO, to earn total
compensation that is commensurate with their contribution to the success of the
Company and that is above the 50th percentile level of comparable utilities and
trending toward the pay practices of a broader range of U.S. companies with
comparable revenues.
11
<PAGE> 14
In 1992, an independent compensation and benefits consulting firm was
retained to conduct a comprehensive study of the Company's Executive
Compensation Program structure and pay levels in comparison to the market. The
study compared the Company's Executive Compensation Program to comparative
groups of 20 utility companies and 24 general industrial companies. The peer
groups used for compensation analysis include 4 utilities that are included in
the Standard & Poor's (S&P) Electric index and 16 general industry companies
that are included in the S&P 500 index. These indexes are used for stock
performance comparison in the performance graph included in this proxy
statement (see page 17). The compensation analysis peer groups were selected
based upon comparable revenue size with the Company and availability of survey
data. Findings of the 1992 study were presented to the Committee for its
review. Based on these findings, the Committee established compensation levels
in line with the guidelines discussed above.
The Company's Executive Compensation Program consists of three components:
base salary, annual cash incentive opportunities and long-term incentive
opportunities in the form of stock. Over the last few years, the Company has
increased the relative weighting of variable incentive compensation in
proportion to the total compensation package. In 1993, an average of 40.4% of
the total compensation of Company executive officers consisted of variable
incentive compensation. In 1993, 48.9% of Mr. Rogers' total compensation
consisted of variable incentive compensation.
BASE SALARIES
Base salaries are set at competitive levels determined by market studies
(salary levels in 1993 reflect the findings of the market studies described
above and are near the 50th percentile of utility companies and, in some cases,
approximating the average of the two competitive groups) and reflect the levels
needed to attract and retain superior performers. Annual increases to base
salaries generally reflect average increases in the utility industry and
general industry. In most instances, the Company's executive officers are given
identical percentage increases. Promotional increases or equity adjustments to
reflect changes in the market or in responsibilities may be appropriate from
time to time. In 1993, the average increase in base salaries of the Company's
executive officers was 4.2%, with a range of 4.0 to 5.2%. In general, however,
superior performance is reflected in the increasingly important variable pay
portion of the executive compensation package.
With respect to Mr. Rogers, the majority of his base salary in 1993 was
determined pursuant to an employment agreement with the Company dated May 17,
1990 (see "Employment Contracts and Termination of Employment and Change in
Control Arrangements" below) as modified prior to February 17, 1993. Mr. Rogers
was given a base salary increase of 4% in 1993. The Committee granted this
increase based upon Mr. Rogers' base salary comparison pursuant to the market
study described above and Mr. Rogers' outstanding leadership role both in the
industry and with regard to the significant contributions the Company has made
in the communities it serves, as evidenced by the highest level of satisfaction
ever registered by our customers in a satisfaction survey and the outstanding
performance of the Company's common stock as displayed in the performance graph
on page 17.
12
<PAGE> 15
ANNUAL CASH INCENTIVE PLAN
The PSI Energy Annual Incentive Plan (the "Plan" or the "Annual Incentive
Plan") was developed to provide additional incentive for superior performance.
The Committee believes that incentives focus and motivate a management team to
strive for excellence and to achieve, through both teamwork and individual
initiative, levels of performance that otherwise would not have been reached.
The Company's customers and its shareholders are the beneficiaries of these
enhanced accomplishments.
Approximately 150 key employees currently participate in the Plan and are
granted cash awards to the extent that certain predetermined corporate and
individual goals are attained during the applicable calendar year. Graduated
standards for achievement are developed to encourage each employee's
contribution. The potential awards range from 6.5% to 55% of the annual salary
of the participant, depending upon the achievement levels and the participant's
position. Under his employment agreement, Mr. Rogers has the ability to receive
55% of his annual salary as awards under the Plan if his performance goals are
met. The Committee reviews and approves both the Plan goals at the beginning of
the year and the achievements at the end of the year.
In 1993, the Plan used a combination of corporate and individual goals.
Achievement of corporate goals accounted for 50% of the total possible award
while achievement of individual goals constituted the remainder. The portion of
the payout in March 1994 attributable to the corporate goals was based on 1993
achievement in two areas: (1) operating income so as to maximize the Company's
return on equity; and (2) fuel cost per million Btu, which made up over 41% of
total operating expense in 1993 and is a key element in maintaining the
Company's low-cost position in the industry. The operating income goal
accounted for 37.5% and the fuel cost goal constituted 12.5% of the total
possible award.
The 1993 incentive awards reflect individual achievement as well as the
Company's attainment of corporate goals. The 1993 individual performance goals
for the executives varied from executive to executive; however, all related to
achievement of the Company's overall strategic mission of becoming a premier
regional energy services company.
In awarding these payments, the Committee considered the additional
achievements by the Company, outlined below, as a result of the efforts of Mr.
Rogers and his management team. The Committee believes these accomplishments
are appropriate considerations in establishing compensation levels for the
executive officers of the Company as they help to secure superior Company
performance as the utility industry moves toward a more competitive
environment.
For Mr. Rogers and each member of the management team, the Committee
assessed the extent to which each person contributed toward the accomplishment
of the Company's strategic mission in 1993. Although its determinations were
subjective, the Committee believes that its assessment accurately measured the
performance of each executive officer. Mr. Rogers was awarded an annual
incentive payment of $239,324 for 1993. This award consisted of $115,364 in
recognition of the Company's corporate goals discussed above, and $123,960 in
recognition of Mr. Rogers' contributions toward helping the Company achieve
superior performance in 1993.
13
<PAGE> 16
The Company's achievements in 1993 were reflected in the gain in total
return for shareholders of 39.1%, compared to 10.1% for the S&P 500 and 12.6%
for the S&P Electrics, as depicted in the performance graph on page 17 of this
report. The Company's most significant accomplishment for its shareholders and
customers in 1993 was progress toward completion of its merger with The
Cincinnati Gas & Electric Co. ("CG&E")(the"CINergy Merger"). Also in 1993, the
Company evaluated an unsolicited bid by IPALCO for control of the Company's
stock and communicated to shareholders the Board's determination that the offer
was not in the best interests of shareholders, customers, and other
constituencies. IPALCO withdrew its offer after the Company's shareholders
elected the Company's nominees to the Board of Directors over IPALCO's
nominees, by nearly a 2-to-1 margin. Thereafter, the Company and CG&E reached
an agreement with IPALCO to resolve lawsuits and other issues in connection
with IPALCO's opposition to the CINergy Merger and its acquisition offer. At
special meetings in November, the Company and CG&E shareholders voted
overwhelmingly to approve the CINergy Merger. On November 9, 83% of the
Company's outstanding shares were voted in favor of the CINergy Merger. On
November 16, over 85% of CG&E's outstanding shares were voted in favor of the
CINergy Merger, far more than the two-thirds necessary for approval. The goal
remains to complete the CINergy Merger during the third quarter of 1994,
although completion could be delayed further if hearings are required at the
Federal Energy Regulatory Commission.
On the financial front, in 1993 the Company had earnings of $1.73 per share.
Even after having incurred significant unexpected charges totalling 37 cents
per share (25 cents for IPALCO defense costs and 12 cents for the settlement of
two outstanding rate orders), earnings were down only 2 cents per share from
1992. The Company was able to achieve this level of earnings through stringent
cost control efforts across the entire corporation, motivated by the Company's
incentive pay programs, including its 401(k) incentive matching contribution.
The Company's shareholders earned a return on equity of 14.1% in 1993. This
was the fifth highest in the nation in a survey of 80 investor-owned utilities
in the U.S. and compared with an industry average of approximately 11.9%.
Additionally, shareholders enjoyed a dividend increase of 10.7%, compared to
the investor-owned utility industry average of 2.6%.
In the regulatory arena, the Indiana Utility Regulatory Commission ("IURC")
approved PSI Energy's plan for complying with Phase I of the acid rain
provisions of the Clean Air Act Amendments of 1990. The IURC also approved PSI
Energy's emission allowance banking strategy, which will afford the Company
greater flexibility in developing its Phase II plan. PSI Energy also filed
testimony with the IURC to support its request for an 11.6% retail rate
increase. This testimony also includes proposals for certain innovative
ratemaking mechanisms designed to reduce business and regulatory risks over the
next three years.
In July 1993, S&P placed PSI Energy's debt ratings on review with positive
implications. In October, S&P evaluated the business position of 124 electric
utilities--assessing each as above average, average, or below average--and
included PSI Energy among 24 companies with an "above average" business
position. A similar study by Prudential Securities' analysts assigned the
Company the fourth-best "competitive risk index" of all utilities studied and
included PSI Energy among "nineteen utilities best able to cope with the new
competitive environment."
14
<PAGE> 17
The Committee believes that the Company's management team has made
significant progress toward positioning the Company so as to be successful in
the competitive world and that the Annual Incentive Plan has been an excellent
tool to focus the management team toward this goal.
LONG-TERM INCENTIVE PLAN AND STOCK OPTION PLAN
The PSI Energy Performance Shares Plan (the "Performance Shares Plan") is a
long-term incentive plan developed to reward officers for contributing to
long-term success by achieving corporate and individual goals approved by the
Committee. The same corporate and individual goals as used in the Annual
Incentive Plan are applicable to this plan. The potential award opportunities
are established in the same manner as the Annual Incentive Plan, and the
minimum award opportunities range from 6.66% to 36.66% of annual salary for the
full performance cycle. The maximum award opportunity is equal to three times
the minimum award opportunity. Mr. Rogers, under the terms of his employment
agreement, has the ability to receive a minimum of 36.66% of his annual salary
in awards if corporate and individual performance goals are met. The award paid
in 1993 was the second installment of the award earned by the participants for
the cycle which covered 1990 and 1991. The award was paid in shares of common
stock and cash sufficient to pay any applicable taxes plus cash or shares equal
to the amount of dividends which otherwise would have been paid if the shares
had been distributed in 1992. Mr. Rogers' installment of the award paid in 1993
for the 1990 to 1991 period was valued at $193,618, which was 42.0%.
As in the Annual Incentive Plan, customers and shareholders benefit from the
management team's accomplishment of these long-term goals. The same executive
officers who participate in the Annual Incentive Plan also participate in this
plan. The Committee took into account the achievements listed above in
determining payouts under this plan.
The Company's executive officers are also eligible for grants under the 1989
Stock Option Plan (the "1989 Plan"). The 1989 Plan is designed to align
executives' compensation with shareholder interest. Both non-qualified and
incentive stock options have been granted under the 1989 Plan.
Options vest at the rate of 20% per year over a five-year period from the
date of grant and are available for purchase over a ten-year term. However,
under the terms of the 1989 Plan, shareholder approval of the CINergy Merger
caused an immediate acceleration of the vesting of all previously non-vested
options. Therefore, as of November 9, 1993, all options previously granted are
now vested. No options were granted in 1993 for the executive officers reported
in the compensation table because of grants to such executive officers made in
earlier years.
OTHER COMPENSATION DECISIONS
The Committee, at its discretion, may award other forms of compensation in
recognition of outstanding service to the Company or any of its subsidiaries.
Consistent with that philosophy, the Committee approved in 1993 special
performance awards for Mr. Leonard and Ms. Foley in the amount of $25,000 each.
These payments were based upon Mr. Leonard's and Ms. Foley's exemplary
performance associated with negotiating the CINergy Merger.
15
<PAGE> 18
OTHER COMPENSATION ELEMENTS
The executive officers, including Mr. Rogers, participate in the PSI Energy
Pension Plan, the PSI Energy Severance Pay Plan, the PSI Energy Excess Benefit
Plan and the PSI Energy Executive Supplemental Life Insurance Program, and are
eligible to participate in the PSI Energy Employees' 401(k) Savings Plan.
Messrs. Rogers and Noland, and Ms. Foley also participate in the PSI Energy
Supplemental Retirement Plan. Mr. Rogers also has an employment agreement, a
deferred compensation agreement and a split dollar life insurance agreement
with the Company. The executive officers also receive other customary medical
and other benefits. No compensation decisions were made by the Committee during
1993 relating to the participation of executive officers with respect to these
plans, agreements and benefits.
SUMMARY
The Committee has sought to establish total compensation at a level above
the 50th percentile level for comparable utilities and trending toward the 50th
percentile for comparable general industry U.S. companies, when performance
warrants. Additionally, for the officers reported in the compensation tables,
45.2% of their total compensation is incentive-driven, which puts such pay "at
risk," therefore adding flexibility and an emphasis on superior performance.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed
into law (the "Revenue Act"). The Revenue Act limits the deductibility of
certain compensation in excess of $1 million per year paid by a publicly traded
corporation to the chief executive officer and the four most highly compensated
executive officers other than the chief executive officer named in the Summary
Compensation Table. Under the Revenue Act, compensation which is payable under
a written contract that was in effect before February 17, 1993, or which
qualifies as "performance based" compensation is exempt from the $1 million
deductibility limitation.
The Committee is aware of these provisions of the Revenue Act and will be
reviewing their application to the Executive Compensation Program over the next
period. The Committee, however, intends to continue to compensate executives on
performance achieved, both corporate and individual.
The tables which follow, and accompanying footnotes, reflect the decisions
covered by the above discussion.
Compensation and Nominating Committee
Van P. Smith, Chairman
Kenneth M. Duberstein
Michael G. Browning
Melvin Perelman
*Actions described under "Other Compensation Decisions" as to Mr. Leonard and
Ms. Foley were approved by the Board of Directors.
16
<PAGE> 19
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PSI Resources ........................................ 100 137 134 147 178 248
S&P Electrics ........................................ 100 133 137 178 188 212
S&P 500 .............................................. 100 132 128 166 179 197
- ---------------------
</TABLE>
Assumes $100 invested December 31, 1988, and all dividends reinvested.
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS
The following tables set forth the compensation of the Chief Executive
Officer and each of the four most highly compensated executive officers for
services in all capacities to the Company and its subsidiaries during 1993 (and
with respect to the Summary Compensation Table, for each of the years 1993,
1992 and 1991). Most compensation is paid by PSI Energy or from PSI Energy's
benefit plans, although some miscellaneous amounts are paid from the Company's
benefit plans.
17
<PAGE> 20
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted Securities All Other
and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Compensation Award(s) Options/SARs Payouts1 sation2
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------- ------ -------- ------- ----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James E. Rogers 1993 402,408 239,324 193,618 83,968 3
Chairman and Chief 1992 385,008 239,254 150,287 118,998
Executive Officer 1991 385,008 192,504 66,429 2,119
Jon D. Noland 1993 230,092 77,311 81,399 8,129
Executive Vice 1992 220,904 70,468 63,192 11,770
President 1991 210,380 65,007 73,174 2,104
J. Wayne Leonard 1993 187,168 92,568 62,210 6,762
Senior Vice President 1992 181,128 57,780 48,313 9,518
and Chief Financial 1991 156,250 51,250 22,972 1,563
Officer
Larry E. Thomas 1993 187,168 67,568 56,339 6,762
Senior Vice President 1992 181,128 57,780 43,736 9,242
and Chief Operations 1991 156,250 47,344 42,489 1,563
Officer (Energy)
Cheryl M. Foley 1993 179,036 89,632 59,866 0
Vice President, 1992 173,256 55,269 46,479 2,815
General Counsel and 1991 156,250 48,281 7,680 0
Secretary
</TABLE>
- ------------------------------
1 The amounts appearing in this column are the values of the shares and cash
paid out under the Performance Shares Plan. The amounts reflected for 1993
were earned by the named executives during the two year cycle from 1990
through 1991 under the Performance Shares Plan, paid in substantially equal
installments in 1992 and 1993.
The amounts reflected for 1991 were earned by the named executives during
the three year cycle from 1987 through 1989 under the Performance Shares
Plan (paid in substantially equal installments in 1990 and 1991). Thus, Mr.
Rogers' LTIP payout for 1992 is greater than that for 1991 because his
participation in the three-year cycle from 1987 through 1989 was prorated
based upon his employment date of October 27, 1988, and other factors such
as a lower closing price per share at December 31, 1989, and a higher annual
base salary than when initially hired.
2 Except where otherwise noted, the amounts in this column are comprised
of employer matching contributions on behalf of each named executive
under the PSI Energy Employees' 401(k) Savings Plan.
3 The employer matching contribution for Mr. Rogers under the PSI Energy
Employees' 401(k) Saving Plan was $8,129. At the Board's direction pursuant
to the terms of a Deferred Compensation Agreement effective as of January 1,
1992, Mr. Rogers received a deferred compensation award in the amount of
$50,000. The above market interest on the deferred compensation award under
the Deferred Compensation Agreement for 1993 is $8,906. The value of
benefits under a Split Dollar Life Insurance Agreement for 1993 is $16,933.
The method used to calculate benefits under this Split Dollar Life Insurance
Agreement has been changed from the method used last year to more accurately
reflect the benefit to Mr. Rogers.
18
<PAGE> 21
II. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table shows stock option exercises for the Company's common
stock by named executive officers during 1993. As reflected in the table,
during 1993, none of the named executive officers exercised any stock options.
However, under the terms of the 1989 Plan, shareholder approval of the CINergy
Merger caused an immediate acceleration of the vesting of all previously non-
vested options. Therefore, as of November 9, 1993, all previously granted
options are now vested. The table shows the number of shares of exercisable
stock options as of December 31, 1993, and the values for "in the money"
options, which represent the positive spread between the exercise price of any
outstanding stock option and the price of the shares as of December 31, 1993,
which was $26.50 per share.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
(a) (b) (c) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised in-the-money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
------------------ ------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
----- ---------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
James E. Rogers ..................... 0 N/A 175,000/0 2,362,241/0
Jon D. Noland ........................ 0 N/A 50,000/0 478,125/0
J. Wayne Leonard ..................... 0 N/A 50,000/0 478,125/0
Larry E. Thomas ...................... 0 N/A 50,000/0 478,125/0
Cheryl M. Foley ...................... 0 N/A 50,000/0 478,125/0
</TABLE>
Directors and certain key employees of the Company and its subsidiaries are
eligible for grants under the 1989 Plan. The 1989 Plan is administered by the
Compensation and Nominating Committee of the Board, which is composed entirely
of outside (non-employee) directors. Both non-qualified and incentive stock
options have been granted under the 1989 plan. The price per share at which
options are granted is the average of the high and low sale price of the
Company's common stock on the New York Stock Exchange on the date of the grant.
Options generally vest at the rate of 20% per year over a five-year period from
the date of grant and are available for purchase over a ten-year term. Vesting,
however, is accelerated when shareholders approve a definitive agreement to
merge or consolidate the Company, such as the agreement regarding the CINergy
Merger. As noted above, the shareholders' action approving the CINergy Merger
on November 9, 1993, caused an immediate acceleration of the vesting of all
previously non-vested shares.
19
<PAGE> 22
III. LONG TERM INCENTIVE PLAN
No grants of performance shares were made in 1993 to the chief executive
officer or to any of the other four most highly compensated executive officers.
IV. PENSION BENEFITS
PSI Energy's non-contributory pension plan (the "Pension Plan") covers all
employees meeting certain minimum age and service requirements. Compensation
utilized to determine benefits under the plan includes substantially all
salaries and annual incentive compensation, including Mr. Rogers' $50,000
deferred compensation award, with certain exceptions such as payments made
under the Performance Shares Plan. Pension Plan benefits are determined under a
final average pay formula with consideration of years of participation to a
maximum of 30, age at retirement and the applicable average Social Security
wage base. The Pension Plan was amended and restated effective January 1, 1989
to comply with recently enacted federal laws including the Tax Reform Act of
1986. PSI Energy also maintains an Excess Benefit Plan designed to restore
pension benefits to those individuals whose benefits under the Pension Plan
would otherwise exceed the limits imposed by the Internal Revenue Code of 1986,
as amended. Benefits payable as a straight-life annuity under both plans to
participants who retire at age 62 are illustrated in the following table:
<TABLE>
<CAPTION>
Pension Plan Table
Years of Participation
----------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000 . . . . . . . . . . $ 27,840 $ 37,120 $ 46,410 $ 55,690 $ 55,690
150,000 . . . . . . . . . . 33,840 45,120 56,410 67,690 67,690
175,000 . . . . . . . . . . 39,840 53,120 66,410 79,690 79,690
200,000 . . . . . . . . . . 45,840 61,120 76,410 91,690 91,690
225,000 . . . . . . . . . . 51,840 69,120 86,410 103,690 103,690
250,000 . . . . . . . . . . 57,840 77,120 96,410 115,690 115,690
300,000 . . . . . . . . . . 69,840 93,120 116,410 139,690 139,690
400,000 . . . . . . . . . . 93,840 125,120 156,410 187,690 187,690
450,000 . . . . . . . . . . 105,840 141,120 176,410 211,690 211,690
500,000 . . . . . . . . . . 117,840 157,120 196,410 235,690 235,690
600,000 . . . . . . . . . . 141,840 189,120 236,410 283,690 283,690
700,000 . . . . . . . . . . 165,840 221,120 276,410 331,690 331,690
800,000 . . . . . . . . . . 189,840 253,120 316,410 379,690 379,690
900,000 . . . . . . . . . . 213,840 285,120 356,410 427,690 427,690
</TABLE>
Benefits reflected in the above table are not subject to any deduction for
social security or other offset amounts.
20
<PAGE> 23
The accredited years of participation under the Pension Plan at age 62 for
each of the executive officers reported in the Summary Compensation Table are
as follows:
<TABLE>
<CAPTION>
Accredited Years of
Name Participation at Age 62
---- -----------------------
<S> <C>
James E. Rogers 21.44
Jon D. Noland 19.53
J. Wayne Leonard 30.00
Larry E. Thomas 30.00
Cheryl M. Foley 20.70
</TABLE>
PSI Energy also has a Supplemental Retirement Plan, which is designed to
provide coverage to employees, designated by the Board, who have not reached
age 62 and will not otherwise qualify for full retirement benefits under the
Pension Plan. Messrs. Rogers and Noland and Ms. Foley participate in this plan.
The benefit provided by the Supplemental Retirement Plan will be an amount
equal to that which a covered employee with maximum permitted years of
participation (30 years) would have received under the Pension Plan, reduced by
the actual benefit provided by the Pension Plan and further reduced by benefits
the covered employee will be eligible to receive from retirement plans from
previous self-employment and from previous employers. PSI Energy has agreed to
waive a portion of the reduction of amounts received by Mr. Noland from
retirement plans from his previous self-employment. The estimated annual
benefit payable at age 62 to each participant under the Supplemental Retirement
Plan is $99,000 for Mr. Rogers, $49,000 for Mr. Noland and $27,000 for Ms.
Foley.
PSI Energy has an Executive Supplemental Life Insurance Program, which
provides key management personnel with additional life insurance coverage prior
to retirement. For employees with an annual base salary of less than $100,000,
life insurance coverage is $50,000. For employees with an annual base salary of
more than $100,000, but less than $200,000, life insurance coverage is
$100,000. For employees with an annual base salary of more than $200,000, life
insurance coverage is $150,000. When an employee becomes a participant in the
program, he or she must elect whether to continue to receive the additional
life insurance coverage after retirement or to receive the total amount of
coverage in the form of deferred compensation in equal, annual installments
over 10 years beginning at age 62 or retirement, whichever is later. However,
employees retiring prior to age 62 due to job elimination are eligible for
payments of deferred compensation at retirement. The estimated annual benefit
payable upon retirement at age 62 to each of Messrs. Rogers and Noland is
$15,000 per year over 10 years and to each of Messrs. Leonard and Thomas and
Ms. Foley is $10,000 per year over 10 years.
21
<PAGE> 24
V. DIRECTORS' COMPENSATION
Effective January 1, 1994, the Board approved a recommended increase in
their retainer fee and board meeting attendance fee. This increase was a result
of comparison of the Company's fees to other companies of comparable revenue
size.
Directors who are not employees receive a retainer fee of $1,500 per month
plus a fee of $1,000 for each Board meeting attended. Non-employee directors
who also serve on a regular committee of the Board receive a retainer fee of
$250 per month for each committee membership plus a fee of $1,000 for each
committee meeting held. Duplicate fees for Board and/or committee meetings are
not paid when the Board of the Company and the Board of PSI Energy or
committees of either Board meet on the same day. The fee for any Board or
committee meeting held via conference call is $500.
Under the Company's Directors' Deferred Compensation Plan, which covers
the outside directors of the Company and the outside directors of all of its
wholly-owned subsidiaries, a director may defer any of the above fees and
have interest accrued thereon at a rate that is equivalent to the rate being
paid on one-year certificates of deposit by a major Indiana bank on the first
business day of each quarter. During 1993, this rate ranged between 3.20% and
3.25%. Fees deferred under this plan may also be deemed to be invested in
theoretical "units" of Company common stock, although participating directors
receive no equity interest in the common stock. Distributions of such
deferrals, however, are made in shares of Company common stock. The number of
units in each account is adjusted to reflect the payment of dividends when
dividends are paid on outstanding shares of Company common stock.
Under the 1989 Stock Option Plan ("1989 Plan"), each outside director
has been granted a non-qualified stock option to purchase 12,500 shares of
Company common stock. Each new director who joins the Board is also granted a
non-qualified stock option to purchase 12,500 shares of Company common stock.
In December 1993, as a result of the shareholder vote on November 9, 1993,
which approved the CINergy Merger, the change-in-control provision of the
Director's Deferred Compensation Plan was triggered and all deferred
compensation, both cash and theoretical units of common stock, were paid out to
the participants and all non-vested stock options under the 1989 Plan vested.
On January 25, 1990, the Company implemented the Retirement Plan for
Directors which, upon retirement, provides non-employee directors of the
Company with five or more years of service on the Board annual compensation in
an amount equal to the annualized Board fees, excluding committee fees, in
effect at the time of retirement for as many years as the director served on
the Board. Two payments were made under this plan in 1993 in the amount of
$18,750 each to Richard B. Stoner and the late Dr. W. George Pinnell's
beneficiary, Dorothy G. Pinnell.
The Company prepares all required Section 16 filings on behalf of its
directors and officers. To the Company's knowledge, during the past fiscal
year, all Section 16 filing requirements applicable to its officers, directors
and greater than ten-percent beneficial owners were complied with, except that
a Form 4 filing for Dr. Kampen reporting one transaction was inadvertently
filed late.
22
<PAGE> 25
VI. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE
IN CONTROL ARRANGEMENTS
The Company and PSI Energy entered into an employment agreement with Mr.
Rogers dated May 17, 1990, which was renewed on December 31, 1993, and will
renew annually, unless prior notice is provided by either party, for a term
ending on the second anniversary of the date of such renewal.
During the term of the employment agreement, Mr. Rogers will serve as
Chairman and Chief Executive Officer of the Company and PSI Energy. Mr. Rogers
will continue to participate in the Annual Incentive Plan and Performance
Shares Plan. Effective for 1993 and thereafter, his award opportunities under
each plan will be 55% of his annual base salary during the year covered by the
award.
Under his employment agreement, Mr. Rogers is entitled to benefits no less
favorable than those available to any other employee of the Company or PSI
Energy. The employment agreement provides for severance payments of two times
Mr. Rogers' most recent two-year average annual compensation and benefits if
(a) there is a change in control (as defined in the agreement) of the Company
and PSI Energy and an adverse change in his responsibilities or (b) he is
relieved of his responsibilities under his employment agreement.
For purposes of his employment agreement, change in control is defined as
the acquisition of 35% or more of the Company's and PSI Energy's voting stock
by a single investor or company (or an affiliated group of investors and/or
companies). However, the consummation of the CINergy Merger will not trigger
severance payments to Mr. Rogers under this agreement.
Under the terms of the amended merger agreement between the Company, PSI
Energy, CINergy, CINergy Sub and CG&E, such parties have entered into an
employment agreement (as amended) with Mr. Rogers (the "CINergy Employment
Agreement"). The CINergy Employment Agreement will become effective only upon
the consummation of the CINergy Merger and will terminate on the third
anniversary of the CINergy Merger's effective date; provided, however, that
commencing on each anniversary date of the effective date, the term of Mr.
Rogers' CINergy Employment Agreement may be extended for one additional year
upon mutual agreement of CINergy and Mr. Rogers. The CINergy Employment
Agreement will supersede the employment agreement with the Company and PSI
Energy.
From the effective date of the Merger, until November 30, 1995, Mr. Rogers
will serve as Vice Chairman, President, and Chief Operating Officer of CINergy,
and thereafter will serve as Vice Chairman, President, and Chief Executive
Officer.
During his term of employment, Mr. Rogers will receive an annual base salary
of not less than the greater of $385,000 or the amount in effect as of the day
before the CINergy Merger's effective date. Mr. Rogers will also be eligible to
receive, based upon the achievement of certain performance objectives, an
annual incentive cash award of up to 55% of his annual base salary pursuant to
a CINergy annual incentive
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plan (the "CINergy Annual Incentive Plan"). Mr. Rogers will be eligible
to participate in all other incentive, stock option, performance award, savings,
retirement and welfare plans applicable generally to CINergy employees, except
to the extent that he has waived his rights.
If CINergy terminates the employment of Mr. Rogers without cause (as defined
below), or if he terminates his employment for good reason (as defined below)
or if he dies, CINergy will pay Mr. Rogers (or his beneficiary, as the case may
be) a lump sum cash amount equal to the sum of (1) his annual base salary
through the termination date to the extent not previously paid, (2) a pro rata
portion of the benefit under the CINergy Annual Incentive Plan calculated based
upon the termination date, and (3) any compensation previously deferred but not
yet paid to him (with accrued interest or earnings thereon) and any unpaid
accrued vacation pay.
In addition, if CINergy terminates Mr. Rogers' employment without cause or
he terminates his employment for good reason, CINergy shall also pay to him (a)
a lump sum cash amount equal to the present value of his annual base salary and
the benefit under the CINergy Annual Incentive Plan payable through the end of
the term of employment at the rate, or applying the incentive goals and
factors, as the case may be, in effect at the time of notice of such
termination, (b) the value of all benefits to which he would have been entitled
had he remained in employment until the end of the term of employment under
CINergy's Performance Shares Plan and Executive Supplemental Life Insurance
Program, (c) the value of all deferred compensation and all executive life
insurance benefits whether or not then vested or payable, and (d) medical and
welfare benefits for him and his family through the end of the term of
employment.
If Mr. Rogers' employment is terminated by CINergy for cause or by Mr.
Rogers without good reason, he will receive earned and unpaid annual base salary
accrued through the termination date and any compensation previously deferred
but not yet paid to him.
Under the CINergy Employment Agreement, "good reason" means (a) the
reduction of Mr. Rogers' annual base salary, his benefit opportunity under the
CINergy Annual Incentive Plan, or any other benefit or payment described in the
CINergy Employment Agreement, (b) the change without Mr. Rogers' consent in his
title, authority, duties or responsibilities as specified in the CINergy
Employment Agreement, (c) the required relocation of Mr. Rogers, without his
consent, to a location other than his current location or Cincinnati, or (d)
any breach by CINergy or PSI Energy of any material provision of the CINergy
Employment Agreement and "cause" means the conviction for the commission of a
felony which, at the time of the commission of the felony, has a materially
adverse effect on CINergy or PSI Energy.
On December 11, 1991, the Company's and PSI Energy's Board of Directors
directed pursuant to the terms of a deferred compensation agreement, as amended
(the "Deferred Compensation Agreement") that, effective January 1, 1992, Mr.
Rogers would be credited with a $50,000 annual base pay increase in the form of
deferred compensation for the five-year period from 1992 through 1996. This
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<PAGE> 27
amount will be further deferred for an additional five-year period beginning
January 1, 1997, and ending December 31, 2001. This deferred compensation award
was in lieu of a cash base pay increase. The purpose of the Deferred
Compensation Agreement is to bring Mr. Rogers' salary more in line with general
industry and to provide an incentive to Mr. Rogers to continue his employment.
Thus, provided that Mr. Rogers remains employed by PSI Energy as of January 1,
1997, he will receive fifteen annual payments ranging from $179,000 to $554,000
depending upon the date benefits commence. If Mr. Rogers remains employed by
PSI Energy as of January 1, 2002, he will receive fifteen additional annual
payments ranging from $179,000 to $247,000 depending upon the date benefits
commence.
Also, on December 11, 1991, the Company's and PSI Energy's Board of
Directors directed that PSI Energy would enter into a split dollar life
insurance agreement (the "Split Dollar Agreement") with Mr. Rogers. Under the
Split Dollar Agreement, as amended, both PSI Energy and Mr. Rogers will
contribute toward the premiums due on the policy. In the event of Mr. Rogers'
death, his beneficiaries will receive death benefits, and, if Mr. Rogers
remains employed by PSI Energy as of December 31, 2002, PSI Energy will
transfer to Mr. Rogers the life insurance policy on September 1, 2007 (the
initial face value of the policy was approximately $2.7 million). The purpose
of the Split Dollar Agreement is to provide death benefits to Mr. Rogers'
beneficiaries, and to encourage his continued employment with Energy.
Upon the termination of his employment, without cause or following a change
in control (as defined therein) or, if the Split Dollar Agreement is not
assumed by a successor employer following a change in control, Mr. Rogers will
be entitled to receive all benefits under his Split Dollar Agreement. A change
in control occurred November 9, 1993 when shareholders approved the CINergy
Merger. If, following a change in control, the Deferred Compensation Agreement
is not assumed by a successor employer, Mr. Rogers will be entitled to receive
all benefits due as of the end of the first award period under the Deferred
Compensation Agreement. The Split Dollar and Deferred Compensation Agreements
will be assumed by CINergy as of the CINergy Merger's effective date.
On December 11, 1992, the Company and PSI Energy entered into severance
agreements with each of Messrs. Rogers, Noland, Leonard and Thomas, and Ms.
Foley, which agreements were amended July 2, 1993 to conform to the new
structure of the Merger. Each agreement extended until December 31, 1993;
provided, however, that the agreements would be automatically extended for an
additional year if the Company or PSI Energy gave timely notice to the
executive and the executive did not object. In December 1993, the Company and
PSI Energy notified each executive of its intent to extend the terms of these
agreements. None of the executives objected. As of the Merger's effective date,
CINergy will assume the Company's and PSI Energy's obligations under each
agreement.
Each agreement provides that, upon the occurrence of a change in control (as
defined therein), if the executive's employment is terminated by the Company
other than for cause (as defined therein) or if the executive terminates
employment for good reason (as defined therein) within 24 months (36 months
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<PAGE> 28
in the case of Mr. Rogers) of the change in control, then either the
Company or PSI Energy will pay to each executive a lump sum cash payment equal
to two times (three times in the case of Mr. Rogers) the sum of such executive's
salary as of the date of the executive's termination of employment or, if
higher, as of the change in control, plus the bonus amounts in effect
immediately prior to the date of the executive's termination of employment, or
if higher, immediately prior to the change in control. In the case of Mr.
Rogers, in lieu of amounts described above, he will receive the amounts due
under his employment agreement if such amounts are higher. In addition, either
the Company or PSI Energy will provide life, disability, accident and health
insurance benefits to the executive for 24 months (36 months in the case of Mr.
Rogers) but reduced to the extent comparable benefits are received, without
cost, by the executive. Mr. Rogers will not receive benefits for the rights to
which he has waived. If Mr. Rogers receives payments under his severance
agreement that would subject him to any federal excise tax due under section
280G of the Internal Revenue Code of 1986, as amended, then Mr. Rogers will also
receive a cash "gross up" payment so that he would be in the same net after-tax
position he would have been in had such excise tax not been applied. Pursuant to
the terms of the agreements, the CINergy Merger will not trigger a Change in
Control.
The Company has entered into a Master Trust Agreement (the "Employees'
Trust Agreement") with National City Bank, Indiana. Effective July 1, 1993, the
U.S. Trust Company of California, N.A. became the successor trustee under the
Trust Agreement (the "Trustee") whereby all accrued benefit payments or awards
under the PSI Energy Annual Incentive Plan, the Performance Shares Plan, the
Company's Employee Stock Purchase and Savings Plan, the 1989 Plan, the PSI
Energy Severance Pay Plan, the PSI Energy Excess Benefit Plan, the PSI Energy
Supplemental Retirement Plan and the PSI Energy Executive Supplemental Life
Insurance Program, will be funded in the event of a "potential change in
control" (as defined therein). Although the final four plans listed do not
contain payment provisions triggered by the occurrence of a change in control
(as defined therein), benefits thereunder will be funded pursuant to the terms
of the Employees' Trust Agreement. A separate Master Trust Agreement (the
"Directors' Trust Agreement" and, together with the Employees' Trust Agreement,
the "Trust Agreements") with the Trustee provides similar funding arrangements
with respect to the Company's Directors' Deferred Compensation Plan, the
Company's Retirement Plan for Directors, and the portion of the 1989 Plan
applicable to directors. The Company entered into the Trust Agreements to help
assure its and its subsidiaries' employees and directors that funds would be
available for the future payment of benefits that the Company and PSI Energy are
obligated to make under such plans, in the event of a change in control. The
Trust Agreements provide for the payment of amounts that may become due under
such plans, subject only to claims of general creditors of the Company in the
event the Company were to become bankrupt or insolvent.
Effective December 1, 1992, the Trust Agreements were amended to exclude,
subject to the Company obtaining the necessary written consents of affected
employees and directors as required by the Trust Agreements, the CINergy Merger
from the definitions of "potential change in control" and "change in control"
with respect to the non-equity plans. As a result of the amendments, the
benefit plans for which funding under the Trust Agreements are required with
respect to the CINergy Merger consist of the 1989 Plan, the Company's Employee
Stock Purchase and Savings Plan, the Performance Shares Plan, and the Company's
Directors' Deferred Compensation Plan.
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As of December 31, 1993, pursuant to the terms of the Trust Agreements, an
aggregate amount of 1,093,520 shares of the Company's common stock were held in
trust for all employees, executive officers and directors participating in the
1989 Plan and the Company's Employee Stock Purchase and Savings Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for the year 1993 were Arthur
Andersen & Co., Bank One Center Tower, 111 Monument Circle, Indianapolis,
Indiana. Upon recommendation of the Audit Committee of the Board, Arthur
Andersen & Co. was employed for the year 1994 by the Board on January 25, 1994.
Representatives of Arthur Andersen & Co. will be present for the Annual
Meeting, will have the opportunity to make a statement and will be available to
respond to appropriate questions.
PROPOSALS BY SHAREHOLDERS
In order to be considered for inclusion in the Company's Proxy Statement for
the 1995 Annual Meeting of Shareholders, proposals from shareholders must be
received by the Secretary of the Company at 1000 East Main Street, Plainfield,
Indiana 46168 not later than December 1, 1994.
By Order of the Board of Directors
Cheryl M. Foley
Secretary
Dated March 9, 1994
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<PAGE> 30
P PSI RESOURCES, INC.
R 1000 E. MAIN STREET
O PLAINFIELD, IN 46168
X
Y PROXY FOR THE APRIL 20, 1994 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints James E. Rogers, John M. Mutz and J. Wayne
Leonard as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated hereon and in their
discretion with respect to any other business properly brought before the
annual meeting, all the shares of stock of PSI Resources, Inc. which the
undersigned is entitled to vote at the annual meeting of shareholders to be
held on April 20, 1994 or any adjournment(s) or postponements(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy when
properly executed will be voted in the manner directed herein by the
undersigned shareholder(s). If no direction is made, the proxy will be voted
"FOR" the proposals on the reverse side hereof.
Please mark, sign, and date on the other side. Return this proxy promptly
using the enclosed envelope.
Continued on Reverse Side
<PAGE> 31
/X/ Please mark your 5255
votes as in this
example.
1. ELECTION OF DIRECTORS- The Board's 2. In their discretion, the proxies
Nominees are: John M. Mutz, James are authorized to vote upon such
E. Rogers, and Robert L. Thompson, other business as may properly
Ph.D. come before the annual meeting or
any adjournment(s) or
postponement(s) thereof.
FOR WITHHELD
1. / / / / Shares represented by all
properly executed proxies will be
For, except vote withheld from the voted in accordance with
following nominee(s) instructions appearing on the
proxy. IN THE ABSENCE OF
- --------------------------------- SPECIFIC INSTRUCTIONS, PROXIES
WILL BE VOTED FOR THE BOARD'S
NOMINEES AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO ANY
OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING.
Check here if you
plan to attend the / /
annual meeting.
Please sign exactly as name(s)
appear on this proxy, and date
this proxy. If joint account,
each joint owner should sign. If
signing for a corporation or
partnership or as agent, attorney
or fiduciary, indicate the
capacity in which you are
signing.
The undersigned hereby revokes
any proxies heretofore given by
the undersigned.
-----------------------------------
-----------------------------------
SIGNATURE(S) DATE
