UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Registrant Title of each class on which registered
Cinergy Corp. Common Stock New York Stock Exchange
The Cincinnati Gas Cumulative Preferred Stock
& Electric Company 4% New York Stock Exchange
Junior Subordinated
Debentures 8.28% New York Stock Exchange
PSI Energy, Inc. Cumulative Preferred Stock
4.32%, 4.16%, 6 7/8%,
7.15%, and 7.44% New York Stock Exchange
First Mortgage Bonds
Series S and Y New York Stock Exchange
The Union Light, None
Heat and Power
Company
<PAGE>
Securities registered pursuant to Section 12(g) of the Act for Cinergy Corp.,
The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light,
Heat and Power Company: None
Indicate by check mark whether all registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
Requirements pursuant to Item 405 of Regulation S-K are not applicable for The
Union Light, Heat and Power Company.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this
Form 10-K with the reduced disclosure format specified in General Instruction
I(2) of Form 10-K.
As of February 28, 1997, the aggregate market values of Cinergy Corp. Common
Stock and PSI Energy, Inc. Cumulative Preferred Stock held by non-affiliates
were $5.4 billion and $174 million, respectively.
Cinergy Corp. is the sole owner of the Common Stock of each of PSI Energy,
Inc. and The Cincinnati Gas & Electric Company. The Union Light, Heat and
Power Company's Common Stock is wholly-owned by The Cincinnati Gas & Electric
Company.
As of February 28, 1997, shares of Common Stock outstanding for each
registrant were as listed:
Company Shares
Cinergy Corp., par value $.01 per share 157,679,129
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement of Cinergy Corp. dated March 17, 1997, and the Information
Statement of PSI Energy, Inc. dated March 24, 1997, are incorporated by
reference into Part III of this report.
This combined Form 10-K is separately filed by Cinergy Corp., The Cincinnati
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant
is filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
PART I
1 Business
Organization . . . . . . . . . . . . . . . . . . . . . . X
CG&E . . . . . . . . . . . . . . . . . . . . . . . . . . X
ULH&P. . . . . . . . . . . . . . . . . . . . . . . . . . X
PSI. . . . . . . . . . . . . . . . . . . . . . . . . . . X
Investments. . . . . . . . . . . . . . . . . . . . . . . X
Services . . . . . . . . . . . . . . . . . . . . . . . . XX
Customer, Sales, and Revenue Data. . . . . . . . . . . . XX
Financial Information by Business Segment. . . . . . . . XX
Regulation . . . . . . . . . . . . . . . . . . . . . . . XX
Regulatory Matters . . . . . . . . . . . . . . . . . . . XX
Power Supply . . . . . . . . . . . . . . . . . . . . . . XX
Fuel Supply. . . . . . . . . . . . . . . . . . . . . . . XX
Gas Supply . . . . . . . . . . . . . . . . . . . . . . . XX
Competition. . . . . . . . . . . . . . . . . . . . . . . XX
Capital Requirements . . . . . . . . . . . . . . . . . . XX
Environmental Matters. . . . . . . . . . . . . . . . . . XX
Employees. . . . . . . . . . . . . . . . . . . . . . . . XX
2 Properties . . . . . . . . . . . . . . . . . . . . . . . . XX
CG&E . . . . . . . . . . . . . . . . . . . . . . . . . . XX
PSI. . . . . . . . . . . . . . . . . . . . . . . . . . . XX
ULH&P. . . . . . . . . . . . . . . . . . . . . . . . . . XX
Other Utility Subsidiaries . . . . . . . . . . . . . . . XX
3 Legal Proceedings
Merger Litigation. . . . . . . . . . . . . . . . . . . . XX
WVPA Settlement Agreement. . . . . . . . . . . . . . . . XX
Enertech Litigation.. . . . . . . . . . . . . XX
4 Submission of Matters to a Vote of Security Holders. . . . XX
Executive Officers of the Registrant . . . . . . . . . . . XX
PART II
5 Market for Registrant's Common Equity
and Related Stockholder Matters. . . . . . . . . . . . . XX
6 Selected Financial Data. . . . . . . . . . . . . . . . . . XX
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . XX
Index to Financial Statements and Financial Statement
Schedules. . . . . . . . . . . . . . . . . . . . . . . . XX
8 Financial Statements and Supplementary Data. . . . . . . . XX
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . XXX
PART III
10 Directors and Executive Officers of the Registrant . . . . XXX
11 Executive Compensation . . . . . . . . . . . . . . . . . . XXX
12 Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . XXX
13 Certain Relationships and Related Transactions . . . . . . XXX
PART IV
14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Financial Statements and Schedules . . . . . . . . . . XXX
Reports on Form 8-K. . . . . . . . . . . . . . . . . .
XXX
Exhibits . . . . . . . . . . . . . . . . . . . . . . . XXX
Signatures . . . . . . . . . . . . . . . . . . . . . . . . XXX
<PAGE>
PART I
ITEM 1. BUSINESS
Cinergy, CG&E, PSI, and ULH&P
Organization
Cinergy Corp., a Delaware corporation (Cinergy or Company), is a registered
holding company under the Public Utility Holding Company Act of 1935 (PUHCA).
Cinergy was created in the October 1994 merger of PSI Resources, Inc.
(Resources) and The Cincinnati Gas & Electric Company (CG&E). The business
combination was accounted for as a pooling of interests. Following the
merger, Cinergy became the parent holding company of PSI Energy, Inc. (PSI),
previously Resources' utility subsidiary, CG&E, Cinergy Investments, Inc.
(Investments) and Cinergy Services, Inc. (Services).
Cinergy's two utility subsidiaries, CG&E and PSI, account for the majority of
Cinergy's revenues and total assets.
Cinergy, CG&E, and ULH&P
CG&E
CG&E, an Ohio corporation, is a combination electric and gas public utility
company with five wholly-owned utility subsidiaries, The Union Light, Heat and
Power Company (ULH&P), Miami Power Corporation (Miami), The West Harrison Gas
and Electric Company, an Indiana corporation (West Harrison), KO Transmission
Company (KO Transmission), and Lawrenceburg Gas Company, an Indiana
corporation (Lawrenceburg). In addition, CG&E has one wholly-owned non-
utility subsidiary, Tri-State Improvement Company (Tri-State).
CG&E and its utility subsidiaries are engaged in the production, transmission,
distribution, and sale of electric energy and/or the sale and transportation
of natural gas in the southwestern portion of Ohio and adjacent areas in
Kentucky and Indiana. The area served with electricity, gas, or both covers
approximately 3,000 square miles, has an estimated population of 1.8 million
people, and includes the cities of Cincinnati and Middletown in Ohio,
Covington and Newport in Kentucky, and Lawrenceburg in Indiana.
KO Transmission, a Kentucky corporation, acquired an interest in an interstate
natural gas pipeline in June 1996, to which CG&E was entitled as a result of a
settlement with the Columbia Gas Transmission Corp. KO Transmission is
engaged in the transportation of natural gas in interstate commerce between
Kentucky and Ohio.
Tri-State, an Ohio corporation, is devoted to acquiring and holding property
in Ohio, Kentucky, and Indiana for substations, electric and gas rights of
way, office space, and other uses in CG&E's and its subsidiaries' operations.
ULH&P
ULH&P, a Kentucky corporation, is engaged in the transmission, distribution,
and sale of electric energy and the sale and transportation of natural gas in
northern Kentucky. The area served with electricity, gas, or both covers
approximately 500 square miles, has an estimated population of 299,000 people,
and includes the cities of Covington and Newport in Kentucky.
Cinergy and PSI
PSI
PSI, an Indiana corporation, is engaged in the production, transmission,
distribution, and sale of electric energy in north central, central, and
southern Indiana. It serves an estimated population of two million people
located in 69 of the state's 92 counties including the cities of Bloomington,
Columbus, Kokomo, Lafayette, New Albany, and Terre Haute.
PSI Energy Argentina, Inc., a wholly-owned subsidiary of PSI and an Indiana
corporation (PSI Energy Argentina), was formed to invest in foreign utility
companies. PSI Energy Argentina is a member of a multinational consortium
which has controlling ownership of Edesur S.A. (Edesur). Edesur is an
electricity-distribution network serving the southern half of Buenos Aires,
Argentina. Edesur provides distribution services to 2.1 million customers.
PSI Energy Argentina owns a small equity interest in this project and provides
operating and consulting services.
South Construction Company, Inc., a wholly-owned subsidiary of PSI and an
Indiana corporation (South Construction), has been used solely to hold legal
title to real estate and interests in real estate which are either not used
and useful in the conduct of PSI's business (such as undeveloped real estate
of PSI abutting a PSI office building) or which has some defect in title which
is unacceptable to PSI. Most of the real estate to which South Construction
acquires title relates to PSI's utility business.
Cinergy
Investments
Investments, a Delaware corporation, is a non-utility subholding company that
was formed to operate Cinergy's domestic non-utility and international
businesses and interests. Investments holds the following non-utility
subsidiaries and interests, which are more fully described below: Enertech
Associates, Inc. (Enertech), formerly Power International, Inc. (Power
International), formerly Enertech Associates International, Inc.; Cinergy
Resources, Inc. (Cinergy Resources), formerly CG&E Resource Marketing, Inc.;
CGE ECK, Inc.; Cinergy Technology, Inc. (Technology), formerly PSI
Environmental Corp.; Cinergy Solutions, Inc. (Solutions); Cinergy Cooling
Corp. (CoolCo); Cinergy UK, Inc. (Cinergy UK), formerly ME Holdings, Inc.; and
Cinergy Capital & Trading, Inc. (Capital & Trading), formerly Wholesale Power
Services, Inc.
Enertech was incorporated in Ohio in 1992 as a vehicle for CG&E to offer
utility management consulting services and to pursue investment opportunities
in energy-related areas, including demand-side management (DSM) services,
consulting, energy and fuel brokering, engineering services, construction
and/or operation of generation, cogeneration, and independent power production
facilities, and project development. In July 1994, Enertech acquired Beheer-
En Belegginsmaatschappij Bruwabel B.V. (Bruwabel) and its subsidiaries for the
purpose of pursuing design, engineering, and development work involving energy
privatization projects, primarily in the Czech Republic. In June 1996,
Investments sold what remained of its investment in Bruwabel and its
subsidiaries and their assets, including the Vytopna Kromeriz Heating Plant
which was acquired by Power Development s.r.o. in 1995. (See Note 12(d) of
the "Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data.")
Cinergy Resources, a Delaware corporation, was formed to hold CG&E's interest
in U.S. Energy Partners, a gas marketing partnership that was dissolved
effective September 1, 1995. Upon dissolution, Cinergy Resources took its
portion of the partnership assets to continue in the gas marketing business.
Cinergy Resources competes with traditional, regulated local distribution
companies by offering "merchant service" (i.e., acquiring natural gas for
resale to end-use customers) and brokers gas to industrial and large
commercial customers.
Technology, an Indiana corporation, was created to manage certain existing
technology-related investments of Cinergy, assess the market potential for
technology-related product and service development opportunities, and form key
alliances for technology-related product development.
Solutions, a Delaware corporation, was formed to market an array of energy-
related products and services and develop, acquire, own, and operate certain
energy-related projects. Solutions holds a 50% interest in Trigen-Cinergy
Solutions LLC, a Delaware limited liability company, (Trigen-Cinergy).
Trigen-Cinergy was formed to build, own, and operate cogeneration and
trigeneration facilities for industrial plants, office buildings, shopping
centers, hospitals, universities, and other major energy users that can
benefit from combined heat and power production economies. Trigen-Cinergy
will also provide energy and asset management services, including fuel
procurement, ancillary to its activities. (See Note 1(e)(ii) of the "Notes to
Financial Statements" in "Item 8. Financial Statements and Supplementary
Data.")
CoolCo, incorporated in Ohio in February 1996, was formed to engage in the
district cooling business. The City of Cincinnati awarded an exclusive
franchise that permits CoolCo to construct, install, maintain, and operate a
chilled water system in the downtown business district of Cincinnati, Ohio.
Construction of such system began in the third quarter of 1996.
Cinergy UK, a Delaware corporation, was formed to hold Cinergy's 50% interest
in Avon Energy Partners Holdings, an unlimited liability company, and its
wholly owned subsidiary, Avon Energy Partners PLC, a limited liability company
(collectively, Avon Energy). During 1996, Avon Energy acquired all of the
outstanding common stock of Midlands Electricity plc (Midlands), a United
Kingdom (U.K.) regional electric company. Midlands primarily distributes and
supplies electricity to 2.2 million industrial, commercial, and residential
customers. In addition, Midlands, together with its subsidiaries, generates
power, supplies natural gas to industrial and commercial customers, and
performs electrical contracting services. (See Notes 1(e)(i) and 12(g) of the
"Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data.")
PSI Recycling, Inc. (Recycling) is an Indiana corporation which recycled metal
from CG&E and paper, metal, and other materials from PSI, its largest single
supplier, and other sources. Investments sold the assets of Recycling in
August 1996.
Power Equipment Supply Co. (PESCO) was incorporated in Indiana to sell
equipment and parts from a PSI generating plant which was canceled, the Marble
Hill Nuclear Project. PESCO also purchased equipment for resale, brokered
equipment, and sold equipment on consignment for others. PESCO discontinued
operations in early 1996.
Capital & Trading, an Indiana corporation, was formed to engage in the
business of marketing power, emission allowances, electricity futures, and
related products and services and to provide consulting services in the
wholesale power-related markets. Capital & Trading will be devoted to
marketing and brokering energy commodities to customers nationwide.
Cinergy, CG&E, PSI, and ULH&P
Services
Services, a Delaware corporation, is the service company for the Cinergy
system, providing member companies with a variety of administrative,
management, and support services.
Cinergy, CG&E, PSI, and ULH&P
Customer, Sales, and Revenue Data
The number of customers served at year-end and the percent of operating
revenues derived from the sale of electricity and the sale and transportation
of natural gas for each registrant for 1996 are as follows:
Operating
Customers Revenues
Registrant Electric Gas Electric Gas
Cinergy and subsidiaries 1,391,938 450,047 84% 14%
CG&E and subsidiaries 729,391 450,047 75% 24%
PSI 662,549 N/A 98% N/A
ULH&P 115,969 75,783 71% 28%
Cinergy's utilities' service territory spans 86 counties in Ohio, Indiana, and
Kentucky and includes approximately 840 cities, towns, unincorporated
communities, and adjacent rural areas, including municipal utilities and rural
electric cooperatives.
The service territory of CG&E and its utility subsidiaries, including ULH&P,
is heavily populated and characterized by a stable residential customer base
and a diverse mix of industrial customers. CG&E's and its utility
subsidiaries' service territory spans 19 counties in Ohio, Indiana, and
Kentucky (of which ULH&P serves six counties in Kentucky) and includes
approximately 130 (44 for ULH&P) cities, towns, unincorporated communities,
and adjacent rural areas, including municipal utilities and rural electric
cooperatives. The area served by PSI is a residential, agricultural, and
widely diversified industrial territory. PSI's service territory includes
approximately 710 cities, towns, unincorporated communities, and adjacent
rural areas, including municipal utilities and rural electric cooperatives.
No one customer accounts for more than 5% of operating revenues for PSI, 5% of
electric or gas operating revenues for CG&E and its utility subsidiaries, or
10% of electric or gas operating revenues for ULH&P. Sales of electricity and
gas sales and transportation are affected by seasonal weather patterns, and,
therefore, operating revenues and associated operating expenses are not
distributed evenly during the year.
Cinergy, CG&E, and ULH&P
Financial Information by Business Segment
For financial information by business segment, see Note 15 of the "Notes to
Financial Statements" in "Item 8. Financial Statements and Supplementary
Data." For a discussion of the potential divestiture of CG&E's, including
ULH&P's, gas operations, see Note 12(f) of the "Notes to Financial Statements"
in "Item 8. Financial Statements and Supplementary Data."
Regulation
Cinergy, CG&E, PSI, and ULH&P
Cinergy, its utility subsidiaries, and certain of its non-utility subsidiaries
are subject to regulation by the Securities and Exchange Commission (SEC)
under the Public Utilities Holding Company Act of 1935 (PUHCA) with respect
to, among other things, issuances and sales of securities, acquisitions and
sales of certain utility properties, acquisitions and retentions of interests
in non-utility businesses, intrasystem sales of certain goods and services,
the method of keeping accounts, and access to books and records. In addition,
the PUHCA generally limits registered holding companies to a single
"integrated" public utility system, which the SEC traditionally has
interpreted to prohibit a registered holding company, with limited exceptions,
from owning both gas and electric properties. (Refer to the information
appearing under the captions "Repeal of the PUHCA" in the "Competitive
Pressures" section and "Potential Divestiture of Gas Operations" in the
"Regulatory Matters" section in "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and to Note 1(f) of the
"Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data.")
CG&E, ULH&P, Miami, and PSI are each subject to regulation by the Federal
Energy Regulatory Commission (FERC) under the Federal Power Act with respect
to the classification of accounts, rates for wholesale sales of electricity,
interconnection agreements, and acquisitions and sales of certain utility
properties. In addition, services by KO Transmission are rendered in
accordance with terms and conditions and at rates contained in a gas tariff
filed with the FERC. Transportation of gas between CG&E and ULH&P is subject
to regulation by the FERC under the Natural Gas Act.
Cinergy, CG&E, and ULH&P
CG&E, as a public utility under the laws of Ohio, is also subject to
regulation by the Public Utilities Commission of Ohio (PUCO) as to retail
electric and gas rates, services, accounts, depreciation, issuance of
securities, acquisitions and sales of certain utility properties, and in other
respects as provided by Ohio law. Rates within municipalities in Ohio are
subject to original regulation by the municipalities. The Ohio Power Siting
Board, a division of the PUCO, has jurisdiction in Ohio over the location,
construction, and initial operation of new electric generating facilities and
certain electric and gas transmission lines presently utilized by CG&E. As to
retail rates and other matters, ULH&P is regulated by the Kentucky Public
Service Commission (KPSC), and West Harrison and Lawrenceburg are regulated by
the Indiana Utility Regulatory Commission (IURC).
Cinergy and PSI
PSI, as a public utility under the laws of Indiana, is also regulated by the
IURC as to its retail rates, services, accounts, depreciation, issuance of
securities, acquisitions and sales of certain utility properties, and in other
respects as provided by Indiana law. Prior to the construction, purchase, or
lease of a facility used for the generation of electricity, a public utility
in Indiana must obtain from the IURC a certificate of public convenience and
necessity.
Cinergy, CG&E, PSI, and ULH&P
Regulatory Matters
Refer to the information appearing under the caption "Regulatory Matters" in
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Power Supply
Cinergy, CG&E, PSI, and ULH&P
Cinergy and other utilities in an eight-state region are participating in the
East Central Area Reliability Coordination Agreement for the purpose of
coordinating the planning and operation of generating and transmission
facilities to provide for maximum reliability of regional bulk power supply.
(Refer to the information appearing under the caption "Cinergy's Response to
the Changing Competitive Environment" in the "Competitive Pressures" section
of "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of Cinergy's involvement in a
coalition for operation of a regional transmission system.)
In addition to an intercompany tie between CG&E's and PSI's electric systems,
Cinergy's electric system, which is operated by Services, is interconnected
with the electric systems of Indiana Michigan Power Company, Columbus Southern
Power Company, Ohio Power Company (all doing business as American Electric
Power Company, Inc. (AEP)), Central Illinois Public Service Company, East
Kentucky Power Cooperative, Hoosier Energy Rural Electric Cooperative, Inc.,
Indianapolis Power and Light Company, Kentucky Utilities Company, Louisville
Gas & Electric Company (LG&E), Northern Indiana Public Service Company,
Southern Indiana Gas and Electric Company, The Dayton Power and Light Company,
and Ohio Valley Electric Corporation.
Cinergy and PSI
PSI has a power supply relationship with Wabash Valley Power Association, Inc.
(WVPA) and Indiana Municipal Power Agency (IMPA) through power coordination
agreements. WVPA and IMPA are also parties with PSI to a joint transmission
and local facilities agreement.
Cinergy, CG&E, and ULH&P
ULH&P does not own or operate any electric generating facilities. Its
requirements for electric energy are purchased from CG&E at rates regulated by
the FERC.
Fuel Supply
Cinergy
Cinergy purchases approximately 25 million tons of coal annually for use by
CG&E and PSI, which historically would rank Cinergy as the sixth largest
utility coal purchaser in the United States.
Cinergy, CG&E, and PSI
A major portion of the coal required by CG&E and PSI is obtained through both
long- and short-term coal supply agreements, with the remaining requirements
purchased on the spot market. The prices to be paid under most of these
contracts are subject to adjustment. In addition, some of these agreements
include extension options and termination provisions pertaining to coal
quality. The coal delivered under these contracts is primarily from mines
located in Indiana, Illinois, and Pennsylvania for PSI and Ohio, Kentucky,
West Virginia, and Pennsylvania for CG&E.
CG&E and PSI monitor alternative sources to assure a continuing availability
of economical fuel supplies. The companies intend to maintain the practice of
purchasing a portion of their coal requirements on the spot market and will
continue to investigate the least cost coal options in connection with their
compliance with the Clean Air Act Amendments of 1990 (CAAA) (see the
information appearing under the caption "Environmental Issues" in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations").
The companies believe they will be able to obtain sufficient coal to meet
future generating requirements. However, both CG&E and PSI are unable to
predict the extent to which coal availability and price may ultimately be
affected by future environmental requirements. Presently, CG&E and PSI expect
the cost of coal to rise in the long run as the supply of more accessible and
higher-grade coal diminishes and as mining, transportation, and other related
costs continue an upward trend.
Cinergy, CG&E, and ULH&P
Gas Supply
In 1996, CG&E and its utility subsidiaries, including ULH&P, purchased the
majority of their natural gas supply (78%) from firm supply agreements, with
remaining volumes purchased in the spot market. These firm contracts feature
dual levels of gas supply: base load for continuous supply for CG&E's and its
utility subsidiaries' core requirements, and "swing" load, which is gas
available on a daily basis to accommodate changes in demand. CG&E pays
reservation charges for firm base and swing supplies. These charges guarantee
delivery from the supplier during extreme weather and protect the supplier
from fluctuations in daily prices associated with swing supplies.
However, as the trend of industrial customers purchasing gas directly from
producers and utilizing CG&E's facilities for transportation increases, CG&E
and its subsidiaries seek to minimize contract commitment costs to firm
suppliers, and reduce the amount of reservation charges paid to suppliers for
firm supply. Accordingly, CG&E and its subsidiaries anticipate purchasing
approximately 50% of their gas supply in the spot market and only 50% from
firm supply agreements in 1997.
Gas purchased by CG&E and its subsidiaries is transported on interstate
pipelines either directly to CG&E's and its subsidiaries' distribution
systems, or it is injected into pipeline storage facilities for withdrawal and
delivery in the future. Most of CG&E's and its utility subsidiaries' gas
supplies are sourced from the Gulf of Mexico coastal area. CG&E and its
subsidiaries have also obtained limited supply sourced from the Appalachian
region and the mid-continent (Arkansas - Oklahoma) basin, and from methane gas
recovered from an Ohio landfill. Over the long term, natural gas is expected
to retain its competitiveness with alternative fuels. However, colder or
warmer than normal winter weather conditions can cause significant price
fluctuation.
Cinergy, CG&E, PSI, and ULH&P
Competition
Refer to the information appearing under the caption "Competitive Pressures"
in "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Cinergy, CG&E, PSI, and ULH&P
Capital Requirements
Refer to the information appearing under the caption "Capital Requirements" in
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Cinergy, CG&E, and PSI
Environmental Matters
Environmental compliance construction expenditures for 1997 for Cinergy and
its subsidiaries are forecasted to be as follows:
Registrant Expenditures
(in thousands)
CG&E and subsidiaries $709
PSI 245
Cinergy and subsidiaries $954
In addition, refer to the information appearing under the caption
"Environmental Issues" in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Employees
Cinergy
The number of employees of Cinergy and its subsidiaries at December 31, 1996,
was 7,973, of whom 4,678 belonged to bargaining units. These bargaining unit
employees were represented by labor agreements between CG&E and its
subsidiaries, including ULH&P, or PSI and the applicable union organization.
Of Cinergy's total employees, 3,019 employees were represented by the
International Brotherhood of Electrical Workers (IBEW), 456 were represented
by the United Steelworkers of America (USWA), and 1,203 were represented by
the Independent Utilities Union (IUU).
Employees assigned to Services at December 31, 1996, totaled 2,798, of whom
905 belonged to bargaining units. These bargaining unit employees were
represented by the labor agreements previously discussed. Of Services' total
employees, 477 were represented by the IUU, 7 were represented by the USWA,
and 421 were represented by the IBEW (142 were represented by the agreement
with PSI and 279 were represented by the agreement with CG&E).
Cinergy and CG&E
The number of employees of CG&E and its subsidiaries at December 31, 1996, was
2,964, of whom CG&E employed 2,676, ULH&P employed 276, and Lawrenceburg
employed 12.
CG&E and its subsidiaries have collective bargaining agreements with several
union organizations. Of CG&E's and its subsidiaries' total employees 726
employees were represented by the IUU, 449 were represented by the USWA, and
1,215 were represented by the IBEW. The current contract between CG&E and the
IUU will expire in April 2001. CG&E and its subsidiaries have a contract with
the USWA expiring May 15, 2002. The IBEW contract expires April 1, 2001.
Cinergy and PSI
The number of employees of PSI at December 31, 1996, was 2,211, of whom 1,383
were represented by the IBEW.
PSI's collective bargaining agreement with the IBEW will expire at the end of
April 1999.
Cinergy and ULH&P
The number of employees of ULH&P at December 31, 1996, was 276, of whom 229
belonged to bargaining units. These bargaining unit employees were
represented by the same labor agreements between CG&E and the applicable union
organization. Of ULH&P's total employees, 62 employees were represented by
the IBEW, 102 were represented by the USWA, and 65 were represented by the
IUU.
The current contract between ULH&P and the IUU will expire in April 2001.
ULH&P has agreements with the USWA and IBEW that will expire May 15, 2002, and
April 1, 2001, respectively.
<PAGE>
ITEM 2. PROPERTIES
Cinergy, CG&E, PSI, and ULH&P
Substantially all utility plant is subject to the lien of each applicable
company's first mortgage bond indenture.
In addition to the information discussed herein, refer to Note 13 of the
"Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data."
Cinergy, CG&E, and PSI
At December 31, 1996, the Cinergy utility subsidiaries owned electric
generating plants, or portions thereof in the case of jointly owned
plants, with net capabilities (winter ratings) as shown in the following
table:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C>
Net
Percent Principal Capability
Plant Name Location Ownership Fuel Source megawatts (mw)__
CG&E
Steam Electric Generating Plants:
Miami Fort Station (Units 5&6) North Bend, Ohio 100.00% Coal 243
Miami Fort Station (Units 7&8) North Bend, Ohio 64.00 Coal 640
W.C. Beckjord Station (Units 1-5) New Richmond, Ohio 100.00 Coal 704
W.C. Beckjord Station (Unit 6) New Richmond, Ohio 37.50 Coal 158
J.M. Stuart Station Aberdeen, Ohio 39.00* Coal 913
Killen Station Adams County, Ohio 33.00* Coal 198
Conesville Station Conesville, Ohio 40.00* Coal 312
William H. Zimmer Generating
Station Moscow, Ohio 46.50 Coal 605
East Bend Station Boone County, Kentucky 69.00 Coal 414
Combustion Turbines:
Dicks Creek Station Middletown, Ohio 100.00 Gas 172
Miami Fort Gas Turbine Station North Bend, Ohio 100.00 Oil 78
W.C. Beckjord Gas Turbine Station New Richmond, Ohio 100.00 Oil 245
Woodsdale Generating Station Butler County, Ohio 100.00 Gas 564
PSI
Steam Electric Generating Plants:
Gibson Generating Station:
(Units 1-4) Princeton, Indiana 100.00 Coal 2,532
(Unit 5) Princeton, Indiana 50.05 Coal 313
Wabash River Station Terre Haute, Indiana 100.00 Coal 668
Cayuga Station Cayuga, Indiana 100.00 Coal 1,005
R.A. Gallagher Station New Albany, Indiana 100.00 Coal 560
Edwardsport Station Edwardsport, Indiana 100.00 Coal 160
Noblesville Station Noblesville, Indiana 100.00 Coal 90
Combustion Turbines:
Cayuga Combustion Turbine Cayuga, Indiana 100.00 Gas 120
Wabash River Coal Gasification
Project Terre Haute, Indiana 100.00 Coal 262
Internal Combustion Units:
Connersville Peaking Station Connersville, Indiana 100.00 Oil 98
Miami-Wabash Peaking Station Wabash, Indiana 100.00 Oil 104
Cayuga Peaking Units Cayuga, Indiana 100.00 Oil 11
Wabash River Peaking Units Terre Haute, Indiana 100.00 Oil 8
Hydroelectric Generating Station:
Markland Generating Station Markland Dam, Ohio
River 100.00 Water 45
<FN>
Station is not operated by CG&E.
</TABLE>
<PAGE>
Cinergy and CG&E
CG&E
CG&E's 1996 peak load, which occurred on August 6 and was exclusive of off-
system transactions, was 4,452 mw. For the period 1997 through 2006, peak
load and kilowatt-hour (kwh) sales are each forecasted to have annual growth
rates of 2%. These forecasts reflect CG&E's load growth, alternative fuel
choices, population growth, and housing starts. These forecasts exclude an
assessment of DSM, non-firm power transactions, and any potential off-system,
long-term firm power sales.
As of December 31, 1996, CG&E's transmission system consisted of 388 circuit
miles of 345,000 volt line, 618 circuit miles of 138,000 volt line, 520
circuit miles of 69,000 volt line, and 116 circuit miles of lesser volt line,
all within the states of Ohio and Kentucky. In addition, as of December 31,
1996, CG&E's distribution system consisted of 14,647 circuit miles, all within
the state of Ohio. As of the same date, CG&E's transmission substations had a
combined capacity of 14,845,000 kilovolt-amperes, and the distribution
substations had a combined capacity of 5,968,000 kilovolt-amperes. A portion
of CG&E's total transmission system is jointly owned, primarily in connection
with its jointly owned electric generating units.
During 1996, almost all of the electricity generated by units owned by CG&E or
in which it has an ownership interest was produced by coal-fired generating
units. Those units generate most of the electric requirements of CG&E and its
utility subsidiaries.
CG&E owns two propane/air peakshaving plants. Associated with these plants
are two underground caverns, one with a seven million gallon capacity and one
with an eight million gallon capacity. Both plants and storage caverns are
located in Ohio and are used primarily to augment CG&E's supply of natural gas
during periods of peak demand and emergencies. CG&E also owns natural gas
distribution systems consisting of 5,632 miles of mains and service lines in
southwestern Ohio.
Cinergy and PSI
PSI
PSI's 1996 peak load, which occurred on August 7 and was exclusive of off-
system transactions, was 5,227 mw. For the period 1997 through 2006, peak
load and kwh sales are each forecasted to have annual growth rates of 2%.
These forecasts reflect PSI's load growth, alternative fuel choices,
population growth, and housing starts. These forecasts exclude an assessment
of DSM, non-firm power transactions, and any potential off-system, long-term
firm power sales.
As of December 31, 1996, PSI's transmission system consisted of 719 circuit
miles of 345,000 volt line, 656 circuit miles of 230,000 volt line, 1,595
circuit miles of 138,000 volt line, and 2,428 circuit miles of 69,000 volt
line, all within the state of Indiana. In addition, as of December 31, 1996,
PSI's distribution system consisted of 19,486 circuit miles, all within the
state of Indiana. As of the same date, PSI's transmission substations had a
combined capacity of 21,535,000 kilovolt-amperes, and the distribution
substations had a combined capacity of 6,299,000 kilovolt-amperes.
During 1996, almost all of PSI's kwh production was obtained from coal-fired
and hydroelectric generation.
Cinergy, CG&E, and ULH&P
ULH&P
As of December 31, 1996, ULH&P owned 104 circuit miles of 69,000 volt electric
transmission line, an electric distribution system consisting of 2,510 circuit
miles, and a gas distribution system consisting of 1,271 miles of mains and
service lines in northern Kentucky. ULH&P also owns a propane/air peakshaving
plant, a seven million gallon capacity underground cavern for the storage of
liquid propane, and related liquid propane feeder lines, located in northern
Kentucky and adjacent to one of the gas lines that transports natural gas to
CG&E. The propane/air plant and cavern are used primarily to augment CG&E's
and ULH&P's supply of natural gas during periods of peak demand and
emergencies.
Cinergy and CG&E
Other Utility Subsidiaries
As of December 31, 1996, Lawrenceburg owned a gas distribution system
consisting of 170 miles of mains and service lines in Indiana adjacent to the
western part of CG&E's service area. Lawrenceburg is connected with and sells
gas at wholesale to the city of Aurora, Indiana, and is also connected within
Indiana with the lines of Texas Gas Transmission Corporation and Texas Eastern
Transmission Corporation.
As of December 31, 1996, West Harrison owned a small electric distribution
system consisting of 10 circuit miles in Indiana adjacent to CG&E's service
area. As of the same date, Miami owned 40 miles of 138,000 volt transmission
line connecting the lines of LG&E with those of CG&E.
As of December 31, 1996, KO Transmission owned a 32.67% interest in a 90-mile
interstate natural gas pipeline. KO Transmission transports gas from
southeast Kentucky northward to the service territories of CG&E and ULH&P.
ITEM 3. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Merger Litigation
Hearings before the United States Court of Appeals for the District of
Columbia Circuit in connection with AEP's petition for review of the FERC's
order approving the merger of CG&E and Resources to form Cinergy (Merger
Order) concluded on March 18, 1997. AEP has objected to the Merger Order
alleging that the post-merger operations of Cinergy would require the use
of AEP's transmission facilities on a continuous basis without
compensation. AEP contends that the FERC, in issuing the Merger Order, did
not adequately evaluate the impact on AEP or whether the need to use AEP's
transmission facilities would interfere with Cinergy achieving merger
benefits. In addition, AEP claims that the FERC failed to evaluate the
extent to which the merged facilities' operations would be consistent with
the integrated public utility concept of the PUHCA. CG&E and PSI have
intervened in this action. While a decision in the appeal is expected by
the end of 1997, Cinergy, CG&E, and PSI currently cannot predict the
outcome.
Cinergy and PSI
Wabash Valley Power Association, Inc. Settlement Agreement
See Note 12(e) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data."
Cinergy, CG&E, and PSI
Enertech Litigation
See Note 12(d) of the "Notes to Financial Statements" in "Item 8.
Financial Statements and Supplementary Data."
ULH&P
ULH&P has no material pending legal proceedings.
Cinergy, CG&E, PSI, and ULH&P
In addition to the above litigation, see " Regulatory Matters" in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Notes 12(b), 12(c), and 12(f) of the "Notes to Financial
Statements" in "Item 8. Financial Statements and Supplementary Data."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cinergy, CG&E, and PSI
None.
ULH&P
Omitted pursuant to instruction I(2)(c).
EXECUTIVE OFFICERS OF THE REGISTRANTS (at February 28, 1997)
Age at
Dec. 31,
Name 1996 Office & Date Elected or in Job
Cinergy, CG&E, and PSI
Jackson H. Randolph 66 Chairman of Cinergy, CG&E, and
PSI - 1995
Chairman and Chief Executive Officer
of Cinergy, CG&E, and PSI - 1994
Chairman, President, and Chief Executive
Officer of CG&E - 1993
President and Chief Executive Officer
of CG&E - 1986
James E. Rogers 49 Vice Chairman, President, and Chief
Executive Officer of Cinergy - 1995
Vice Chairman and Chief Executive
Officer of CG&E and PSI - 1995
Vice Chairman, President, and Chief
Operating Officer of Cinergy - 1994
Vice Chairman and Chief Operating
Officer of CG&E and PSI - 1994
Chairman and Chief Executive Officer
of Resources - 1993
Chairman, President, and Chief Executive
Officer of PSI - 1990
Cheryl M. Foley 49 Vice President, General Counsel, and
Secretary of CG&E - 1995
Vice President, General Counsel, and
Secretary of Cinergy - 1994
Vice President, General Counsel, and
Secretary of PSI and Resources - 1991
Vice President and General Counsel of
Resources - 1990
Elizabeth K. Lanier 1/ 45 Vice President and Chief of Staff - 1996
Partner - Frost & Jacobs 2/ - 1984
J. Wayne Leonard 46 President, Energy Commodities Business Unit
of Cinergy - 1996
Group Vice President and Chief
Financial Officer of CG&E and PSI - 1995
Group Vice President and Chief Financial
Officer of Cinergy - 1994
Senior Vice President and Chief Financial
Officer of PSI and Resources - 1992
Vice President and Chief Financial
Officer of PSI and Resources - 1989
William L. Sheafer 53 Treasurer of Cinergy and PSI - 1994
Treasurer of CG&E - 1987
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS (continued)
Age at
Dec. 31,
Name 1996 Office & Date Elected or in Job
Larry E. Thomas 51 President, Energy Delivery Business Unit
of Cinergy - 1996
Group Vice President and Chief
Transformation Officer of Cinergy, CG&E,
and PSI - 1995
Group Vice President, Reengineering and
Operations Services of CG&E and
PSI - 1995
Group Vice President, Reengineering
and Operations Services of Cinergy - 1994
Senior Vice President and Chief Operations
Officer of PSI - 1992
Senior Vice President and Chief Operating
Officer, Customer Operations of
PSI - 1990
Charles J. Winger 51 Comptroller of CG&E - 1995
Comptroller of Cinergy - 1994
Comptroller of Resources - 1988
Comptroller of PSI - 1984
Cinergy and CG&E
William J. Grealis 3/ 51 President, Energy Services Business Unit
of Cinergy - 1996
President of CG&E - 1995
Vice President of Cinergy - 1995
President, Gas Business Unit of CG&E - 1995
President of Investments - 1995
Partner - Akin, Gump, Strauss, Hauer
& Feld 2/ - 1978
Cinergy and PSI
John M. Mutz 4/ 61 Vice President of Cinergy - 1995
President of PSI - 1994
President of Resources - 1993
President - Lilly Endowment, Inc. 2/ - 1989
Cinergy
J. Joseph Hale, Jr. 47 Vice President of Cinergy - 1996
General Manager, Marketing
Operations of CG&E - 1995
President of Cinergy Foundation,
Inc. 5/ - 1992
President - The Kaiser Group,
Inc. 2/ - 1989
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS (continued)
Age at
Dec. 31,
Name 1996 Office & Date Elected or in Job
M. Stephen Harkness 48 Vice President of Cinergy - 1996
Executive Vice President and Chief
Operating Officer of Trigen-Cinergy
Solutions LLC 6/ - 1996
General Manager, Corporate Development
and Financial Services of Cinergy - 1994
Treasurer of PSI and Resources - 1986
Jerry W. Liggett 55 Vice President of Cinergy - 1996
Senior Manager, Human Resources
Strategy of Cinergy - 1995
General Manager, Employee Relations,
Compensation & Benefits of Cinergy - 1995
Executive Director, Human Resources
of PSI and Resources - 1990
Michael M. Sample 44 Vice President of Cinergy - 1996
General Manager, International
Investments of Cinergy - 1994
Vice President, Government Affairs
of PSI and Resources - 1991
ULH&P
Omitted pursuant to instruction I(2)(c).
Cinergy, CG&E, and PSI
None of the officers is related in any manner. Executive officers of Cinergy
are elected to the offices set opposite their respective names until the next
annual meeting of the Board of Directors and until their successors shall have
been duly elected and shall have been qualified.
1/ Prior to becoming Vice President effective June 1, 1996, Ms. Lanier
was a partner in the law firm of Frost & Jacobs located in Cincinnati,
Ohio.
2/ Non-affiliate of Cinergy.
3/ Prior to becoming President of Investments, Mr. Grealis was a
partner in the Washington, D.C. law firm of Akin, Gump, Strauss, Hauer
& Feld. In addition, prior to the merger, Mr. Grealis was President of
PSI Investments, Inc. on an interim basis beginning in 1992.
4/ Prior to becoming President of Resources, Mr. Mutz was President of
Lilly Endowment, Inc., a private philanthropic foundation located in
Indianapolis, Indiana.
5/ An affiliated public benefit corporation organized and operating
exclusively for charitable purposes.
6/ Joint venture company formed by Cinergy and Trigen Energy Corporation.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Cinergy, CG&E, PSI, and ULH&P
Cinergy's common stock is listed on the New York Stock Exchange and has
unlisted trading privileges on the Boston, Chicago, Cincinnati, Pacific, and
Philadelphia exchanges. As of February 7, 1997, Cinergy's most recent
dividend record date, there were 77,405 common shareholders of record. The
following table shows the high and low sales prices per share, if applicable,
and the dividends on common stock declared by Cinergy, CG&E, PSI, and ULH&P
for the past two years:
Market Price (a) Dividends Declared_____
High Low (per share) (in thousands)
1995
Cinergy
4th Quarter 31 1/8 27 3/4 .43
3rd Quarter 27 7/8 25 1/4 .43
2nd Quarter 27 24 5/8 .43
1st Quarter 25 1/4 23 3/8 .43
CG&E
4th Quarter 56 600 (b)
3rd Quarter 55 400 (b)
2nd Quarter 55 900 (b)
1st Quarter 51 650 (b)
ULH&P
4th Quarter 6.00 (b)
1996
Cinergy
4th Quarter 34 1/4 30 7/8 .45
3rd Quarter 32 29 1/8 .43
2nd Quarter 32 27 1/2 .43
1st Quarter 32 1/8 28 1/4 .43
CG&E
4th Quarter 50 949 (b)
3rd Quarter 239 909 (b)
2nd Quarter 45 116 (b)
1st Quarter 41 995 (b)
PSI
4th Quarter 29 713 (b)
3rd Quarter 28 311 (b)
2nd Quarter 28 165 (b)
1st Quarter 25 887 (b)
ULH&P
4th Quarter 8.50 (b)
(a) Market price for CG&E, PSI, and ULH&P is not applicable.
(b) All of CG&E's and PSI's dividends were paid to Cinergy and all of
ULH&P's dividends were paid to CG&E.
See Note 2(b) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data" for a brief description of common dividend
restrictions.
All CG&E and PSI common stock is held by Cinergy and all ULH&P common stock is
held by CG&E; therefore, there is no public trading market for their common
stock.
ITEM 6. SELECTED FINANCIAL DATA
Cinergy
1996 1995 1994 1993 1992
(in millions, except per share amounts)
Operating revenues (1) $3 243 $3 023 $2 888 $2 833 $2 613
Net income (1) 335 347 191 63 271
Common stock
Earnings per share (1) (5) 2.00 2.22 1.30 .43 1.91
Dividends declared per share 1.74 1.72 1.50 1.46 1.39
Total assets (2) 8 849 8 220 8 150 7 804 7 133
Cumulative preferred stock of
subsidiaries subject to mandatory
redemption (3) - 160 210 210 210
Long-term debt (4) 2 535 2 531 2 715 2 645 2 547
Long-term debt due within
one year 140 202 60 - 46
CG&E
1996 1995 1994 1993 1992
(in millions)
Operating revenues (1) $1 976 $1 848 $1 788 $1 752 $1 553
Net income (loss)(1) 227 236 158 (9) 202
Total assets (2) 4 967 5 197 5 182 5 144 4 802
Cumulative preferred stock subject
to mandatory redemption (3) - 160 210 210 210
Long-term debt (4) 1 565 1 703 1 838 1 829 1 810
Long-term debt due within
one year 130 152 - - 7
PSI
1996 1995 1994 1993 1992
(in millions)
Operating revenues (1) $1 332 $1 248 $1 114 $1 092 $1 066
Net income (1) 126 146 82 125 107
Total assets (2) 3 295 3 076 2 945 2 645 2 300
Long-term debt (4) 970 828 878 816 737
Long-term debt due within
one year 10 50 60 - 40
Cinergy, CG&E, and PSI
(1) See Notes 1 and 15 of the "Notes to Financial Statements" in
"Item 8. Financial Statements and Supplementary Data."
(2) See Notes 1(f) and 6 of the "Notes to Financial Statements" in
(3) "Item
8. Financial Statements and Supplementary Data."
(3) See Note 3 of the "Notes to Financial Statements" in "Item 8.
Financial Statements and Supplementary Data."
(4) See Note 4 of the "Notes to Financial Statements" in "Item 8.
Financial Statements and Supplementary Data."
(5) Includes costs incurred in 1996 by Cinergy of $.12 per share related
to the reacquisition of 90% of CG&E's preferred stock through a
tender offer.
In addition, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 12 of the "Notes to Financial
Statements" in "Item 8. Financial Statements and Supplementary Data" for
discussions of material uncertainties for Cinergy, CG&E, and PSI.
ULH&P
Omitted pursuant to Instruction I(2)(a).
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
CAUTIONARY STATEMENTS REGARDING FORWARD - LOOKING INFORMATION Matters
discussed in this "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" reflect and elucidate the Companies'
corporate vision of the future and, as a part of that, outline goals and
aspirations, as well as specific projections. These goals and projections are
considered forward-looking statements and are based on management's beliefs,
as well as certain assumptions made by management. In addition to any
assumptions and other factors that are referred to specifically in connection
with these statements, other factors that could cause actual results to differ
materially from those indicated in any forward-looking statements include,
among others:
Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unscheduled generation outages;
unusual maintenance or repairs; unanticipated changes to fossil fuel costs,
gas supply costs, or availability constraints due to higher demand,
shortages, transportation problems or other developments; environmental
incidents; or electric transmission or gas pipeline system constraints.
Increased competition in the electric and gas utility industries
including effects of: industry restructuring; transmission system operation
and/or administration; customer choice; and cogeneration.
Regulatory factors such as unanticipated changes in rate-setting policies
or procedures; recovery of investments made under traditional regulation,
and the frequency and timing of rate increases.
Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board (FASB), the Securities and Exchange
Commission (SEC), the Federal Energy Regulatory Commission (FERC), state
public utility commissions, state entities which regulate natural gas
transmission, gathering and processing and similar entities with regulatory
oversight.
Economic conditions including inflation rates and monetary fluctuations.
Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not limited
to, price, basis, credit, liquidity, volatility, capacity, transmission,
currency exchange, interest rate, and warranty risks.
Availability or cost of capital, resulting from changes in: Cinergy and
its subsidiaries, interest rates, and securities ratings or market
perceptions of the utility industry and energy-related industries.
Employee workforce factors including changes in key executives,
collective bargaining agreements with union employees, or work stoppages.
Legal and regulatory delays and other obstacles associated with mergers,
acquisitions, and investments in joint ventures.
Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims, and other matters, including but not
limited to those described in Note 12 of the "Notes to Financial
Statements" in "Item 8. Financial Statements and Supplementary Data."
Changes in international, Federal, state, or local legislative
requirements such as changes in tax laws or rates; environmental laws and
regulations.
Cinergy and its subsidiaries undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of changes in
actual results, changes in assumptions, or other factors affecting such
statements.
Cinergy, CG&E, PSI, and ULH&P
THE COMPANIES
Cinergy Corp., a Delaware corporation (Cinergy or Company) is a registered
holding company under the Public Utility Holding Company Act of 1935 (PUHCA).
Cinergy was created in the October 1994 merger of PSI Resources, Inc.
(Resources) and The Cincinnati Gas & Electric Company (CG&E). The business
combination was accounted for as a pooling of interests. Following the
merger, Cinergy became the parent holding company of PSI Energy, Inc. (PSI),
previously Resources' utility subsidiary, CG&E, Cinergy Investments, Inc.
(Investments), and Cinergy Services, Inc.
FINANCIAL CONDITION
COMPETITIVE PRESSURES
Electric Utility Industry
Cinergy, CG&E, PSI, and ULH&P
Introduction The changing competitive environment for energy services
continues as the primary factor which will influence the future operations,
structure, and profitability of Cinergy. Changes in the industry include the
convergence of gas and electricity as complementary energy sources, new
emerging technologies, the commoditization of electric power, full competition
in the wholesale power markets from both traditional electric utilities and
new power marketers and brokers, and continuing pressure for "customer choice"
by all classes of customers. In addition, traditional investor owned
utilities are becoming more diversified by using merger and acquisition
strategies to support regional, national, and international market strategies.
These merger and acquisition strategies include the combining of electric
utilities with one another and cross-commodity combinations of electric
utilities with gas transmission, distribution, and marketing companies.
Pressures for Customer Choice Extending choice to end-use customers,
sometimes referred to as retail wheeling or retail access, will allow all
customers within a particular utility's franchise service territory to
"unbundle" their purchase decisions. In effect, customers would be allowed to
purchase power as a commodity directly from any available source and would buy
delivery services (i.e., transmission and distribution) from the local
utilities which own the power lines or from independent system operators (ISO)
(see below). Other value-added services beyond delivery to the customer's
premises could potentially be provided by third-party energy services
companies. The regulatory and legislative reforms to facilitate customer
choice are primarily driven by: (1) large industrial energy users' need to
access lower cost power sources; (2) the continuing emergence of new
technologies and new marketers to provide electric power; and (3) evidence
from other previously regulated industries that wherever effective competition
is feasible, it can yield both lower costs and a wider range of customer
options and services as compared to traditional cost-of-service regulation.
The genesis for the new competitors to the local franchise utilities was the
enactment of the Energy Policy Act of 1992 (Energy Act), which granted the
FERC authority to order wholesale transmission access. As a result, in 1996,
the FERC's order 888 (FERC Order 888) was implemented. This order encourages
full wholesale competition by requiring all utilities subject to the FERC's
jurisdiction to make their transmission systems available to power buyers and
sellers at prices comparable to those the transmission owner charges itself
for comparable service. These new competitors to the local franchise utility
include power marketers, power brokers, and other utilities, who now have the
ability to sell power in regional or national markets. To date, the FERC has
granted licenses to more than 200 power marketers, enabling these new
competitors to sell wholesale power at market-based rates. Cinergy was
granted a power marketing license in December 1995.
Power brokers are intermediaries between buyers and sellers and do not take
title to the power which they broker. Power marketers conduct bulk power
trades at market-based prices. They manage owned generation and portfolios of
power contracts, to which they have title, and package energy products for
customers of bulk power, including price risk management contracts such as
options on fixed-price energy and guaranteed fixed-price contracts. Power
marketers compete not only in price, but also on service, such as structuring,
hedging services, and scheduling flexibility.
The demands of industrial and commercial customers continue to drive
deregulation into the legislative process in many states. Four states,
California, New Hampshire, Pennsylvania, and Rhode Island, enacted legislation
in 1996 which will lead to total customer choice for power supply. Several
states have proposed legislation which is currently being debated in their
respective legislatures and in most other states the complex technical and
economic issues presented by deregulation and restructuring are being
discussed and examined. Among other things, states are considering the trade-
offs between achieving long-run economic efficiency and potential short-term
wealth transfers between customers and shareholders or among customer groups,
as well as the potential impact (if any) restructuring may have on state and
local tax structures and socially desirable objectives such as clean air or
energy efficiency. In addition to legislative efforts to totally restructure
the electric utility industry, several states have initiated pilot retail
access programs which allow a limited number of retail customers the
opportunity to shop for electricity among several suppliers.
The most contentiously debated issue has been how best to transition from the
historical monopoly cost-of-service regulated environment to the competitive
market-driven environment and who will bear the costs of past commitments made
under the old order. If the generation component of the industry was
immediately brought to market and priced at competitive wholesale prices, it
is likely many utilities would be unable to recover a large percentage of
their fixed costs. Other costs such as investments in energy efficiency
(demand-side management (DSM) investments) could also become "stranded" (i.e.,
unrecoverable at competitive market prices) in this scenario. The financial
impact to the industry and each investor owned utility of alternative
scenarios for a transition to a competitive market is highly dependent upon:
(1) the speed of the transition and type of price regulation during the
transition; (2) the ultimate clearing price for electricity in a competitive
environment; and (3) customer behavior when afforded potentially lower-cost
alternatives.
Because of the complex nature of electric power flows, the variety of state-
by-state regulations and the potential inability or unwillingness to shut down
high-cost, uneconomical generation facilities, such as nuclear, in a fully
competitive environment, great uncertainty exists as to the time frame
required for the future price of electricity in a commodity market to rise to
long-run marginal cost (e.g., full cost of new resources) and, importantly,
how close to short-term marginal cost (e.g., fuel and variable operating
costs) prices may fall in the interim. For example, Moody's Investors
Service, Inc. (Moody's) has estimated the stranded investment issue for the
industry at $136 billion (computed on a present value basis), while Standard
and Poor's (S&P) has estimated a total exposure of between $10 billion and $26
billion (6% and 16%, respectively) of total industry annual revenues. The
position that recovery of prudent past investments and commitments must be
considered has received support at the FERC, in FERC Order 888, and in the
four states which have enacted competition-related legislation (see further
discussion herein).
In addition either corporate separation and/or divestiture continues to be
advocated by some constituents in order to protect against market power abuses
which could result from one electric utility controlling large segments of
generating capacity and transmission assets within a local or regional market.
As a result, electric utilities could face substantial costs to restructure
the corporate vertical integration in the delivery of electric power which
exists today. If legal separation is required, for example, first mortgage
bond indentures may not allow for major asset dispositions by the electric
utility. In order to legally unbundle, the electric utility could be required
to repurchase the outstanding debt under the indenture at substantial call
premiums or pay similar fees to the bondholders in order to amend the bond
indenture to allow for the unbundling. At a minimum, regulators will likely
mandate functional unbundling of the generation, transmission, and
distribution businesses.
In addition, electric utilities could also face substantial costs or
competitive restrictions to comply with codes of conduct which are likely to
be implemented by regulators to encourage fair competition among the many new
competitors entering a market and the local franchise utility.
Cinergy's Response to the Changing Competitive Environment Cinergy continues
to be an aggressive supporter of increased competition in the electric utility
industry. Cinergy believes competition would benefit electric customers
individually and the economy as a whole. At the same time, Cinergy possesses
certain competitive advantages, such as low-cost generation, which could
benefit shareholders in a deregulated environment. However, these advantages
could be substantially eroded by restrictive regulations which lag the
development of a competitive market and which limit Cinergy's energy commodity
and energy services business units' ability to preempt the competition in
responding to the needs of customers or which result in pricing at the lower
of cost or market for former "franchise" holding utilities. As such, Cinergy
will continue its leadership role in both state and Federal debates on
industry reform.
Cinergy believes there are two substantial impediments to realizing the
potential efficiencies of competition in the generation component of the
business: (1) resolving the issue of stranded costs associated with past
utility commitments and (2) recognizing states' rights, concerns, and
authority in regulating a product which flows in interstate commerce. While
Cinergy is among the lowest-cost producers nationwide and has been recognized
by both Moody's and S&P as having minimal exposure to stranded investment,
Cinergy nevertheless recognizes the legitimacy of the industry's argument for
recovery of at least some of the costs associated with past commitments and
the importance of resolving this issue in the interest of moving the debate to
more important issues such as, how to achieve the potential economic
efficiencies which competition offers and what regulatory and structural
reforms are necessary to achieve those results. Cinergy believes that even
low-cost producers, under certain scenarios, could face difficult if not
ruinous competition in an excess capacity market which was created at least in
part by past government policies. Cinergy has approximately $1 billion of
regulatory assets (past costs incurred for which regulators have promised
recovery from customers in the future) which could be at risk, at least in
part, in some scenarios. At the same time, regardless of certain regulatory
actions or statements to the contrary, Cinergy believes full recovery of the
industry's potential stranded investment is unrealistic to expect in a
marketplace where certain customers can bypass stranded cost recovery
mechanisms through self-generation (see Trigen Energy Corporation (Trigen)
below), is politically infeasible, and is neither necessarily equitable nor
efficient. Cinergy believes the resolution of certain broad restructuring
issues (e.g., market power, codes of conduct, universal service to customers,
reliability standards, and certain tax consequences) must be addressed on a
regional or national basis to prevent state-by-state disparity which could
provide inequitable advantages to some competitors while unduly harming
others' ability to compete in the marketplace.
During 1996, Cinergy has taken numerous steps to prepare itself not only for
the changing environment, but to assure equity and consistency in the setting
of rules and regulations in the various markets in which Cinergy competes,
including the following:
Cinergy and five other midwestern utilities formed a coalition to create
and develop a multi-state transmission region operated by an ISO. Since
its formation, 18 additional midwestern transmission owners have joined the
coalition. The coalition is proposing a Midwest ISO which would ensure
non-discriminatory open transmission access and system reliability, as well
as, the development of a regional transmission tariff that helps eliminate
the "pancaking" of transmission rates that occurs today when power is
transmitted through multiple utility systems. Cinergy believes the
existence of ISO's will ease regulatory and customer concerns over the
exercise of market power by transmission-owning utilities.
Cinergy reorganized its electric operations into three strategic business
units. This functional unbundling separated Cinergy's electric utility
business into an energy services business unit, an energy delivery business
unit, and an energy commodities business unit. Each of these separate
business units will be responsible for expanding its business through,
among other things, expansion of its markets and the offering of new
products and services.
Cinergy acquired, through a joint venture, a 50% interest in Midlands
Electricity plc (Midlands), an electricity distribution company located in
the United Kingdom (U.K.). In addition to diversifying Cinergy's
distribution business into a foreign market, the U.K.'s advanced stage of
opening its electricity market to competition will allow Cinergy to gain
experience and knowledge of customer behavior in a competitive market prior
to deregulation in its United States (U.S.) markets.
Cinergy and Trigen formed a joint venture to develop and operate
cogeneration and trigeneration energy facilities throughout the U.S. and
Canada. This will allow Cinergy to participate in the delivery of
alternative low-cost energy solutions and technologies to its own franchise
customers and to customers outside of its franchise territory.
Cinergy was an active and successful participant in retail access pilot
programs in Illinois, New Hampshire, New York, and Washington. In
addition, Cinergy intends to be an active participant in certain states'
restructuring processes.
Cinergy's energy commodities business unit accelerated its marketing of
power in the wholesale market (megawatt (mw) sales increased by more than
80%). Cinergy now has power marketing representation in all regions of the
U.S. In late 1996, Cinergy acquired exclusive rights to provide power to
two midwestern electric cooperatives for the next five to seven years.
Cinergy continued its business reengineering efforts, which were
initiated in 1994. These initiatives continue to streamline and make
operations more efficient in order for Cinergy to become even more prepared
to compete in a competitive environment.
As discussed below, Cinergy worked with industrial groups and one other
franchise utility in Indiana and is currently working with the other
investor owned utilities in Ohio to propose customer choice legislation
which properly considers the issues and trade-offs discussed above.
For an electric utility to be successful in a competitive environment, it is
critical that regulatory reform keep pace with the market realities facing
electric utilities and their customers not only in generation, but also
transmission, distribution, and energy services activities. Strict adherence
to traditional, cost-based rate-of-return regulation will both significantly
disadvantage a utility's ability to compete successfully to supply customer
needs and result in a failure to realize the potential economic efficiencies
from restructuring. For example, performance-based regulation for those
businesses which remain regulated would result in better economic incentives
to control costs and likely add flexibility for the franchise utility in the
transition to a fully competitive environment.
Federal Developments
Open Access Transmission - FERC Orders 888 and 889 The Energy Act granted the
FERC authority to order wholesale transmission access. Acting on that
authority, in April 1996, the FERC issued its final orders. The final rules
provide for mandatory filing of open access/comparability transmission
tariffs, provide for functional unbundling of all services, require utilities
to use the filed tariffs for their own bulk power transactions, establish an
electronic bulletin board for transmission availability and pricing
information, and establish a contract-based approach to recovering any
potential stranded costs as a result of customer choice at the wholesale
level. The final rules became effective in July 1996. PSI, CG&E, and its
Kentucky subsidiary, The Union Light, Heat and Power Company (ULH&P) have made
compliance filings with the FERC and are now operating under open
access/comparability tariffs.
In adopting these rules, the FERC considered, but did not require, the
divestiture of any facilities. Additionally, ISO's will not be required;
however, principles to guide the FERC's evaluation of ISO proposals are set
forth to encourage their formation.
FERC Merger Policy In December 1996, the FERC issued a policy statement
setting forth new guidelines which address three key factors the FERC will
consider in evaluating public utility mergers: the effect on competition
(i.e., market power); the effect on rates; and the effect on regulation. The
purpose of the policy statement is to ensure that mergers are consistent with
the public interest and to provide greater certainty and expedition in the
FERC's analysis of merger applications. The new guidelines are in response to
the continuing changes in the electric power industry and the regulation of
the industry and are intended to accelerate the FERC approval process.
A proposed merger's effect on market power will be determined by analyzing the
merger candidates' share of the defined market (in terms of both geographic
and product markets). In cases where utilities may exercise market power, the
guidelines encourage the utility to offer potential remedies such as turning
over control of their transmission systems to an ISO or divesting themselves
of generation assets. With respect to effect on rates, estimates of future
costs and benefits of the merger will no longer be required. Instead, the
utility should propose appropriate rate protections for its wholesale
customers, such as open seasons for customers to terminate contracts, rate
freezes, or rate reductions.
Repeal of the PUHCA In 1995, the SEC endorsed recommendations for reform of
the PUHCA. The recommendations call for repeal and, pending repeal,
significant administrative reform of the 61-year-old statute. While the
recommendation report offers three alternative approaches to repeal and
legislative reform, the SEC's preferred option is repeal coupled with a
transition period of one year or longer and a transfer of certain consumer-
protection provisions of the PUHCA to the FERC.
The report further recommends that, pending consideration of legislative
options, the SEC take prompt administrative action, by rulemaking and on a
case-by-case basis, to modernize and simplify regulation under the PUHCA, with
particular reference to financing transactions, diversification into non-
utility businesses, utility mergers and acquisitions, and the PUHCA's
"integration" standards. In the latter regard, the report recommends a
changed interpretation of the PUHCA to permit registered holding companies to
own combination electric and gas utility companies, provided the affected
states agree. Subsequent to the issuance of the report, the SEC adopted rule
changes exempting various types of financing transactions by utility and non-
utility subsidiaries of registered holding companies. The SEC also proposed a
rule which would exempt investments by registered systems in specified
"energy-related companies," subject to certain conditions. In February 1997,
the rule was adopted substantially as proposed.
Since the release of the SEC's report, numerous bills were introduced in both
houses of the U.S. Congress providing for the repeal or significant amendment
of the PUHCA. It is expected that similar bills addressing repeal of the
PUHCA and industry restructuring will be introduced in Congress during 1997.
Cinergy continues to support the repeal of the PUHCA, either as part of
comprehensive reform of the electric industry or as separate legislation.
Cinergy, CG&E, PSI, ULH&P
State Developments While the pace of deregulation varies by state and region,
nearly all states have initiated or taken part in formal or informal
processes, held hearings, and/or passed legislation addressing retail
wheeling, restructuring, competition, alternative regulation, or closely
related issues.
Cinergy and CG&E
Ohio The Public Utilities Commission of Ohio (PUCO) continues to explore
potential opportunities under the existing regulatory framework prior to
embarking on a more fundamental restructuring which could lead to customer
choice. In April 1996, the PUCO approved a "buy-through" plan allowing large
industrial customers with interruptible contracts to purchase electricity
supplies from generators outside the host utility's service territory in order
to avoid an interruption in their power supply. Also, in December 1996, the
PUCO issued its order and guidelines for a conjunctive electric service two-
year pilot program. Under this program, different customer service locations
in a service territory may be aggregated for cost of service, rate design,
rate eligibility, and billing purposes. CG&E has filed tariffs complying with
the buy-through order, and will submit tariffs complying with the conjunctive
electric service order, during the first quarter of 1997.
Both the interruptible buy-through plan and the conjunctive electric service
guidelines were initially developed by The Ohio Electric Competition
Roundtable (Roundtable). The Roundtable, which was formed by the PUCO,
continues to meet and is currently discussing competitive market structures,
including universal service and unbundling.
The PUCO has approved long-term rate plans for two "at-risk," high-cost
utilities, with both plans designed to improve the competitive position of the
utilities by the end of each respective plan. One plan involved a price cap,
together with provisions allowing for accelerated depreciation and
amortization of the utility's nuclear generation and regulatory assets while
the second plan involved a rate increase and a recommendation from the PUCO
that the utility develop a plan to reduce the carrying value of its regulatory
and nuclear generation assets during the next five years. Neither plan
involved provisions for any type of customer choice.
Finally, a retail wheeling and industry restructuring bill was introduced in
the Ohio legislature during 1996. The bill, which was not passed during the
1996 legislative session, would have restructured the provision of electric
service in Ohio, allowed all electric consumers to choose an alternative power
supplier beginning in 1998, and permit utilities to recover "legitimate,
verifiable, and fully mitigated costs." A similar bill (House Bill 220) has
been introduced in the 1997 legislative session. Additionally, the state
legislature has created a bipartisan joint study committee to make
recommendations regarding customer choice legislation. Cinergy is currently
working with other investor owned utilities in Ohio to propose customer choice
legislation and will continue its efforts to bring consumer groups and other
stakeholders into the process. Although Cinergy is aggressively pursuing
customer choice legislation in Ohio, the time frame for passage of legislation
providing for customer choice is uncertain due to the complex issues and
numerous stakeholder interests involved.
Cinergy and PSI
Indiana Enacted legislation allows the Indiana Utility Regulatory Commission
(IURC) to approve utility alternative regulation proposals upon a showing
that, among other things, traditional regulation in a particular service
sector is no longer needed. However, during 1996, the IURC did not approve
the Company's limited customer choice pilot proposals which were included in a
general rate case previously filed by PSI. The IURC stated that any type of
industry restructuring should be left to the state legislature.
Although no formal investigation into electric competition has been initiated,
the IURC has continued to sponsor informal competition forums which are
designed to develop a better understanding of issues related to expanding the
competitive market on both the wholesale and retail levels.
In January 1997, customer choice legislation was introduced in the Indiana
legislature. The legislation was drafted by a coalition which included
Cinergy, the Indiana Manufacturers Association, the Indiana Industrial Energy
Consumers, Inc., and one other Indiana investor owned electric utility. Under
the proposed legislation, there would be a transition period from October 1,
1999, through June 30, 2004, during which customers would have the right to
choose their electric supplier. Those customers not selecting a supplier
would continue to buy their electric power from the franchise utility at a
total "bundled" price. The total bundled price would be frozen at the rate in
effect as of July 1, 1999, subject to certain adjustments during the
transition period, including limited adjustments for specific material cost
changes and a downward trending of the retail electric production component of
the total frozen price to the current statewide average. Trending of the
frozen price would not be applicable to those utilities, such as PSI, whose
retail electric production price is currently below the statewide average.
Those customers choosing a supplier would pay that supplier's open market
price for power and would pay the franchise utility the portion of the bundled
price applicable to transmission and distribution services, and an access
charge (designed to compensate the franchise utility for its loss in revenues,
if any, during the transition period, after giving effect to the revenues
which would be realized by the franchise utility from sales of the power in
the open market). After June 30, 2004, all customers would continue to have
the right to choose their supplier and would continue to pay the franchise
utility for transmission and distribution services which would continue to be
regulated as to price by the IURC. The access charge would no longer be paid
by any customer.
The proposed legislation provides for each utility to file a transition plan
with the IURC which would include, among other things, a proposed amortization
period for regulatory asset balances as of the beginning of the transition
period. Recovery of regulatory assets during the transition period would be
included in retail rates as a charge for transmission and distribution
services. However, any regulatory assets, as well as other stranded costs, at
the end of the transition period which are applicable to retail electric
production, would be the responsibility of the shareholders.
Although Cinergy is aggressively pursuing customer choice legislation in
Indiana, the time frame for passage of legislation providing for customer
choice is uncertain due to the complex issues and numerous stakeholder
interests involved.
Cinergy, CG&E, and ULH&P
Kentucky There continues to be considerably less activity and interest in
industry restructuring in Kentucky. This situation is generally attributable
to the fact that Kentucky is one of the lowest-cost states in the country for
electric service. During 1996, the Kentucky Public Service Commission (KPSC)
began an informal investigation into alternative regulation by holding
conferences addressing competition and soliciting input from interested
parties to determine the appropriate approach to considering such regulation.
Cinergy, CG&E, PSI, and ULH&P
Other States As illustrated by the above discussion of customer choice
initiatives in the states where Cinergy holds franchise agreements, the
Midwest, traditionally a low-cost region, has moved more slowly than the high-
cost regions of the country. Michigan has a pilot retail wheeling program in
place and the state's governor has submitted a restructuring plan which
proposes the creation of an ISO by 1998 and direct access for new commercial
and industrial load by 1997. Illinois, which has pilot retail wheeling
programs in place, has several retail access proposals supported by utilities
and/or consumer groups which may be introduced in the state legislature during
1997.
Outside the Midwest, California, New Hampshire, Pennsylvania, and Rhode
Island, all of which are considered to be high-cost states, each enacted
legislation during the year which will lead to complete retail competition
over the next several years. Several other states likely will enact or at
least consider customer choice legislation in 1997. Other states are pursuing
restructuring plans and pilot retail wheeling experiments on a smaller scale
to gain "real world" knowledge on the issues surrounding customer choice.
The California plan, for example, will simultaneously create an ISO, a
wholesale power exchange, and direct access (customer choice) phased in over
four years beginning January 1, 1998. The plan further provides for a non-
bypassable competitive transition charge (CTC) on all retail customers to
provide utilities the opportunity for recovery of their stranded costs by
2002. The California legislation also allows utilities to securitize a
portion of their stranded cost recovery through the issuance of state-backed
rate reduction bonds. This will enable the utilities to receive the CTC in
advance of payment by customers, thereby allowing for the repayment of higher-
cost debt with the proceeds from issuance of the lower-cost rate reduction
bonds. These cost savings will be used to fund decreases in customers' rates.
Legislation in New Hampshire and Rhode Island requires customer choice by
1998. Pennsylvania requires full competition in generation by 2001. All
three states' plans allow for at least partial stranded investment recovery
during a transition period. Pennsylvania will also have a structure for
utilities to securitize their stranded investment recovery.
Cinergy
United Kingdom
Transition to full competition in the U.K.'s electric utility industry began
with the industry's privatization in 1991. When the industry was privatized,
the generation, transmission, and regional distribution businesses were, in
effect, unbundled into separate companies. The regional distribution
companies, including Midlands, own no transmission facilities and are limited
as to the amount of generation they may own. Third-party access to the
transmission and local distribution systems was also put into place, enabling
licensed suppliers to use these networks.
Upon privatization, customers with a maximum demand of greater than one mw
were allowed to buy electricity from any licensed supplier and, since 1994,
choice of supplier has been available to all customers with a maximum demand
above 100 kilowatts. Beginning in 1998, choice of supplier will be permitted
on a phased-in basis for all classes of customers. The distribution and
transmission portions of the industry will continue to be regulated.
Suppliers purchase their respective power requirements from a "pool" that was
established as part of the overall industry privatization. Generators bid
volumes and prices into the pool, which then issues a series of next-day half-
hourly prices to meet expected demand. Suppliers purchase their requirements
under this system, but also have the ability to enter into "contracts for
differences" (Cfds) with generators and others. Cfds are used to avoid the
uncertainties of pool prices, fix future obligations, and hedge at least
portions of the risk of the pool system.
New entrants into the industry have been limited to independent power
producers, who compete with the formerly state-run generators by using new,
efficient technology such as gas-fired combined-cycle generation. There have
been no new major entrants into the supply business from outside of the
industry. However, it is believed that with full competition for all customer
classes in 1998, new entrants, such as retailers, banks, or companies with
strong consumer brand names may emerge into the supply business.
Approximately 30% of Midlands' revenues are related to the distribution
business which remains a regulated monopoly. In the supply business, Midlands
has retained a significant number of its customers who have the ability to
choose suppliers and at the same time has gained new customers outside of its
franchise territory. Midlands intends to actively pursue expansion of its
customer base when all customers gain the ability to choose suppliers.
Cinergy, CG&E, PSI, and ULH&P
The Industry and Cinergy's Future - Others' Views The major credit rating
agencies continue to recognize the risk of the restructuring of the electric
utility industry. As discussed above, two major credit rating agencies have
quantified their views of the potential stranded investment resulting from
competition. In an October 1996 report, a credit rating agency stated that
credit ratings will remain volatile as individual companies reinvent
themselves. Despite these cautious views of the electric industry, Cinergy
has received praise and some measure of optimism for its position in a more
competitive environment. At its last upgrading of Cinergy's operating
subsidiaries' debt and preferred stock, in November 1995, Moody's expressed
its opinion that Cinergy "will have no exposure to stranded costs" and that
"Cinergy is expected to be a formidable competitor because of its low
production costs." In its July 1995 upgrade of Cinergy's operating
subsidiaries' debt and preferred stock, S&P commented that "the business
position evaluation of all the Cinergy operating units is now high average"
reflecting "low electric production costs, efficient coal-fired equipment,
relatively low rates, a well-positioned gas operation, the absence of nuclear
challenges, a healthy service territory, and a balanced capital structure."
In October 1996, The Energy Daily presented its annual Corporate Leadership
Award to Cinergy, for "the aggressive example it has set in moving forward
with industry reform" and for Cinergy having "led the search for new and
imaginative concepts in the reengineering of the industry."
Certain sell-side equity analysts continue to rank Cinergy highly as a utility
possessing a strong competitive profile and aggressive and forward-looking
management with some considering Cinergy prepared to outperform the market in
the competitive arena. In particular, in a recent study of global competition
in various industries, Cinergy was one of nine energy companies world-wide
which were identified as most likely to prosper in the more competitive
environment of the coming decade.
Cinergy believes these opinions further support its position that its
competitive strategy and agenda will be successful.
Cinergy, CG&E, and ULH&P
Gas Utility Industry
Order 636 In 1992, the FERC issued order 636 (Order 636) which restructured
operations between interstate gas pipelines and their customers for gas sales
and transportation services. Order 636 mandated changes in the way CG&E and
its utility subsidiaries purchase gas supplies and contract for transportation
and storage services, resulting in increased risks in meeting the gas demands
of their customers.
CG&E and its utility subsidiaries have responded to the supply risks and
opportunities of Order 636 by introducing innovations to their supply
strategy. These innovations include: contracting with major producers and
marketers for firm gas supply agreements with flexible, market-sensitive
pricing; marketing short-term unused pipeline capacity and storage gas to
other companies throughout the country through use of electronic bulletin
boards; and restructuring their allotment of interstate pipeline capacity
among delivering pipelines.
Order 636 also allowed pipelines to recover from customers, including CG&E and
its utility subsidiaries, transition costs incurred in complying with the
order. In July 1994, the PUCO issued an order approving a stipulation between
CG&E and its residential and industrial customer groups providing for recovery
of these pipeline transition costs. CG&E is presently recovering its Order
636 transition costs pursuant to a PUCO-approved tariff. CG&E's utility
subsidiaries, including ULH&P, recover such costs through their gas cost
recovery mechanisms.
Customer Choice In a January 1996 filing in Ohio, CG&E proposed to initiate a
pilot program which would allow residential customers the ability to choose
their gas supplier and have CG&E transport the gas for them. The proposed
pilot would extend to residential customers the choice that has been available
for several years to large-volume commercial and industrial customers. The
PUCO did not approve CG&E's pilot program as filed but directed CG&E to meet
with interested parties and refine the program in accordance with certain
guidelines specified by the PUCO. CG&E expects to file a modified plan, as
directed by the PUCO, in the second quarter of 1997.
House Bill 476 (HB 476) In June 1996, HB 476 was signed into law in Ohio. HB
476 addresses regulatory reform of the natural gas industry at the state level
and thus is an extension of Order 636 for local distribution companies. HB
476, among other things, provides that natural gas commodity sales services
may be exempted from PUCO regulation and that the PUCO allow alternative
ratemaking methodologies in connection with other regulated services. The
PUCO issued final rules under the new law in March 1997.
Cinergy, CG&E, PSI, and ULH&P
Substantial Accounting Implications
Historically, regulated utilities have applied the provisions of Statement of
Financial Accounting Standards No. 71, Accounting for the Effects of Certain
Types of Regulation (Statement 71). The accounting afforded regulated
utilities in Statement 71 is based on the fundamental premise that rates
authorized by regulators allow recovery of a utility's costs in its
generation, transmission, and distribution operations. These principles have
allowed the deferral of costs (i.e., regulatory assets) based on assurances of
a regulator as to the future recoverability of the costs in rates charged to
customers. Certain criteria must be met for the continued application of the
provisions of Statement 71, including regulated rates designed to recover the
specific utility's costs. Failure to satisfy the criteria in Statement 71
would eliminate the basis for recognition of regulatory assets.
The provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of (Statement 121), became effective in January 1996 for
Cinergy. Statement 121, which addresses the identification and measurement of
asset impairments for all enterprises, is particularly relevant for electric
utilities as a result of the potential for deregulation of the generation
component of the business. Statement 121 requires the recognition of
impairment losses on long-lived assets when book values exceed expected future
cash flows. In addition, Statement 121 imposes a stricter criterion for
recognition of regulatory assets by requiring that future recovery be probable
at each balance sheet date.
Based on Cinergy's current regulatory orders and the regulatory environment in
which it currently operates, the recognition of its regulatory assets as of
December 31, 1996, is fully supported. In addition, the application of the
provisions of Statement 121 did not have an effect on reported amounts for
regulatory assets and other long-lived assets at December 31, 1996.
The ultimate outcome of the changing competitive environment could result in
Cinergy discontinuing the application of Statement 71 for its generation,
transmission, and/or distribution businesses. As a result, regardless of
whether such previously deferred costs would be recoverable (i.e., covered by
revenues) in a competitive environment, Cinergy would be required to write-off
the portion of any regulatory asset for which sufficient regulatory assurance
of future recovery no longer exists. In addition, the outcome of applying the
provisions of Statement 121 could change significantly as a result of future
competitive pressures and the type of restructuring of the electric utility
industry to which Cinergy will be subjected.
Cinergy intends to continue its pursuit of competitive strategies which
mitigate the potential impact of these issues on the financial condition of
the Company.
Cinergy, CG&E, PSI, and ULH&P
SECURITIES RATINGS
The current ratings provided by the major credit rating agencies; Duff &
Phelps Credit Rating Co. (D&P), Fitch Investors Service, LP (Fitch), Moody's,
and S&P are included in the following table:
D&P Fitch Moody's S&P
CG&E
Secured Debt A- A- A3 A-
Senior Unsecured Debt BBB+ Not rated Baa1 BBB+
Junior Unsecured Debt BBB Not rated Baa2 BBB+
Preferred Stock BBB BBB+ baa1 BBB+
PSI
Secured Debt A- A A3 A-
Unsecured Debt BBB+ A- Baa1 BBB+
Preferred Stock BBB BBB+ baa1 BBB+
ULH&P
Secured Debt A- Not rated A3 A-
Unsecured Debt Not rated Not rated Baa1 BBB+
These securities ratings may be revised or withdrawn at any time, and each
rating should be evaluated independently of any other rating.
REGULATORY MATTERS
Cinergy and PSI
Indiana
IURC Orders - PSI's Retail Rate Proceeding and DSM Proceeding In September
1996, the IURC issued an order (September 1996 Order) approving an overall
average retail rate increase for PSI of 7.6% ($75.7 million annually). PSI
had requested a retail rate increase of 10.5% ($104.8 million annually).
Among other things, the IURC authorized the inclusion in rates of the costs of
a 262-mw clean coal power generating facility located at Wabash River
Generating Station (Clean Coal Project) and the costs of a scrubber at Gibson
Generating Station. The order also reflects a return on common equity of
11.0%, before the 100 basis points additional common equity return allowed as
a merger savings sharing mechanism in the IURC's February 1995 order (February
1995 Order) discussed further herein, with an 8.21% overall rate of return on
net original cost rate base. The difference between the Company's request and
the authorized increase is primarily related to return on common equity and
the deferral to a separate proceeding of an increase in the level of recovery
of DSM costs, as discussed below.
In October 1996, The Office of the Utility Consumer Counselor (UCC) and the
Citizens Action Coalition of Indiana, Inc. (CAC) filed a Joint Petition for
Reconsideration and Rehearing of the September 1996 Order with the IURC. The
principal issues raised by the UCC and CAC are the fair value rate of return
and the cut-off date for the inclusion of costs to achieve merger savings in
retail rates. PSI has filed a response in opposition and cannot predict what
action the IURC may take with respect to the requested rehearing and
reconsideration.
A settlement agreement between PSI and certain intervenors in a proceeding
established to review PSI's current and proposed DSM programs was approved by
the IURC in December 1996. The settlement agreement allows PSI to recover $35
million per year over the next four years, which is designed to recover all
previously incurred, but as yet unrecovered, DSM costs and all costs related
to satisfying remaining commitments associated with a previous DSM settlement
agreement, together with carrying costs thereon, through a non-bypassable
charge in PSI's retail rates. The new agreement also authorizes PSI to spend
up to $8 million annually on ongoing DSM programs through the year 1999 and to
collect such amounts currently in retail rates.
February 1995 Order - Retail Rate Proceeding and Merger Savings Allocation
Plan The IURC's February 1995 Order approved a settlement agreement between
PSI and certain intervenors authorizing PSI to increase retail rates $33.6
million before credits to base rates of $4.4 million in 1995 and an additional
$2.2 million and $2.4 million in 1996 and 1997, respectively, to reflect the
sharing with customers of non-fuel operation and maintenance expense merger
savings (Non-fuel Merger Savings).
Additionally, the February 1995 Order provides PSI an opportunity to earn up
to an additional 100 basis points above the common equity return authorized in
the September 1996 Order until December 31, 1997. In order to be eligible for
such additional earnings, PSI must meet certain performance-related standards.
PSI currently meets these standards, which are measured in conjunction with
quarterly fuel adjustment clause filings. After December 31, 1997, the 100
basis point increment to the authorized common equity return will be phased
out ratably over a twelve-month period.
Effective with this order, PSI began recovering carrying costs on certain
environmental-related projects while under construction and prior to the date
of an order reflecting such projects in rates. Through this mechanism,
revenues were increased by $9 million, $18 million, and $2 million on an
annual basis in February 1995, March 1995, and January 1996, respectively.
Coal Contract Buyout Costs In August 1996, PSI entered into a coal supply
agreement with Eagle Coal Company (Eagle) for the supply of approximately
three million tons of coal per year. The agreement, which terminates December
31, 2000, provides for a buyout fee of $179 million (including interest) to be
included in the price of coal to PSI over the term of the contract. This fee
represents the costs to Eagle of the buyout of the coal supply agreement
between PSI and Exxon Coal and Minerals Company. The retail jurisdictional
portion of the buyout charge, excluding the portion applicable to joint
owners, will be recovered through the quarterly fuel adjustment clause, with
carrying costs on unrecovered amounts, through December 2002. PSI has also
filed a petition at the FERC for recovery of the wholesale jurisdictional
portion of the buyout costs through the wholesale fuel adjustment clause.
Generally, the FERC will allow recovery if the utility can demonstrate there
will be net benefits to customers during the buyout cost recovery period. The
FERC is expected to issue an order on PSI's petition during 1997. PSI cannot
predict what action the FERC may take with respect to this petition. (See
Note 1(i) of the "Notes to Financial Statements" in Item 8. "Financial
Statements and Supplementary Data.")
Cinergy and CG&E
Ohio
PUCO Order - CG&E's Gas Rate Proceeding In December 1996, the PUCO issued an
order (December 1996 Order) approving an overall average increase in gas
revenues for CG&E of 2.5% ($9.3 million annually). CG&E had requested a rate
increase of 7.8% ($26.2 million annually). The PUCO established an overall
rate of return of 9.7%, including a return on common equity of 12.0%. In
developing this return on common equity, the PUCO considered, among other
things, CG&E's efforts to reduce costs and increase operating efficiency and
its proposals to allow residential customers to choose their natural gas
supplier. The PUCO disallowed certain of CG&E's requests, including the
requested working capital allowance, recovery of certain capitalized
information systems development costs, and certain merger-related costs.
These disallowances resulted in a pretax charge to earnings during the fourth
quarter of $20 million ($15 million net of taxes or 10 cents per share).
CG&E's request for a rehearing on the disallowed information systems costs and
other aspects of the order was denied. CG&E has until April 14, 1997 to
appeal these issues to the Supreme Court of Ohio.
Other In April 1994, the PUCO issued an order approving a settlement
agreement among CG&E, the PUCO Staff, the Office of the Ohio Consumers'
Counsel, and other intervenors which resolved outstanding issues related to
the merger and the PUCO's May 1992 order which established a rate phase-in
plan for the Wm. H. Zimmer Generating Station (Zimmer). As a result of this
order, the rate phase-in plan, which granted annual increases in electric
revenues of $37.8 million, $38.8 million, and $39.8 million in May 1992, 1993,
and 1994, respectively, remained unchanged. Additionally, as part of this
settlement, CG&E agreed to a moratorium on increases in base electric rates
until January 1, 1999 (except under certain circumstances). In return, CG&E
is allowed to retain all PUCO electric jurisdictional Non-fuel Merger Savings
until 1999.
Consistent with the provisions of the settlement agreement and the December
1996 Order, CG&E expensed merger transaction costs and costs to achieve merger
savings (Merger Costs) applicable to its PUCO jurisdiction of $32 million, $5
million, and $41 million (including $6 million as a result of the December
1996 Order) in 1994, 1995, and 1996, respectively. CG&E and its utility
subsidiaries are deferring the non-PUCO jurisdictional portion of Merger Costs
for future recovery in customer rates.
Additionally, in December 1996, the PUCO issued an order applicable to CG&E's
DSM programs. The order requires CG&E to spend up to one-half of the annual
$5 million currently included in retail rates on PUCO-sanctioned low-income
residential programs. The remaining portion of the $5 million is to be
applied to the recovery of DSM cost deferrals. CG&E's participation in the
low-income programs will be a factor considered by the PUCO in setting future
rates of return and approving competitive transition plans.
Cinergy, CG&E, and ULH&P
Kentucky In exchange for the KPSC's support of the merger, in May 1994, ULH&P
accepted the KPSC's request for an electric rate moratorium commencing after
ULH&P's next retail rate case (which has not yet been filed) and extending to
January 1, 2000. In addition, the KPSC has authorized concurrent recovery of
costs related to various DSM programs of ULH&P.
ULH&P is deferring its portion of Merger Costs for future recovery in
customers' rates.
KPSC Order In July 1996, the KPSC issued an order authorizing a decrease in
ULH&P's electric rates of approximately $1.8 million annually to reflect a
reduction in the cost of electricity purchased from CG&E.
Cinergy, CG&E, and ULH&P
Potential Divestiture of Gas Operations Under the PUHCA, the divestiture of
CG&E's gas operations may be required. In its order approving the merger, the
SEC reserved judgment over Cinergy's ownership of the gas operations for a
period of three years. As previously discussed in the "Competitive Pressures"
section, in June 1995, the SEC endorsed recommendations for reform/repeal of
the PUHCA, including allowing registered holding companies to own combination
electric and gas utility companies, provided the affected states agree. It is
expected that legislation addressing repeal of the PUHCA and industry
restructuring will be introduced in Congress during 1997.
Regardless of the outcome of the proposals to reform/repeal the PUHCA, Cinergy
believes it has a justifiable basis for retention of its gas operations and
will continue its pursuit of SEC approval. If divestiture is ultimately
required, the SEC has historically allowed companies sufficient time to
accomplish divestitures in a manner that protects shareholder value.
ENVIRONMENTAL ISSUES
Cinergy, CG&E, and PSI
Clean Air Act Amendments of 1990 (CAAA) The 1990 revisions to the Clean Air
Act require reductions in both sulfur dioxide and nitrogen oxide emissions
from utility sources. Reductions of these emissions are to be accomplished in
two phases. Compliance under Phase I was required by January 1, 1995, and
Phase II compliance is required by January 1, 2000. To achieve the sulfur
dioxide reduction objectives of the CAAA, emission allowances have been
allocated by the United States Environmental Protection Agency (EPA) to
affected sources (e.g., Cinergy's electric generating units). Each allowance
permits one ton of sulfur dioxide emissions. The CAAA allows compliance to be
achieved on a national level, which provides companies the option to achieve
this compliance by reducing emissions and/or purchasing emission allowances.
Cinergy's operating strategy for Phase I is based upon the compliance plans
developed by PSI and CG&E and approved by the IURC and the PUCO. All required
modifications to Cinergy's generating units to implement the compliance plans
were completed prior to January 1, 1995.
To comply with Phase II sulfur dioxide emission requirements, Cinergy's
current strategy includes a combination of switching to lower-sulfur coal
blends and utilizing an emission allowance banking strategy. This cost-
effective strategy will allow Cinergy to meet Phase II sulfur dioxide
reduction requirements while maintaining optimal flexibility to meet changes
in output due to increased customer choice as well as potentially significant
future environmental requirements. Cinergy intends to utilize an emission
allowance banking strategy to the extent a viable emission allowance market
exists. However, the availability and economic value of emission allowances
over the long term is still uncertain. In the event the market price for
emission allowances or lower-sulfur coal increases substantially from the
current forecast, Cinergy could be forced to consider high capital cost
options.
To meet nitrogen oxide reductions required by Phase II, Cinergy may install
additional low-nitrogen oxide burners on certain affected units in addition to
the use of a system-wide nitrogen oxide emission averaging strategy.
Cinergy is forecasting CAAA compliance capital expenditures of $27 million
during the 1997 through 2001 period. Of these forecasted expenditures, $15
million relates to CG&E and $12 million relates to PSI. These expenditures
are included in the amounts provided in the "Capital Requirements" section
herein. In addition, operating costs may increase due to higher fuel costs
(e.g., higher-quality, lower-sulfur coal; increased use of natural gas) and
maintenance expenses.
Global Climate Change Some scientists, environmentalists, and policymakers
continue to express concern about the potential for climate change from
increasing amounts of greenhouse gases released as by-products of burning
fossil fuel and other industrial processes. However, significant uncertainty
exists concerning increased greenhouse gas concentrations and their effect on
the global climate system. Cinergy's plan for managing the potential risk and
uncertainty of climate change includes: (1) implementing cost effective
greenhouse gas emission reduction and offsetting activities; (2) encouraging
the use of alternative fuels for transportation vehicles (a major source of
greenhouse gases); (3) funding research of more efficient and alternative
electric generating technologies; (4) funding research to better understand
the causes and consequences of climate change; and (5) encouraging a global
discussion of the issues and how best to manage them. Cinergy believes that
voluntary programs, such as the United States Department of Energy Climate
Challenge Program, which Cinergy joined in 1995, can successfully limit
greenhouse gas emissions.
Air Toxics The air toxics provisions of the CAAA exempted fossil-fueled steam
utility plants from mandatory reduction of 189 listed air toxics until the EPA
completes a study. In October 1996, the EPA issued its final interim report
indicating these emissions create little risk to public health. A final
report, including further assessments on mercury emissions, is expected at a
later date. If additional air toxics regulations are issued, the cost of
compliance could be significant. Cinergy cannot predict the outcome or the
effects of this EPA study.
Ambient Air Standards The EPA is proceeding with two programs aimed at
assuring clean air. As required by the CAAA, the EPA is reviewing the
adequacy of the ozone and particulate matter National Ambient Air Quality
Standards (NAAQS) to protect human health. Preliminary proposals indicate the
EPA's intent is to make the standards more stringent, thus designating more
areas as non-attainment. The EPA has stated its intent to issue final rules
by summer 1997. At the same time, the EPA has published its intent to notify
certain states that their State Implementation Plans (SIPs) need to be
modified in order for existing non-attainment areas to more rapidly reach
attainment with the current ozone standard. Even states in attainment of the
NAAQS could be required to reduce emissions if they are determined to impact
non-attainment areas in other states. The specific affected states and
proposed ozone precursor reductions are to be proposed this spring and
finalized later in the year. Since the new NAAQS levels are not yet final and
the studies of long-range pollution transport have not been completed, Cinergy
cannot predict the outcome or effect of the proposed NAAQS and SIP
modifications.
Cinergy, CG&E, PSI, and ULH&P
Other As more fully discussed in Note 12(b)(ii) of the "Notes to Financial
Statements" in "Item 8. Financial Statements and Supplementary Data", PSI has
received notification from Indiana Gas Company, Inc. (IGC) and Northern
Indiana Public Service Company (NIPSCO) alleging PSI is a Potentially
Responsible Party under the Comprehensive Environmental Response, Compensation
and Liability Act with respect to certain manufactured gas plant (MGP) sites.
PSI has not assumed any responsibility to reimburse IGC or NIPSCO for their
costs of investigating and remediating MGP sites, with the exception of a site
at Shelbyville, Indiana, for which the costs are not material. It is
premature, at this time, to predict the nature, extent, and ultimate costs of,
or PSI's responsibility for, environmental investigations and remediations at
MGP sites owned or previously owned by PSI or its predecessors. Information
available to PSI regarding the current status of investigation and/or
remediation at the sites identified in IGC's claim indicates PSI's potential
exposure to probable and reasonably estimable liabilities associated with
these MGP sites would not be material to its financial condition or results of
operations. However, further investigation and remediation activities at
these sites and the additional sites identified in NIPSCO's claim may indicate
that the potential liability for MGP sites could be material.
Refer to Note 12(b) and (c) of the "Notes to Financial Statements" in "Item 8.
Financial Statements and Supplementary Data" for a more detailed discussion of
the status of certain environmental issues.
CAPITAL REQUIREMENTS
CONSTRUCTION AND OTHER INVESTING ACTIVITIES
Cinergy, CG&E, PSI, and ULH&P
Construction expenditures for the Cinergy system are forecasted to be
approximately $345 million for 1997, and over the next five years (1997
through 2001), are forecasted to be approximately $1.7 billion. Of these
projected expenditures, approximately $170 million and $817 million relate to
CG&E (including $19 million and $111 million for ULH&P) and $175 million and
$908 million relate to PSI, for 1997, and over the next five years,
respectively. Substantially all of these expenditures are for capital
improvements to and expansion of Cinergy's operating facilities.
Cinergy's 1995 Form 10-K, as amended, and CG&E's, PSI's, and ULH&P's 1995 Form
10-K, reflected forecasted capital expenditures of $2.1 billion ($1.1 billion
for CG&E, including $102 million for ULH&P, and $1.0 billion for PSI) for the
period 1996-2000. That amount included expenditures for investments in new
generation of $520 million ($285 million for CG&E and $235 million for PSI)
over the five-year period. Cinergy is no longer forecasting investments in
new generating facilities under the belief that excess supply in the market
will continue to exist at least through the transition to full customer
choice. However, Cinergy is in the process of securing options to purchase
power in order to assure the necessary resources are available to meet its
franchise obligations during the transition (see further discussion in
"Competitive Pressures" section). If deregulation of the generation component
of the electric utility industry does not occur in the manner or in the time
frame anticipated, and depending on capacity constraints, franchise demand
requirements, and the regulatory requirements dictated for Integrated Resource
Planning, Cinergy could be forced to make capital investments in new
generating facilities in excess of $100 million annually in lieu of relying
upon the existing market for its energy needs. (All forecasted amounts are in
nominal dollars and reflect assumptions as to the economy, capital markets,
construction programs, legislative and regulatory actions, frequency and
timing of rate increases, and other related factors, all or any of which may
change significantly.)
Cinergy
As discussed in the "Competitive Pressures" section, during 1996, Cinergy
acquired a 50% interest in Midlands. Cinergy and GPU, Inc. (GPU) formed Avon
Energy Partners Holdings (Avon Energy), a 50%/50% joint venture, and acquired
the outstanding common stock of Midlands through Avon Energy's wholly-owned
subsidiary for approximately $2.6 billion. Cinergy and GPU have each invested
approximately $500 million in Avon Energy. Cinergy funded its investment
through its credit facility. Avon Energy funded the remainder of the purchase
price through the issuance of non-recourse debt (see Note 1(e)(i) of the
"Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data").
In the fourth quarter of 1996, Cinergy and Trigen formed a joint venture,
Trigen-Cinergy Solutions LLC (Trigen-Cinergy). Cinergy expects to invest up
to $100 million and to provide guaranties of debt and other obligations in an
aggregate amount not to exceed $250 million at any one time with respect to
energy-related products and services, including those undertaken by Trigen-
Cinergy. (See the "Competitive Pressures" section herein.)
Cinergy
Cinergy's net cash used in investing activities was $832 million in 1996,
compared to $330 million and $528 million in 1995 and 1994, respectively. The
increase in 1996 was primarily attributable to Cinergy's investment in
Midlands.
CG&E and ULH&P
CG&E and its subsidiaries' net cash used in investing activities was $156
million in 1996 (including $19 million for ULH&P), compared to $147 million
and $196 million in 1995 and 1994 (including $19 million and $20 million for
ULH&P), respectively. The increase in 1996 was primarily attributable to an
increase in the amount of DSM expenditures.
PSI
PSI's net cash used in investing activities was $163 million in 1996, compared
to $203 million and $331 million in 1995 and 1994, respectively. The decrease
in 1996 was primarily attributable to an increase in the amortization of DSM
deferrals as a result of the September 1996 Order.
OTHER COMMITMENTS
Cinergy, CG&E, PSI, and ULH&P
Securities Redemptions Mandatory redemptions of long-term debt total $492
million ($371 million for CG&E and its subsidiaries, including $20 million for
ULH&P, and $121 million for PSI) during the period 1997 through 2001. Cinergy
will continue to evaluate opportunities for the refinancing of outstanding
securities beyond mandatory redemption requirements.
Maintenance and replacement fund provisions contained in CG&E's, PSI's, and
ULH&P's first mortgage bond indentures require cash payments, bond
retirements, or pledges of unfunded property additions each year based on an
amount related to the net revenues of the respective company.
Cinergy and CG&E
Preferred Stock Tender Offer During the third quarter of 1996, Cinergy
commenced an offer to purchase any and all outstanding shares of preferred
stock of CG&E. The total cost of the tender for these preferred shares ($194
million) was funded from short-term borrowings and the liquidation of certain
short-term investments. Through the tender, approximately 90% of the
outstanding preferred stock of CG&E was retired. At the same time, a
restrictive covenant as to the amount of unsecured debt which could be issued
by CG&E was eliminated. The resulting premium on the reacquisition of
preferred stock of $18 million (including fees paid to tender agents) is shown
as a reduction from net income for purposes of determining net income and
earnings per share applicable to common stock.
Cinergy, CG&E, PSI, and ULH&P
Year 2000 Costs Cinergy, like most owners of computer software, will be
required to modify significant portions of its software so that it will
function properly in the year 2000. Preliminary estimates of the total costs
to be incurred prior to 2000 range from $12 million to $17 million.
Maintenance or modification costs will be expensed as incurred, while the
costs of new software will be capitalized and amortized over the software's
useful life.
CAPITAL RESOURCES
Cinergy, CG&E, PSI, and ULH&P
Cinergy, CG&E and its subsidiaries (including ULH&P), and PSI forecast that
their need for external funds during the 1997 through 2001 period will
primarily be for the refinancing of existing securities. (This forecast
reflects nominal dollars and assumptions as to the economy, capital markets,
construction programs, legislative and regulatory actions, frequency and
timing of rate increases, and other related factors, all or any of which may
change significantly.)
INTERNAL FUNDS
Cinergy, CG&E, PSI, and ULH&P
General Currently, the majority of Cinergy's revenues and corresponding cash
flows are derived from cost-of-service regulated operations. As previously
discussed in the "Competitive Pressures" section, Cinergy believes the
generation component of the electric utility industry will ultimately be
deregulated. However, the timing and nature of the deregulation and
restructuring of the industry is uncertain. In the interim, revenues provided
by cost-of-service regulated operations are anticipated to continue as the
primary source of funds for Cinergy. As a result of its low-cost position and
market strategy, over the long term, Cinergy believes it will be successful in
a more competitive environment. However, as the industry becomes more
competitive, future cash flows from Cinergy's operations could be subject to a
higher degree of volatility than under the present regulatory structure.
Cinergy
For the year ended December 31, 1996, Cinergy's cash provided from operating
activities was $816 million compared to $703 million in 1995 and $441 million
in 1994. The increase in 1996 was primarily due to CG&E's and ULH&P's sales
of accounts receivables during 1996. The increase was offset, in part, by
PSI's payment of $80 million in accordance with a 1989 settlement agreement
between PSI and Wabash Valley Power Association, Inc. (WVPA). (See Notes 6
and 12(e) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
CG&E and ULH&P
For the year ended December 31, 1996, CG&E and its subsidiaries' cash provided
from operating activities was $676 million (including $42 million for ULH&P)
compared to $441 million in 1995 (including $37 million for ULH&P) and $447
million (including $33 million for ULH&P) in 1994. The increase in 1996 was
primarily due to CG&E's and ULH&P's sales of accounts receivable during 1996.
(See Note 6 of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
PSI
For the year ended December 31, 1996, PSI's cash provided from operating
activities was $228 million compared to $257 million in 1995 and $42 million
in 1994. The decrease in 1996 reflects PSI's payment of $80 million in
accordance with a 1989 settlement agreement between PSI and WVPA. (See Note
12(e) of the "Notes to Financial Statements" in "Item 8. Financial Statements
and Supplementary Data.")
PSI
Contribution from Parent Company
In December 1994, Cinergy publicly issued approximately 7.1 million shares of
common stock. The net proceeds of approximately $160 million were contributed
to the equity capital of PSI for general corporate purposes, including
repayment of short-term indebtedness incurred for construction financing.
Cinergy, CG&E, PSI, and ULH&P
Merger Savings As previously discussed in the "Regulatory Matters" section,
PSI and CG&E currently have regulatory orders in effect which provide
mechanisms for the retention of a portion of net Non-fuel Merger Savings.
COMMON STOCK
Cinergy
During 1996, 1995, and 1994, Cinergy issued 15 thousand, 2.6 million, and 2.8
million shares, respectively, of common stock pursuant to its dividend
reinvestment and stock purchase plan and various stock-based employee plans.
Cinergy purchased 1.2 million outstanding shares on the open market to satisfy
substantially all of its 1996 obligations under these plans. Cinergy plans to
continue using market purchases of common stock to satisfy all or at least a
portion of its obligations under these plans.
In October 1996, Cinergy increased the quarterly dividend by approximately 5%
to 45 cents per share of common stock.
LONG-TERM DEBT
Cinergy, CG&E, PSI, and ULH&P
As of December 31, 1996, CG&E, PSI, and ULH&P had state regulatory authority
for long-term debt issuances of $250 million, $87 million, and $40 million,
respectively. Regulatory approval to issue additional amounts of securities
will be requested as needed.
SHORT-TERM DEBT
Cinergy, CG&E, PSI, and ULH&P
Cinergy's subsidiaries had regulatory authority to borrow up to $838 million
($438 million for CG&E and its subsidiaries, including $35 million for ULH&P,
and $400 million for PSI) as of December 31, 1996. In connection with this
authority, unsecured lines of credit (Committed Lines) have been established
which permit borrowings of up to $280 million ($80 million for CG&E and $200
million for PSI), of which $181 million ($65 million for CG&E and $116 million
for PSI) remained unused at December 31, 1996. CG&E and PSI also have the
capability to issue commercial paper which must be supported by Committed
Lines of the respective company. Neither CG&E nor PSI issued commercial paper
in 1996 and none remained outstanding as of December 31, 1996. Additionally,
pursuant to this authority, additional short-term borrowings with various
banks are arranged on an "as offered" basis.
To better manage cash and working capital requirements, Cinergy's utility
subsidiaries, including CG&E, PSI, and ULH&P, participate in a money pooling
arrangement. Under this money pooling arrangement, Cinergy system companies
with surplus short-term funds, whether from internal or external sources,
provide short-term loans to other system companies at rates that reflect (1)
the actual costs of the external borrowing and/or (2) the costs of the
internal funds which are set at the 30-day Federal Reserve "AA" industrial
commercial paper rate. The SEC's approval of the money pool, pursuant to the
PUHCA, extends through May 31, 1997. In March 1997, Cinergy's utility
subsidiaries, including CG&E, PSI, and ULH&P and other Cinergy system
companies, which participate in the money pooling arrangement, filed an
application with the SEC under the PUHCA requesting reauthorization of the
money pool through December 31, 2002.
Cinergy
Cinergy has established a $600 million credit facility, which expires in May
2001, of which $91 million remained unused as of December 31, 1996. This new
credit facility was established, in part, to fund the acquisition of Midlands
through Avon Energy and its wholly-owned subsidiary ($500 million has been
designated for this purpose) with the remaining portion available for general
corporate purposes. The prior $100 million credit facility, which would have
expired in September 1997, has been terminated.
In addition, Cinergy U.K., a subsidiary of Investments, which holds Cinergy's
50% investment in Avon Energy, entered into a $40 million non-recourse credit
agreement, of which $27 million is outstanding as of December 31, 1996. This
new credit agreement was also used to fund the acquisition of Midlands.
Cinergy has borrowed approximately $500 million under the two agreements to
fund its equity investment in Avon Energy.
Net cash used in financing activities totaled $110 thousand for 1996, as
compared to $410 million for 1995 and a source of $147 million for 1994. The
change in cash flow from financing activities for 1996 primarily resulted from
Cinergy borrowing under its credit facility to fund the acquisition of
Midlands.
CG&E and ULH&P
CG&E and its subsidiaries' net cash used in financing activities totaled $521
million (including $23 million for ULH&P) for 1996, as compared to $339
million (including $17 million for ULH&P) for 1995 and $203 million (including
$14 million for ULH&P) for 1994. The change in cash flow from financing
activities for 1996 was primarily attributable to CG&E's payments of common
stock dividends to Cinergy during 1996.
PSI
PSI's net cash used in financing activities totaled $77 million for 1996, as
compared to $45 million for 1995 and a source of $291 million for 1994. The
change in cash flow from financing activities for 1996 was primarily
attributable to PSI's payments of common stock dividends to Cinergy during
1996.
SALE OF ACCOUNTS RECEIVABLE
Cinergy, CG&E, PSI, and ULH&P
In January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on a
revolving basis, undivided percentage interests in certain of their accounts
receivable up to an aggregate maximum of $350 million, of which $246 million
($164 million by CG&E and its subsidiaries, including $23 million by ULH&P,
and $82 million by PSI) has been sold as of December 31, 1996. PSI had a
similar agreement, which expired in January 1996, to sell up to $90 million of
its accounts receivable.
FINANCIAL DERIVATIVES
Cinergy, CG&E, PSI, and ULH&P
As discussed in Notes 8(a) and 16(b) of the "Notes to Financial Statements" in
"Item 8. Financial Statements and Supplementary Data," Cinergy and its
subsidiaries use forward foreign exchange contracts and currency swaps to
hedge exposures to fluctuations in foreign currency exchange rates, and
interest rate swap agreements to lower funding costs and reduce exposures to
fluctuations in interest rates.
POWER MARKETING AND TRADING
Cinergy, CG&E, and PSI
As discussed in the "Competitive Pressures" section, Cinergy has functionally
reorganized its electric operations into three strategic business units,
including an energy commodities business unit. The energy commodities
business unit includes Cinergy's power marketing and trading function, which
was formally established in 1995 and was the natural successor of CG&E's and
PSI's existing bulk power operations.
At present, the competitive electric power market is dominated by a small
number of large participants (primarily utilities and a few power marketers),
trading liquidity is limited, and pricing is not transparent. Similar to the
development of natural gas markets, the market for trading electricity is
expected to develop rapidly and Cinergy plans to be a major participant.
At December 31, 1996, Cinergy's trading book principally consisted of physical
contracts with fixed pricing. The majority of these physical contracts are
fixed-price forward-purchase and sales contracts, which require settlement by
physical delivery of electricity. During 1996, Cinergy also began entering
into option contracts which, to the extent the options are exercised, are also
settled with physical delivery of electricity. Contracts requiring settlement
in cash were not significant during 1996.
These transactions give rise to market risk, which represents the potential
adverse impact of changes in the market value of a particular commitment. As
Cinergy continues to develop its power marketing and trading business (and due
to its substantial investment in generating assets), its potential exposure to
movements in the price of electricity and other energy commodities will become
greater.
Credit risk represents to the risk of loss which would occur as a result of
nonperformance by counterparties pursuant to the terms of their contractual
obligations. As the competitive electric power market expands, counterparties
will increasingly include new market entrants, such as other power marketers,
brokers, and commodities traders. This increased level of new market
entrants, as well as competitive pressures on the utility market participants,
could increase Cinergy's exposure to credit risk.
As Cinergy expands its power marketing and trading business, in addition to
increased exposure to market and credit risks, it will also be subject to
increased earnings volatility. Cinergy has established a risk management
function and is implementing risk management policies and procedures to manage
its exposure to market and credit risks.
ACCOUNTING CHANGES
Cinergy, CG&E, PSI, and ULH&P
The FASB has issued Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities (Statement 125). Statement 125, which is effective for
transactions occurring after December 31, 1996, provides consistent standards
for distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. Based on the terms of CG&E's, PSI's, and ULH&P's
current securitization agreement with respect to their sales of accounts
receivables, the application of the provisions of Statement 125 will not
significantly affect the companies financial statements. Costs to service the
receivables sold are not material. (See Note 6 of the "Notes to Financial
Statements" in "Item 8. Financial Statements and Supplementary Data.")
INFLATION
Cinergy, CG&E, PSI, and ULH&P
Over the past several years, the rate of inflation has been relatively low.
Cinergy believes that the recent inflation rates do not materially affect its
results of operations or financial condition. However, under existing
regulatory practice, only the historical cost of plant is recoverable from
customers. As a result, cash flows designed to provide recovery of historical
plant costs may not be adequate to replace plant in future years.
DIVIDEND RESTRICTIONS
Cinergy, CG&E, and PSI
See Note 2(b) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data."
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "ITEM 8. Financial Statements and Supplementary Data."
<PAGE>
Index to Financial Statements and Financial Statement Schedules
Page Number
Financial Statements
Cinergy, CG&E, PSI, and ULH&P
Report of Independent Public Accountants. . . . . . . . XX
Cinergy
Consolidated Statements of Income for the
three years ended December 31, 1996. . . . . . . . . XX
Consolidated Balance Sheets at
December 31, 1996 and 1995 . . . . . . . . . . . . . XX
Consolidated Statements of Changes in
Common Stock Equity for the three years
ended December 31, 1996. . . . . . . . . . . . . . . XX
Consolidated Statements of Cash Flows
for the three years ended December 31, 1996. . . . . XX
Results of Operations. . . . . . . . . . . . . . . . . XX
CG&E
Consolidated Statements of Income for the
three years ended December 31, 1996. . . . . . . . . XX
Consolidated Balance Sheets at
December 31, 1996 and 1995 . . . . . . . . . . . . . XX
Consolidated Statements of Changes in
Common Stock Equity for the three years
ended December 31, 1996. . . . . . . . . . . . . . . XX
Consolidated Statements of Cash Flows
for the three years ended December 31, 1996. . . . . XX
Results of Operations. . . . . . . . . . . . . . . . . XX
PSI
Consolidated Statements of Income for the
three years ended December 31, 1996. . . . . . . . . XX
Consolidated Balance Sheets at
December 31, 1996 and 1995 . . . . . . . . . . . . . XX
Consolidated Statements of Changes in
Common Stock Equity for the three years
ended December 31, 1996. . . . . . . . . . . . . . . XX
Consolidated Statements of Cash Flows
for the three years ended December 31, 1996. . . . . XX
Results of Operations. . . . . . . . . . . . . . . . . XX
ULH&P
Statements of Income for the three years ended
December 31, 1996. . . . . . . . . . . . . . . . . . XX
Balance Sheets at December 31, 1996 and 1995 . . . . . XX
Statements of Changes in Common Stock Equity
for the three years ended December 31, 1996. . . . . XX
Statements of Cash Flows for the three years
ended December 31, 1996. . . . . . . . . . . . . . . XX
Results of Operations. . . . . . . . . . . . . . . . . XX
Notes to Financial Statements . . . . . . . . . . . . . . XX
<PAGE>
Index to Financial Statements and Financial Statement Schedules (cont.)
Page Number
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
Cinergy . . . . . . . . . . . . . . . . . . . . . . XXX
CG&E. . . . . . . . . . . . . . . . . . . . . . . . XXX
PSI . . . . . . . . . . . . . . . . . . . . . . . . XXX
ULH&P . . . . . . . . . . . . . . . . . . . . . . . XXX
The information required to be submitted in schedules other than those
indicated above has been included in the balance sheets, the statements of
income, related schedules, the notes thereto, or omitted as not required by
the Rules of Regulation S-X.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Cinergy Corp., The Cincinnati Gas & Electric
Company, PSI Energy, Inc., and The Union Light, Heat and Power Company:
We have audited the financial statements of Cinergy Corp. (a Delaware
Corporation), The Cincinnati Gas & Electric Company (an Ohio Corporation), PSI
Energy, Inc. (an Indiana Corporation), and The Union Light, Heat and Power
Company (a Kentucky Corporation), as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996, as listed in
the index on page 48. These financial statements and the schedules referred
to below are the responsibility of management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cinergy Corp., The Cincinnati
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental financial statement
schedules listed in the index on page 49 pursuant to Item 14, are presented
for purposes of complying with the Securities and Exchange Commission's Rules
and Regulations under the Securities Exchange Act of 1934 and are not a
required part of the basic financial statements. The supplemental financial
statement schedules have been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Cincinnati, Ohio,
January 29, 1997
<PAGE
Cinergy Corp.
and Subsidiaries
<PAGE
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
1996 1995 1994
(in thousands, except per share amounts)
<S> <C> <C> <C>
Operating Revenues
Electric $2 768 706 $2 612 579 $2 446 049
Gas 474 034 410 852 442 398
3 242 740 3 023 431 2 888 447
Operating Expenses
Fuel used in electric production 713 250 716 754 712 993
Gas purchased 249 116 206 250 248 293
Purchased and exchanged power 158 838 47 632 49 082
Other operation 598 434 520 590 549 152
Maintenance 193 908 182 180 200 959
Depreciation 282 763 279 759 294 395
Amortization of phase-in deferrals 13 598 9 091 -
Post-in-service deferred operating
expenses - net (1 509) (2 500) (5 998)
Phase-in deferred depreciation - - (2 161)
Income taxes (Note 11) 218 269 221 429 154 494
Taxes other than income taxes 257 815 255 533 243 716
2 684 482 2 436 718 2 444 925
Operating Income 558 258 586 713 443 522
Other Income and Expenses - Net
Allowance for equity funds used
during construction 1 225 1 964 6 201
Post-in-service carrying costs 1 223 3 186 9 780
Phase-in deferred return 8 372 8 537 15 351
Equity in earnings of unconsolidated
subsidiary (Note 1(e)) 25 430 - -
Income taxes (Note 11) 19 536 7 358 12 922
Other - net (40 464) (3 051) (33 789)
15 322 17 994 10 465
Income Before Interest and Other Charges 573 580 604 707 453 987
Interest and Other Charges
Interest on long-term debt 190 617 213 911 219 248
Other interest 31 169 20 826 20 370
Allowance for borrowed funds used
during construction (6 183) (8 065) (12 332)
Preferred dividend requirements of
subsidiaries 23 180 30 853 35 559
238 783 257 525 262 845
Net Income $ 334 797 $ 347 182 $ 191 142
Costs of Reacquisition of Preferred
Stock of Subsidiary (Note 3(b)) (18 391) - - _
Net Income Applicable to Common Stock $ 316 406 $ 347 182 $ 191 142
Average Common Shares Outstanding 157 678 156 620 147 426
Earnings Per Common Share
Net income $2.12 $2.22 $1.30
Costs of reacquisition of preferred
stock of subsidiary (Note 3(b)) (.12) - - _
Net income applicable to
common stock $2.00 $2.22 $1.30
Dividends Declared Per Common Share $1.74 $1.72 $1.50
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31
1996 1995_
(dollars in thousands)
<S> <C> <C>
Utility Plant - Original Cost
In service
Electric $8 809 786 $8 617 695
Gas 713 829 680 339
Common 185 255 183 422
9 708 870 9 481 456
Accumulated depreciation 3 591 858 3 367 401
6 117 012 6 114 055
Construction work in progress 172 614 135 852
Total utility plant 6 289 626 6 249 907
Current Assets
Cash and temporary cash investments 19 327 35 052
Restricted deposits 1 721 2 336
Accounts receivable less accumulated provision
for doubtful accounts of $10,618 in 1996 and
$10,360 in 1995 (Note 6) 199 361 371 150
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 71 730 122 409
Gas stored for current use 32 951 21 493
Other materials and supplies 80 292 85 076
Property taxes applicable to subsequent year 123 580 116 822
Prepayments and other 37 049 32 347
566 011 786 685
Other Assets
Regulatory assets (Note 1(f))
Amounts due from customers - income taxes 377 194 423 493
Post-in-service carrying costs and deferred
operating expenses 186 396 187 190
Coal contract buyout costs 138 171 -
Deferred demand-side management costs 134 742 129 400
Phase-in deferred return and depreciation 95 163 100 388
Deferred merger costs 93 999 56 824
Unamortized costs of reacquiring debt 70 518 73 904
Other 72 483 74 911
Investment in unconsolidated
subsidiary (Note 1(e)) 592 660 -
Other 231 551 137 362
1 992 877 1 183 472
$8 848 514 $8 220 064
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
December 31
1996 1995_
(dollars in thousands)
<C> <C> <C>
Common Stock Equity (Note 2)
Common stock - $.01 par value;
authorized shares - 600,000,000;
outstanding shares - 157,679,129 in 1996
and 157,670,141 in 1995 $ 1 577 $ 1 577
Paid-in capital 1 590 735 1 597 050
Retained earnings 992 273 950 216
Cumulative foreign currency
translation adjustment (131) - _
Total common stock equity 2 584 454 2 548 843
Cumulative Preferred Stock of Subsidiaries
(Note 3)
Not subject to mandatory redemption 194 232 227 897
Subject to mandatory redemption - 160 000
Long-term Debt (Note 4) 2 534 978 2 530 766
Total capitalization 5 313 664 5 467 506
Current Liabilities
Long-term debt due within one year (Note 4) 140 000 201 900
Notes payable (Note 5) 713 617 165 800
Accounts payable 305 420 268 139
Litigation settlement (Note 12(e)) - 80 000
Accrued taxes 323 059 317 185
Accrued interest 55 590 55 995
Other 114 653 57 202
1 652 339 1 146 221
Other Liabilities
Deferred income taxes (Note 11) 1 146 263 1 120 900
Unamortized investment tax credits 175 935 185 726
Accrued pension and other postretirement
benefit costs (Notes 9 and 10) 263 319 171 771
Other 296 994 127 940
1 882 511 1 606 337
Commitments and Contingencies (Note 12)
$8 848 514 $8 220 064
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
Cumulative
Foreign
Currency
Common Paid-in Retained Translation Total Common
Stock Capital Earnings Adjustment Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $1 453 $1 312 426 $ 907 802 $ - $2 221 681
Net income 191 142 191 142
Issuance of 9,830,042 shares of
common stock 99 227 882 227 981
Common stock issuance expenses (5 225) (5 225)
Dividends on common stock (see
page 52 for per share amounts) (221 362) (221 362)
Other 575 (521) 54
Balance December 31, 1994 1 552 1 535 658 877 061 2 414 271
Net income 347 182 - 347 182
Issuance of 2,472,103 shares of
common stock - net 25 60 343 60 368
Common stock issuance expenses (229) (229)
Dividends on common stock (see
page 52 for per share amounts) (268 851) (268 851)
Other 1 278 (5 176) (3 898)
Balance December 31, 1995 1 577 1 597 050 950 216 - 2 548 843
Net income 334 797 334 797
Issuance of 8,988 shares of
common stock - net 311 311
Dividends on common stock (see
page 52 for per share amounts) (274 358) (274 358)
Translation adjustments (131) (131)
Costs of reacquisition of
preferred stock of subsidiary (18 391) (18 391)
Other (6 626) 9 ____ (6 617)
Balance December 31, 1996 $1 577 $1 590 735 $ 992 273 $(131) $2 584 454
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net income $ 334 797 $ 347 182 $ 191 142
Items providing (using) cash currently:
Depreciation 282 763 279 759 294 395
Deferred income taxes and investment
tax credits - net 47 912 28 411 30 926
Allowance for equity funds used during
construction (1 225) (1 964) (6 201)
Regulatory assets - net 280 1 026 (58 165)
Changes in current assets and current
liabilities
Restricted deposits (358) (1 035) 10 046
Accounts receivable, net of reserves
on receivables sold 132 749 (71 641) 40 550
Materials, supplies, and fuel 44 005 51 214 (45 949)
Accounts payable 37 281 1 672 (8 191)
Advance under accounts receivable purchase
agreement - - (49 940)
Litigation settlement (80 000) - -
Accrued taxes and interest 5 469 56 635 5 753
Other items - net 12 416 12 136 36 890
Net cash provided by operating activities 816 089 703 395 441 256
Financing Activities
Issuance of common stock 311 60 139 222 756
Issuance of long-term debt 174 817 344 280 420 935
Funds on deposit from issuance of long-term debt 973 9 987 27 897
Retirement of preferred stock of subsidiaries (212 487) (93 466) (40 426)
Redemption of long-term debt (237 183) (398 833) (313 682)
Change in short-term debt 547 817 (63 100) 51 186
Dividends on common stock (274 358) (268 851) (221 362)
Net cash provided by (used in) financing
activities (110) (409 844) 147 304
Investing Activities
Construction expenditures (less allowance for
equity funds used during construction) (323 013) (324 905) (480 533)
Deferred demand-side management costs - net (5 342) (25 273) (47 268)
Investment in unconsolidated subsidiary (503 349) - -
Equity investments in Argentine utilities - 19 799 -
Net cash used in investing activities (831 704) (330 379) (527 801)
Net increase (decrease) in cash and temporary
cash investments (15 725) (36 828) 60 579
Cash and temporary cash investments at beginning
of period 35 052 71 880 11 121
Cash and temporary cash investments at end of
period $ 19 327 $ 35 052 $ 71 880
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized) $ 207 393 $ 218 357 $ 211 163
Income taxes 141 917 140 189 96 680
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - CINERGY
Kilowatt-Hour (kwh) Sales
Cinergy's total kwh sales in 1996, as compared to 1995, increased 11.0%
reflecting an increase in sales to all customer classes. Increased activity
in Cinergy's power marketing and trading operations led to higher non-firm
power sales for resale. The increase in retail sales which reflects a higher
average number of residential and commercial customers was partially offset by
the return to more normal weather in 1996. The increase in industrial sales
was due to growth in the primary metals sector.
As compared to 1994, total kwh sales in 1995 increased 4.1% reflecting higher
sales to all retail customer classes. Contributing significantly to this
increase were higher residential and commercial sales due to warmer weather
during the 1995 summer cooling season and colder weather during the fourth
quarter of 1995. Additionally, increased sales to industrial customers,
reflecting growth in the primary metals and chemicals sectors, contributed to
the increased kwh sales level. These increases were offset, in part, by a
decline in non-firm power sales for resale.
Total kwh sales increased 2.8% in 1994, as compared to 1993, due, in large
part, to non-firm power sales for resale, reflecting third-party, short-term
power sales to other utilities through PSI's system and direct power sales by
PSI to other utilities. This increase was partially offset by CG&E's reduced
power sales to other utilities in 1994. Also significantly contributing to
the total kwh sales levels were increased sales to industrial customers. This
increase reflected growth in the primary metals and transportation equipment
sectors. Commercial sales increased due, in part, to new customers. A
decrease in residential sales resulted from the milder weather experienced
during the third and fourth quarters of 1994.
Year-to-year changes in kwh sales for each major class of customers are shown
below:
Increase (Decrease) from Prior Year
1996 1995 1994_
Retail
Residential 2.4% 5.8% (1.7)%
Commercial 1.3 4.3 1.9
Industrial 3.3 4.6 4.6
Total retail 2.4 4.9 1.6
Sales for resale
Firm power obligations 10.5 1.7 2.5
Non-firm power transactions 82.0 (1.3) 14.4
Total sales for resale 59.6 (.4) 10.5
Total sales 11.0 4.1 2.8
Cinergy currently forecasts a 2% annual compound growth rate in kwh sales over
the 1997 through 2001 period. This forecast does not reflect the effects of
DSM programs and excludes non-firm power sales for resale and any potential
new off-system, long-term firm power sales.
Thousand Cubic Feet (Mcf) Sales and Transportation
Mcf gas sales and transportation volumes increased 8.4%, as compared to 1995.
Colder weather in the first quarter of 1996 and cooler than normal weather
early in the second quarter of 1996 led to increased gas sales to residential
and commercial customers. Also contributing to the increase in total sales
was an increase in the number of residential and commercial customers.
Industrial sales decreased and gas transported increased as customers
continued to purchase gas directly from suppliers using transportation
services provided by CG&E. The increase in transportation volumes mainly
reflects demand for gas transportation services in the primary metals sector.
Total gas sales and transportation volumes increased 8.6% in 1995, as compared
to 1994. Increased sales to residential customers, resulting from colder
weather during the fourth quarter of 1995 and an increase in the number of
customers, contributed to the higher sales levels. Additionally, increases in
commercial and industrial transportation volumes, which resulted from
customers electing to purchase gas directly from suppliers, more than offset
declines in industrial and commercial sales. The increased transportation
volumes mainly reflect industrial demand for gas transportation services in
the primary metals, food products, and paper products sectors.
The milder weather experienced in 1994 contributed to a decrease in
residential and commercial gas sales volumes and led to the decrease in total
Mcf sales and transportation of 1.2%, as compared to 1993. An increase in gas
transportation volumes to industrial customers, mainly in the primary metals
sector, partially offset this decrease.
Year-to-year changes in Mcf sales for each major class of customers and Mcf
transportation volumes are shown below:
Increase (Decrease) from Prior Year
1996 1995 1994 _
Retail
Residential 3.6% 10.5% (10.2)%
Commercial 7.8 (2.0) (1.5)
Industrial (13.3) (26.6) (9.9)
Total sales 2.1 1.5 (6.7)
Gas transported 19.8 24.4 13.9
Total gas sold and transported 8.4 8.6 (1.2)
Operating Revenues
ELECTRIC OPERATING REVENUES
The $156 million (6.0%) increase in 1996 electric operating revenues, as
compared to 1995, is due, in large part, to the increase in kwh sales as
previously discussed. Also contributing to the increase was the effect of
PSI's 7.6% retail rate increase approved in the September 1996 Order, as well
as a full year's effect of PSI's 4.3% retail rate increase approved in the
February 1995 Order and PSI's 1.9% increase for carrying costs on construction
work in progress property which was approved by the IURC in March 1995. These
rate increases were offset by the return of approximately $10 million to PSI's
customers in accordance with the February 1995 Order, which requires all
retail operating income above a certain level to be refunded to customers, the
operation of CG&E's fuel adjustment clauses reflecting a lower average cost of
fuel used in electric production, and a decrease in ULH&P's electric rates
reflecting a reduction in the cost of electricity purchased from CG&E.
Higher retail kwh sales, PSI's electric rate increases which became effective
in February 1995 and March 1995, and a full year's effect of CG&E's electric
rate increase which became effective in May 1994, significantly contributed to
the $167 million (6.8%) increase in electric operating revenues for 1995, when
compared to 1994.
Electric operating revenues increased $82 million (3.5%) in 1994, as compared
to 1993, as a result of CG&E's electric rate increases which became effective
in May 1993, August 1993, and May 1994, PSI's increased kwh sales, and the
effects of PSI's $31 million refund to retail customers accrued in June 1993
as a result of the settlement of an April 1990 IURC order.
An analysis of electric operating revenues for the past three years is shown
below:
1996 1995 1994_
(dollars in millions)
Previous year's electric
operating revenues $2 613 $2 446 $2 364
Increase (Decrease) due to change in:
Price per kwh
Retail (1) 54 32
Sales for resale
Firm power obligations (4) (1) 1
Non-firm power transactions - 4 -
Total change in price per kwh (5) 57 33
Kwh sales
Retail 56 109 34
Sales for resale
Firm power obligations 9 1 2
Non-firm power transactions 94 (1) 14
Total change in kwh sales 159 109 50
Other 2 1 (1)
Current year's electric
operating revenues $2 769 $2 613 $2 446
GAS OPERATING REVENUES
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing CG&E facilities to transport the gas (see the "Mcf
Sales and Transportation" section) continues to put downward pressure on gas
operating revenues. When Cinergy sells gas, the sales price reflects the cost
of gas purchased by Cinergy to support the sale plus the costs to deliver the
gas. When gas is transported, Cinergy does not incur any purchased gas costs
but delivers gas the customer has purchased from other sources. Since
providing transportation services does not necessitate recovery of gas
purchased costs, the revenue per Mcf transported is less than the revenue per
Mcf sold. As a result, a higher relative volume of gas transported to gas
sold translates into lower gas operating revenues.
Gas operating revenues increased $63 million (15.4%), as compared to 1995.
This increase is attributable to the increase in gas sales and transportation
volumes. Also contributing to the increase was the operation of fuel
adjustment clauses reflecting a higher cost of gas purchased.
In 1995, gas operating revenues declined $32 million (7.1%), as compared to
1994, as a result of the aforementioned trend toward increased transportation
services and the operation of fuel adjustment clauses reflecting a lower
average cost of gas purchased.
Gas operating revenues decreased $27 million (5.7%) in 1994, as compared to
1993, due to the operation of fuel adjustment clauses which reflected a lower
average cost of gas purchased during the latter part of 1994 and a reduction
in total volumes sold and transported.
Operating Expenses
FUEL
Fuel Used in Electric Production Electric fuel costs, Cinergy's largest
operating expense, remained relatively constant in 1996, showing less than a
1% decrease when compared to 1995.
An analysis of fuel costs for the past three years is shown below:
1996 1995 1994
(dollars in millions)
Previous year's fuel expense $717 $713 $733
Increase (Decrease) due to change in:
Price of fuel (6) (25) (39)
Kwh generation 2 29 19
Current year's fuel expense $713 $717 $713
Gas Purchased Gas purchased increased $43 million (20.8%), as compared to
1995 due to an increase in volumes purchased and a higher average cost per Mcf
of gas purchased, as previously discussed.
In 1995, gas purchased expense decreased $42 million (16.9%), as compared to
1994, primarily reflecting a decline in the average cost per Mcf of gas
purchased.
A reduction in the average cost per Mcf of gas purchased and lower volumes
purchased contributed to the decline in gas purchased expense of $33 million
(11.6%) in 1994, as compared to 1993.
PURCHASED AND EXCHANGED POWER
Purchased and exchanged power increased $111 million, as compared to 1995.
The increase primarily reflects increased purchases of non-firm power for
resale to others as a result of increased activity in Cinergy's power
marketing and trading operations.
The increase in purchased and exchanged power of $13 million (35.6%) in 1994,
as compared to 1993, reflected an increase in third-party, short-term power
sales to other utilities through PSI's system and increased purchases of other
non-firm power by PSI primarily to serve its own load.
OTHER OPERATION
Other operation increased $78 million (15.0%) in 1996, as compared to 1995.
This increase is due to a number of factors, including increased
administrative and general expenses reflecting, in part, charges of $35
million for voluntary early retirement and severance programs and charges
totaling $6 million related to the December 1996 Order. In addition, an
increase of $7 million in production expenses associated with the operations
of the Clean Coal Project contributed to the increase.
In 1995, other operation expenses decreased $29 million (5.2%), as compared to
1994. Charges of $62 million in 1994 for Merger Costs and other expenditures
which cannot be recovered from customers under the merger savings sharing
mechanisms authorized by regulators significantly contributed to the decrease.
In addition, emphasis on achieving merger savings and other cost reductions
led to lower operating costs for 1995. These decreases were partially offset
by the recognition of postretirement benefit costs on an accrual basis, an
increase in the ongoing level of DSM expenses, and the amortization of
deferred postretirement benefit costs, deferred Merger Costs, and deferred DSM
costs, all of which are being recovered in revenues pursuant to the February
1995 Order.
Other operation expenses increased $105 million (23.7%) in 1994, as compared
to 1993, due to a number of factors including the previously discussed charges
of $62 million, fuel litigation expenses of $8 million incurred by PSI, and
increased electric production and distribution expenses.
MAINTENANCE
An increase of $12 million (6.4%) in maintenance costs, as compared to 1995,
is primarily attributable to increased maintenance associated with the Clean
Coal Project which began commercial operation in November 1995. Increased
transmission and distribution expenses also contributed to the higher level of
maintenance expense.
Maintenance costs decreased $19 million (9.3%) in 1995, as compared to 1994,
primarily due to improved scheduling of routine maintenance on electric
generating units. Lower maintenance costs on gas and electric distribution
facilities also contributed to this decrease.
Increased maintenance on a number of PSI's generating stations and the initial
costs of PSI's new distribution line clearing program resulted in increased
maintenance expenses of $8 million (4.2%) in 1994, as compared to 1993.
DEPRECIATION
In 1995, depreciation expense decreased $15 million (5.0%), when compared to
1994, due in large part to the adoption of lower depreciation rates for PSI
effective in March 1995. This decrease was partially offset by the effect of
additions to utility plant.
Depreciation expense increased $16 million (5.6%) in 1994, as compared to
1993, primarily as a result of additions to electric utility plant.
POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET
Post-in-service deferred operating expenses - net reflect various deferrals of
depreciation, operation and maintenance expenses (exclusive of fuel costs),
and property taxes on certain generating units and other utility plant from
the in-service date until the related plant is reflected in retail rates, net
of amortization of these deferrals as they are recovered through retail rates.
(See Note 1(h) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
PHASE-IN DEFERRED DEPRECIATION AND RETURN AND AMORTIZATION OF PHASE-IN
DEFERRALS
Phase-in deferred depreciation, phase-in deferred return, and amortization of
phase-in deferrals reflect the PUCO-ordered phase-in plan for Zimmer. (See
Note 1(k) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes increased $12 million (4.8%) in 1995 and $15
million (6.5%) in 1994, primarily due to increased property taxes resulting
from a greater investment in taxable property and higher property tax rates.
Other Income and Expenses - Net
POST-IN-SERVICE CARRYING COSTS
Post-in-service carrying costs reflect the deferral of carrying costs on
certain generating units and other utility plant from the in-service date
until the related plant is reflected in retail rates. (See Note 1(h) of the
Notes to Consolidated Financial Statements).
OTHER - NET
The change in other - net of $37 million, as compared to 1995, is due to a
number of factors including $4 million of interest received in 1995 on an
income tax refund related to prior years, charges totaling $14 million
associated with the December 1996 Order, expenses associated with CG&E's and
ULH&P's sales of accounts receivables in 1996, and the effect of a $10 million
gain in 1995 on the sale of Cinergy's investment in an Argentine utility.
The $31 million change in other - net in 1995, as compared to 1994, is due in
part to interest on the income tax refund and the $10 million gain discussed
above and charges of $17 million in 1994 for merger-related and other
expenditures which cannot be recovered from customers.
In 1994, other - net increased $9 million, as compared to 1993, primarily as a
result of the write-off during 1993 of $22 million related to the defense
against the IPALCO Enterprises, Inc. hostile takeover attempt. The increase
was offset, in part, by the charges in 1994 of $17 million previously
discussed.
Interest and Other Charges
INTEREST ON LONG-TERM DEBT
Interest on long-term debt decreased $23 million (10.9%), as compared to 1995,
due to the refinancing and redemptions of long-term debt by CG&E, PSI, and
ULH&P during 1995 and 1996.
OTHER INTEREST
Other interest increased $10 million (49.7%), as compared to 1995, primarily
reflecting increased interest expense on short-term borrowings used to fund
Cinergy's investment in Avon Energy.
PREFERRED DIVIDEND REQUIREMENTS OF SUBSIDIARIES
Preferred dividend requirements of subsidiaries decreased $8 million (24.9%),
as compared to 1995. The decrease was primarily attributable to the
reacquisition of approximately 90% of the outstanding preferred stock of CG&E,
pursuant to Cinergy's tender offer (see Note 3(b) of the Notes to Financial
Statements).
<PAGE>
The Cincinnati Gas & Electric Company
and subsidiaries
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Revenues
Electric
Non-affiliated companies $1 458 828 $1 407 119 $1 341 120
Affiliated companies 43 180 30 104 4 667
Gas
Non-affiliated companies 474 034 410 852 442 398
Affiliated companies 7 - - _
Total operating revenues 1 976 049 1 848 075 1 788 185
Operating Expenses
Fuel used in electric production 349 197 327 353 325 470
Gas purchased 249 116 206 250 248 293
Purchased and exchanged power
Non-affiliated companies 46 333 13 870 12 349
Affiliated companies 21 921 42 575 8 583
Other operation 330 169 291 874 336 030
Maintenance 96 205 94 688 106 810
Depreciation 160 951 158 986 156 676
Amortization of phase-in deferrals 13 598 9 091 -
Post-in-service deferred operating
expenses - net 3 290 3 290 3 290
Phase-in deferred depreciation - - (2 161)
Income taxes (Note 11) 145 075 136 386 104 128
Taxes other than income taxes 207 904 203 680 197 381
1 623 759 1 488 043 1 496 849
Operating Income 352 290 360 032 291 336
Other Income and Expenses - Net
Allowance for equity funds
used during construction 1 225 1 790 1 971
Phase-in deferred return 8 372 8 537 15 351
Income taxes (Note 11) 9 139 4 587 6 619
Other - net (21 296) 4 221 (6 726)
(2 560) 19 135 17 215
Income Before Interest 349 730 379 167 308 551
Interest
Interest on long-term debt 123 616 143 334 150 386
Other interest 2 793 3 486 2 831
Allowance for borrowed funds
used during construction (3 859) (3 854) (2 977)
122 550 142 966 150 240
Net Income 227 180 236 201 158 311
Preferred Dividend Requirement 10 643 17 673 22 377
Costs of Reacquisition of
Preferred Stock (Note 3(b)) 18 391 - -___
Net Income Applicable to
Common Stock $ 198 146 $ 218 528 $ 135 934
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Utility Plant - Original Cost
In service
Electric $4 631 605 $4 564 711
Gas 713 829 680 339
Common 185 255 183 422
5 530 689 5 428 472
Accumulated depreciation 1 868 579 1 730 232
3 662 110 3 698 240
Construction work in progress 95 984 77 661
Total utility plant 3 758 094 3 775 901
Current Assets
Cash and temporary cash investments 5 120 6 612
Restricted deposits 1 171 1 144
Notes receivable from affiliated companies 31 740 24 715
Accounts receivable less accumulated
provision for doubtful accounts of $9,178 in
1996 and $9,615 in 1995 (Note 6) 117 912 292 493
Accounts receivable from affiliated companies 2 453 17 162
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 29 865 40 395
Gas stored for current use 32 951 21 493
Other materials and supplies 52 023 55 388
Property taxes applicable to subsequent year 123 580 116 822
Prepayments and other 32 433 30 572
429 248 606 796
Other Assets
Regulatory assets (Note 1(f))
Amounts due from customers - income taxes 344 126 397 155
Post-in-service carrying costs and deferred
operating expenses 141 492 148 316
Phase-in deferred return and depreciation 95 163 100 388
Deferred demand-side management costs 33 534 19 158
Deferred merger costs 17 709 14 538
Unamortized costs of reacquiring debt 38 439 39 428
Other 19 545 41 025
Other 89 908 54 691
779 916 814 699
$4 967 258 $5 197 396
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Common Stock Equity (Note 2)
Common stock - $8.50 par value;
authorized shares - 120,000,000;
outstanding shares - 89,663,086 in 1996
and 1995 $ 762 136 $ 762 136
Paid-in capital 536 276 339 101
Retained earnings 247 403 427 226
Total common stock equity 1 545 815 1 528 463
Cumulative Preferred Stock (Note 3)
Not subject to mandatory redemption 21 146 40 000
Subject to mandatory redemption - 160 000
Long-term Debt (Note 4) 1 565 108 1 702 650
Total capitalization 3 132 069 3 431 113
Current Liabilities
Long-term debt due within one year (Note 4) 130 000 151 500
Notes payable (Note 5) 30 488 -
Notes payable to affiliated companies 103 -
Accounts payable 166 064 138 735
Accounts payable to affiliated companies 12 726 20 468
Accrued taxes 267 841 250 189
Accrued interest 30 570 31 299
Other 32 191 40 409
669 983 632 600
Other Liabilities
Deferred income taxes (Note 11) 767 085 795 385
Unamortized investment tax credits 123 185 129 372
Accrued pension and other postretirement
benefit costs (Notes 9 and 10) 165 282 117 641
Other 109 654 91 285
1 165 206 1 133 683
Commitments and Contingencies (Note 12)
$4 967 258 $5 197 396
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance December 31, 1993 $748 528 $314 218 $ 456 511 $1 519 257
Net income 158 311 158 311
Issuance of 1,601,003 shares of
common stock 13 608 23 142 36 750
Common stock issuance expenses (39) (39)
Dividends on preferred stock (22 377) (22 377)
Dividends on common stock (158 970) (158 970)
Other 553 (513) 40
Balance December 31, 1994 762 136 337 874 432 962 1 532 972
Net income 236 201 236 201
Dividends on preferred stock (17 673) (17 673)
Dividends on common stock (219 550) (219 550)
Other 1 227 (4 714) (3 487)
Balance December 31, 1995 762 136 339 101 427 226 1 528 463
Net income 227 180 227 180
Dividends on preferred stock (10 643) (10 643)
Dividends on common stock (377 969) (377 969)
Contribution from parent company 197 207 197 207
Costs of reacquisition of
preferred stock (18 391) (18 391)
Other (32) (32)
Balance December 31, 1996 $762 136 $536 276 $ 247 403 $1 545 815
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net income $ 227 180 $ 236 201 $ 158 311
Items providing (using) cash currently
Depreciation 160 951 158 986 156 676
Deferred income taxes and investment
tax credits - net 18 929 26 938 13 680
Allowance for equity funds used during
construction (1 225) (1 790) (1 971)
Regulatory assets - net 34 761 16 654 (21 248)
Changes in current assets and current
liabilities
Restricted deposits (27) (1 046) 22
Accounts and notes receivable, net of
reserves on receivables sold 156 182 (65 350) 43 145
Materials, supplies, and fuel 2 437 14 039 21 202
Accounts payable 19 587 38 386 (8 093)
Accrued taxes and interest 16 923 21 935 8 211
Other items - net 39 843 (4 105) 77 462
Net cash provided by operating activities 675 541 440 848 447 397
Financing Activities
Issuance of common stock - - 36 711
Issuance of long-term debt - 344 280 311 957
Retirement of preferred stock - (93 450) (40 400)
Redemption of long-term debt (162 583) (338 378) (313 522)
Change in short-term debt 30 591 (14 500) (16 500)
Dividends on preferred stock (10 643) (17 673) (22 377)
Dividends on common stock (377 969) (219 550) (158 970)
Net cash used in financing activities (520 604) (339 271) (203 101)
Investing Activities
Construction expenditures (less allowance for
equity funds used during construction) (142 053) (138 325) (189 954)
Deferred demand-side management costs - net (14 376) (9 156) (6 396)
Net cash used in investing activities (156 429) (147 481) (196 350)
Net increase (decrease) in cash and temporary
cash investments (1 492) (45 904) 47 946
Cash and temporary cash investments at beginning
of period 6 612 52 516 4 570
Cash and temporary cash investments at end of
period $ 5 120 $ 6 612 $ 52 516
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized) $ 117 848 $ 137 892 $ 142 380
Income taxes 109 034 79 769 88 639
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - CG&E
Kwh Sales
CG&E's total kwh sales increased 10.6% in 1996, as compared to 1995,
reflecting an increase in sales to all customer classes. The increase to
retail sales which reflects a higher average number of residential and
commercial customers was partially offset by the return to more normal weather
in 1996. The increase in industrial sales was due to growth in the primary
metals sector. Increased activity in Cinergy's power marketing and trading
operations led to higher non-firm power sales for resale.
Kwh sales for 1995 increased 15.3% over 1994, reflecting increased sales to
all customer classes. Significantly contributing to this increase were higher
non-firm power sales for resale primarily due to increased sales to PSI, as a
result of the coordination of CG&E's and PSI's electric dispatch systems.
Higher residential and commercial sales resulted primarily from warmer weather
during the 1995 summer cooling season and colder weather during the fourth
quarter of 1995. Additionally, increased sales to industrial customers were
mainly attributable to growth in the primary metals and chemicals sectors.
CG&E's total kwh sales in 1994, as compared to 1993, decreased 1.2%, due in
large part to reduced power sales to other utilities in 1994 and decreased
residential sales resulting from milder weather experienced during the third
and fourth quarters of 1994. This decrease was partially offset by increased
kwh sales to industrial customers reflecting growth in the primary metals and
machinery sectors.
Year-to-year changes in kwh sales for each major class of customers are shown
below:
Increase (Decrease) from Prior Year
1996 1995 1994
Retail
Residential 4.7% 3.8% (2.0)%
Commercial 2.3 3.4 2.3
Industrial 3.4 3.9 4.3
Total retail 3.3 3.8 1.1
Sales for resale
Firm power obligations 3.7 6.3 1.7
Non-firm power transactions 51.7 211.8 (29.3)
Total sales for resale 48.1 172.6 (24.9)
Total sales 10.6 15.3 (1.2)
CG&E currently forecasts a 2% annual compound growth rate in kwh sales over
the 1997 through 2001 period. This forecast does not reflect the effects of
DSM programs and excludes non-firm power sales for resale and any potential
new off-system, long-term firm power sales.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes increased 8.4%, as compared to 1995.
Colder weather in the first quarter of 1996 and cooler than normal weather
early in the second quarter of 1996 led to increased gas sales to residential
and commercial customers. Also contributing to the increase in total sales
was an increase in the number of residential and commercial customers.
Industrial sales decreased and gas transported increased as customers
continued to purchase gas directly from suppliers using transportation
services provided by CG&E. The increase in transportation volumes mainly
reflects demand for gas transportation services in the primary metals sector.
Total gas sales and transportation volumes increased 8.6% in 1995, as compared
to 1994. Increased sales to residential customers, resulting from colder
weather during the fourth quarter of 1995 and an increase in the number of
customers, contributed to the higher sales levels. Additionally, increases in
commercial and industrial transportation volumes, which resulted from
customers electing to purchase gas directly from suppliers, more than offset
declines in industrial and commercial sales. The increased transportation
volumes mainly reflect industrial demand for gas transportation services in
the primary metals, food products, and paper products sectors.
The milder weather experienced in 1994 contributed to a decrease in
residential and commercial gas sales volumes and led to the decrease in total
Mcf sales and transportation of 1.2%, as compared to 1993. An increase in gas
transportation volumes to industrial customers, mainly in the primary metals
sector, partially offset this decrease.
Year-to-year changes in Mcf sales for each major class of customers and Mcf
transportation volumes are shown below:
Increase (Decrease) from Prior Year
1996 1995 1994
Retail
Residential 3.6 % 10.5 % (10.2)%
Commercial 7.8 (2.0) (1.5)
Industrial (13.3) (26.6) (9.9)
Total sales 2.1 1.5 (6.7)
Gas transported 19.8 24.4 13.9
Total gas sold and transported 8.4 8.6 (1.2)
Operating Revenues
ELECTRIC OPERATING REVENUES
The $65 million (4.5%) increase in 1996 electric operating revenues, as
compared to 1995, is due, in large part, to the increase in kwh sales as
previously discussed. This increase was partially offset by the operation of
fuel adjustment clauses reflecting a lower average cost of fuel used in
electric production.
Electric operating revenues increased $91 million (6.8%) in 1995, as compared
to 1994. This increase reflects the higher kwh sales, as previously discussed
and a full year's effect of CG&E's electric rate increase which became
effective in May 1994. This increase was partially offset by the operation of
fuel adjustment clauses reflecting a lower average cost of fuel used in
electric production.
CG&E's electric rate increases which became effective in May 1993, August
1993, and May 1994 substantially contributed to the increase in electric
operating revenues of $63 million (4.9%) in 1994, as compared to 1993.
An analysis of electric operating revenues for the past three years is shown
below:
1996 1995 1994_
(in millions)
Previous year's electric
operating revenues $1 437 $1 346 $1 282
Increase (Decrease) due to change in:
Price per kwh
Retail (13) (10) 55
Sales for resale
Firm power obligations - 1 -
Non-firm power transactions (10) (9) 3
Total change in price per kwh (23) (18) 58
Kwh sales
Retail 44 49 14
Sales for resale
Firm power obligations 1 1 -
Non-firm power transactions 41 60 (9)
Total change in kwh sales 86 110 5
Other 2 (1) 1
Current year's electric
operating revenues $1 502 $1 437 $1 346
GAS OPERATING REVENUES
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing CG&E facilities to transport the gas (see the "Mcf
Sales and Transportation" section) continues to put downward pressure on gas
operating revenues. When CG&E sells gas, the sales price reflects the cost of
gas purchased by CG&E to support the sale plus the costs to deliver the gas.
When gas is transported, CG&E does not incur any purchased gas costs but
delivers gas the customer has purchased from other sources. Since providing
transportation services does not necessitate recovery of gas purchased costs,
the revenue per Mcf transported is less than the revenue per Mcf sold. As a
result, a higher relative volume of gas transported to gas sold translates
into lower gas operating revenues.
Gas operating revenues increased $63 million (15.4%)as compared to 1995.
This increase is attributable to the increase in gas sales and transportation
volumes. Also contributing to the increase was the operation of fuel
adjustment clauses reflecting a higher cost of gas purchased.
In 1995, gas operating revenues declined $32 million (7.1%), as compared to
1994, as a result of the aforementioned trend toward increased transportation
services and the operation of fuel adjustment clauses reflecting a lower
average cost of gas purchased.
Gas operating revenues decreased $27 million (5.7%)in 1994, as compared to
1993, due to the operation of fuel adjustment clauses which reflected a lower
average cost of gas purchased during the latter part of 1994 and a reduction
in total volumes sold and transported.
Operating Expenses
FUEL
Fuel Used in Electric Production Electric fuel costs increased $22 million
(6.7%) in 1996, when compared to 1995.
An analysis of fuel costs for the past three years is shown below:
1996 1995 1994
(in millions)
Previous year's fuel expense $327 $325 $333
Increase (Decrease) due to change in:
Price of fuel (4) (20) (9)
Kwh generation 26 22 1
Current year's fuel expense $349 $327 $325
Gas Purchased
Gas purchased increased $43 million (20.8%), as compared to 1995, due to an
increase in volumes purchased and a higher average cost per Mcf of gas
purchased, as previously discussed.
In 1995, gas purchased expense decreased $42 million (16.9%), as compared to
1994, primarily reflecting a decline in the average cost per Mcf of gas
purchased.
A reduction in the average cost per Mcf of gas purchased and lower volumes
purchased contributed to the decline in gas purchased expense of $33 million
(11.6%) in 1994, as compared to 1993.
PURCHASED AND EXCHANGED POWER
Purchased and exchanged power increased $12 million (20.9%), as compared to
1995. The increase primarily reflects increased purchases of non-firm power
for resale to others as a result of increased activity in Cinergy's power
marketing and trading operations.
Purchased and exchanged power costs increased $36 million in 1995, as compared
to 1994, reflecting increased purchases from PSI resulting from the
coordination of PSI's and CG&E's electric dispatch systems. These increases
were partially offset by a decline in third-party, short-term power sales to
other utilities.
OTHER OPERATION
Other operation increased $38 million (13.1%) in 1996, as compared to 1995.
This increase is attributable to higher administrative and general expenses
reflecting, in part, charges of $30 million for voluntary early retirement and
severance programs and charges totaling $6 million related to the December
1996 Order. The increase is partially offset by a decrease in electric
distribution expenses.
In 1995, other operation expenses decreased $44 million (13.1%), as compared
to 1994. Charges of $52 million in 1994 for Merger Costs and other
expenditures which cannot be recovered from customers under the merger savings
sharing mechanism authorized by the PUCO significantly contributed to the
decrease. In addition, emphasis on achieving merger savings and other cost
reductions led to lower operating costs for 1995. The decrease was partially
offset by the write-off of obsolete inventory in December 1995.
Other operation expenses increased $79 million (30.5%) in 1994, as compared to
1993, due to a number of factors including the previously discussed charges of
$52 million and increased electric production and distribution expenses.
MAINTENANCE
The decrease in maintenance expense of $12 million (11.3%) in 1995, as
compared to 1994, was primarily attributable to improved scheduling of routine
maintenance on electric generating units. Lower maintenance costs on gas and
electric distribution facilities also contributed to the decline.
POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET
Post-in-service deferred operating expenses - net reflect various deferrals of
depreciation, operation and maintenance expenses (exclusive of fuel costs),
and property taxes on certain generating units and other utility plant from
the in-service date until the related plant is reflected in retail rates, net
of amortization of these deferrals as they are recovered through retail rates.
(See Note 1(h) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
PHASE-IN DEFERRED DEPRECIATION AND RETURN AND AMORTIZATION OF PHASE-IN
DEFERRALS
Phase-in deferred depreciation, phase-in deferred return, and amortization of
phase-in deferrals reflect the PUCO-ordered phase-in plan for Zimmer. (See
Note 1(k) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes increased $6 million (3.2%) in 1995, and $14
million (7.6%) in 1994, primarily due to increased property taxes resulting
from a greater investment in taxable property and higher property tax rates.
Other Income and Expenses - Net
OTHER - NET
The change in other - net of $26 million in 1996, as compared to 1995, is due
to a number of factors including $4 million of interest received in 1995 on an
income tax refund related to prior years, charges totaling $14 million
associated with the December 1996 Order, and expenses associated with CG&E's
and ULH&P's sales of accounts receivables in 1996.
The increase in other - net of $11 million in 1995, as compared to 1994, is
due in part to interest on the income tax refund discussed above and charges
of $12 million in 1994 for merger-related and other expenditures which cannot
be recovered from customers.
Interest and Other Charges
Interest on Long-term Debt
Interest on long-term debt decreased $20 million (13.8%), as compared to 1995,
due to the refinancing and redemptions of long-term debt in 1996 and 1995.
PREFERRED DIVIDEND REQUIREMENT
Preferred dividend requirements decreased $7 million (39.8%), as compared to
1995. The decrease was primarily attributable to the reacquisition of
approximately 90% of the outstanding preferred stock of CG&E, pursuant to
Cinergy's tender offer (see Note 3(b) of the "Notes to Financial Statements"
in "Item 8. Financial Statements and Supplementary Data").
CG&E's preferred dividend requirement decreased $5 million (21.0%) for 1995,
as compared to 1994. The decrease was attributable to the early redemption of
400,000 shares of $100 par value, 9.28% Series Cumulative Preferred Stock in
April 1994, along with the early redemption of 400,000 and 500,000 shares of
$100 par value Cumulative Preferred Stock, 7.44% Series and 9.15% Series,
respectively, on July 1, 1995.
<PAGE>
PSI Energy, Inc.
and Subsidiaries
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Revenues
Non-affiliated companies $1 309 878 $1 205 460 $1 104 929
Affiliated companies 22 084 42 575 8 583
1 331 962 1 248 035 1 113 512
Operating Expenses
Fuel 364 053 389 401 387 523
Purchased and exchanged power
Non-affiliated companies 112 505 33 762 36 733
Affiliated companies 43 343 30 104 4 667
Other operation 268 478 228 508 213 122
Maintenance 97 703 87 492 94 149
Depreciation 121 812 120 773 137 719
Post-in-service deferred operating
expenses - net (4 799) (5 790) (9 288)
Income taxes (Note 11) 73 194 85 043 50 366
Taxes other than income taxes 49 911 51 853 46 335
1 126 200 1 021 146 961 326
Operating Income 205 762 226 889 152 186
Other Income and Expenses - Net
Allowance for equity funds
used during construction - 174 4 230
Post-in-service carrying costs 1 223 3 186 9 780
Income taxes (Note 11) (3 997) 941 (1 312)
Other - net 1 878 (3 188) (7 893)
(896) 1 113 4 805
Income Before Interest 204 866 228 002 156 991
Interest
Interest on long-term debt 67 001 70 577 68 862
Other interest 14 511 15 821 15 292
Allowance for borrowed funds
used during construction (2 324) (4 211) (9 355)
79 188 82 187 74 799
Net Income 125 678 145 815 82 192
Preferred Dividend Requirement 12 537 13 180 13 182
Net Income Applicable to Common Stock $ 113 141 $ 132 635 $ 69 010
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Electric Utility Plant - Original Cost
In service $4 178 181 $4 052 984
Accumulated depreciation 1 723 279 1 637 169
2 454 902 2 415 815
Construction work in progress 76 630 58 191
Total electric utility plant 2 531 532 2 474 006
Current Assets
Cash and temporary cash investments 2 911 15 522
Restricted deposits 550 1 187
Notes receivable from affiliated companies 3 -
Accounts receivable less accumulated provision
for doubtful accounts of $1,269 in 1996 and
$468 in 1995 (Note 6) 74 289 73 419
Accounts receivable from affiliated companies 4 016 20 568
Materials, supplies, and fuel - at average cost
Fuel 41 865 82 014
Other materials and supplies 28 268 29 462
Prepayments and other 3 184 1 234
155 086 223 406
Other Assets
Regulatory assets (Note 1(f))
Amounts due from customers - income taxes 33 068 26 338
Post-in-service carrying costs and deferred
operating expenses 44 904 38 874
Coal contract buyout costs 138 171 -
Deferred demand-side management costs 101 208 110 242
Deferred merger costs 76 290 42 286
Unamortized costs of reacquiring debt 32 079 34 476
Other 52 938 33 886
Other 129 667 92 056
608 325 378 158
$3 294 943 $3 075 570
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Common Stock Equity (Note 2)
Common stock - without par value; $.01 stated
value; authorized shares - 60,000,000;
outstanding shares - 53,913,701 in 1996 and 1995 $ 539 $ 539
Paid-in capital 402 947 403 253
Retained earnings 626 089 625 275
Total common stock equity 1 029 575 1 029 067
Cumulative Preferred Stock (Note 3)
Not subject to mandatory redemption 173 086 187 897
Long-term Debt (Note 4) 969 870 828 116
Total capitalization 2 172 531 2 045 080
Current Liabilities
Long-term debt due within one year (Note 4) 10 000 50 400
Notes payable (Note 5) 147 129 165 800
Notes payable to affiliated companies 13 186 32 731
Accounts payable 114 330 116 817
Accounts payable to affiliated companies 12 850 -
Litigation settlement (Note 12(e)) - 80 000
Accrued taxes 73 206 65 851
Accrued interest 24 045 24 696
Other 17 107 16 000
411 853 552 295
Other Liabilities
Deferred income taxes (Note 11) 372 997 331 876
Unamortized investment tax credits 52 750 56 354
Accrued pension and other postretirement
benefit costs (Notes 9 and 10) 98 037 54 130
Other 186 775 35 835
710 559 478 195
Commitments and Contingencies (Note 12)
$3 294 943 $3 075 570
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance December 31, 1993 $539 $229 288 $483 242 $ 713 069
Net income 82 192 82 192
Dividends on preferred stock (13 182) (13 182)
Dividends on common stock (59 142) (59 142)
Contribution from parent company 159 999 159 999
Other 22 (7) 15
Balance December 31, 1994 539 389 309 493 103 882 951
Net income 145 815 145 815
Dividends on preferred stock (13 181) (13 181)
Contribution from parent company 13 926 13 926
Other 18 (462) (444)
Balance December 31, 1995 539 403 253 625 275 1 029 067
Net income 125 678 125 678
Dividends on preferred stock (12 629) (12 629)
Dividends on common stock (112 076) (112 076)
Other (306) (159) (465)
Balance December 31, 1996 $539 $402 947 $626 089 $1 029 575
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net income $125 678 $ 145 815 $ 82 192
Items providing (using) cash currently:
Depreciation 121 812 120 773 137 719
Deferred income taxes and investment
tax credits - net 29 925 5 201 24 127
Allowance for equity funds used during
construction - (174) (4 230)
Regulatory assets - net (34 481) (15 628) (36 917)
Changes in current assets and current
liabilities
Restricted deposits (336) 16 10 024
Accounts receivable 2 722 (57 926) (7 404)
Income tax refunds - - 28 900
Materials, supplies, and fuel 41 343 31 748 (66 697)
Accounts payable 10 363 (25 958) (1 318)
Advance under accounts receivable
purchase agreement - - (49 940)
Litigation settlement (80 000) - -
Accrued taxes and interest 6 704 34 078 (2 928)
Other items - net 3 813 18 714 (71 554)
Net cash provided by operating activities 227 543 256 659 41 974
Financing Activities
Issuance of long-term debt 174 817 - 108 978
Funds on deposit from issuance of long-term debt 973 9 987 27 897
Retirement of preferred stock (15 116) (16) (26)
Redemption of long-term debt (74 600) (60 455) (160)
Change in short-term debt (38 216) 4 958 66 872
Dividends on preferred stock (12 629) (13 181) (13 182)
Dividends on common stock (112 076) - (59 142)
Capital contribution from parent company - 13 926 159 999
Net cash provided by (used in) financing
activities (76 847) (44 781) 291 236
Investing Activities
Construction expenditures (less allowance for
equity funds used during construction) (172 341) (186 580) (290 579)
Deferred demand-side management costs - net 9 034 (16 117) (40 872)
Net cash used in investing activities (163 307) (202 697) (331 451)
Net increase (decrease) in cash and temporary
cash investments (12 611) 9 181 1 759
Cash and temporary cash investments at beginning
of period 15 522 6 341 4 582
Cash and temporary cash investments at end of
period $ 2 911 $ 15 522 $ 6 341
Supplemental Disclosure Of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized) $ 76 655 $ 80 465 $ 67 150
Income taxes 37 048 60 148 8 162
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - PSI
Kwh Sales
PSI's total kwh sales increased 11.0% in 1996, as compared to 1995. Increased
activity in Cinergy's power marketing and trading operations led to higher
non-firm power sales for resale. The increase in retail sales which reflects
a higher average number of residential and industrial customers was partially
offset by the return to more normal weather in 1996. The increase in
industrial sales was due to growth in the primary metals and transportation
equipment sectors.
As compared to 1994, total kwh sales in 1995 increased 6.3%, reflecting
increased sales to all customer classes. Contributing significantly to this
increase were higher residential and commercial sales due to warmer weather
during the 1995 summer cooling season, colder weather during the fourth
quarter of 1995, and an increase in the number of residential and commercial
customers. Increased sales to industrial customers, reflecting growth in the
primary metals, chemicals, and food products sectors, also contributed to the
increased kwh sales level. This increase also reflects higher non-firm power
sales for resale resulting from an increase in sales to CG&E reflecting the
coordination of PSI's and CG&E's electric dispatch systems.
Total kwh sales increased 6.3% in 1994, as compared to 1993, due, in large
part, to non-firm power sales for resale, reflecting third party, short-term
power sales to other utilities through PSI's system and direct power sales by
PSI to other utilities. Also contributing to the total kwh sales levels were
increased sales to industrial customers. This increase reflected growth in
the primary metals and transportation equipment sectors. A decrease in
residential sales resulted from the milder weather experienced during the
third and fourth quarters of 1994.
Year-to-year changes in kwh sales for each major class of customers are shown
below:
Increase (Decrease) from Prior Year
1996 1995 1994
Retail
Residential - % 7.9% (1.4)%
Commercial 0.4 5.2 1.4
Industrial 3.3 5.1 4.9
Total retail 1.5 6.0 2.0
Sales for resale
Firm power obligations 11.4 1.1 2.6
Non-firm power transactions 51.6 10.2 33.5
Total sales for resale 40.2 7.4 22.4
Total sales 11.0 6.3 6.3
PSI currently forecasts a 2% annual compound growth rate in kwh sales over the
1997 through 2001 period. This forecast does not reflect the effects of DSM
programs and excludes non-firm power sales for resale and any potential new
off-system, long-term firm power sales.
Operating Revenues
Operating revenues increased $84 million (6.7%) in 1996, as compared to 1995,
due, in large part, to the increase in kwh sales as previously discussed.
Also contributing to the increase was the effect of a 7.6% retail rate
increase approved in the September 1996 Order, as well as a full year's effect
of a 4.3% retail rate increase approved in the February 1995 Order and a 1.9%
increase for carrying costs on construction work in progress (CWIP) property
which was approved by the IURC in March 1995. Partially offsetting these
increases was the return of approximately $10 million to customers in
accordance with the February 1995 Order, which requires all retail operating
income above a certain level to be refunded to customers.
Higher kwh sales and electric rate increases which became effective in
February 1995 and March 1995 significantly contributed to the $135 million
(12.1%) increase in operating revenues for 1995, when compared to 1994.
Operating revenues increased $21 million (1.9%) in 1994, as compared to 1993,
as a result of increased kwh sales, the effects of a $31 million refund to
retail customers accrued in June 1993 as a result of the settlement of an
April 1990 IURC order, and increased fuel costs. Partially offsetting these
increases were the 1.5% retail rate reduction resulting from a December 1993
IURC order and the return of approximately $9 million to customers in
connection with certain provisions of Indiana law which limit the level of
retail operating income as determined in quarterly fuel adjustment clause
proceedings.
An analysis of operating revenues for the past three years is shown below:
1996 1995 1994
(in millions)
Previous year's operating revenues $1 248 $1 114 $1 092
Increase (Decrease) due to change in:
Price per kwh
Retail 8 68 (23)
Sales for resale
Firm power obligations (3) (1) 2
Non-firm power transactions - 1 -_ _
Total change in price per kwh 5 68 (21)
Kwh sales
Retail 16 55 18
Sales for resale
Firm power obligations 8 1 2
Non-firm power transactions 55 9 23
Total change in kwh sales 79 65 43
Other - 1 - __
Current year's operating revenues $1 332 $1 248 $1 114
Operating Expenses
FUEL
Fuel costs, PSI's largest operating expense, decreased approximately $25
million (6.5%) in 1996, when compared to 1995.
An analysis of fuel costs for the past three years is shown below:
1996 1995 1994
(in millions)
Previous year's fuel expense $389 $387 $400
Increase (Decrease) due to change in:
Price of fuel (2) (5) (30)
Kwh generation (23) 7 17
Current year's fuel expense $364 $389 $387
PURCHASED AND EXCHANGED POWER
Purchased and exchanged power increased $92 million in 1996, as compared to
1995. This increase primarily reflects increased purchases of non-firm power
for resale to others as a result of increased activity in Cinergy's power
marketing and trading operations and increased purchases from CG&E as a result
of the coordination of PSI's and CG&E's electric dispatch systems.
Purchased and exchanged power increased $22 million (54.3%) in 1995, as
compared to 1994, reflecting increased purchases from CG&E as a result of the
coordination of PSI's and CG&E's electric dispatch systems. These increases
were partially offset by a decline in third party, short-term power sales to
other utilities.
Purchased and exchanged power increased $17 million (70.6%) in 1994, as
compared to 1993, reflecting an increase in third party, short-term power
sales to other utilities through PSI's system and increased purchases of other
non-firm power by PSI primarily to serve its own load.
OTHER OPERATION
Other operation expenses increased approximately $40 million (17.5%) in 1996,
as compared to 1995. This increase was due to a number of factors, including
an increase related to the ongoing level and amortization of DSM expenses and
an increase in production expenses associated with the operations of the Clean
Coal Project, all of which are being recovered in revenues pursuant to the
February 1995 and September 1996 Orders. Charges related to voluntary early
retirement and severance programs and increased transmission costs also
contributed to the higher level of other operation expenses.
In 1995, other operation expenses increased $15 million (7.2%), as compared to
1994. This increase was due to a number of factors, including the recognition
of postretirement benefit costs on an accrual basis, an increase in the
ongoing level of DSM expenses, and the amortization of deferred postretirement
benefit costs, deferred Merger Costs, and deferred DSM costs, all of which are
being recovered in revenues pursuant to the February 1995 Order. These
increases were partially offset by charges of $10 million in 1994 for
severance benefits to former officers of PSI which cannot be recovered from
customers under the merger savings sharing mechanisms authorized by the IURC.
In addition, emphasis on achieving merger savings and other cost reductions
also partially offset the increase in other operation expenses.
Other operation expenses increased $26 million (14.2%) in 1994, as compared to
1993, due to a number of factors including the previously discussed charges of
$10 million and fuel litigation expenses of $8 million.
MAINTENANCE
An increase of $10 million (11.7%) in maintenance costs as compared to 1995 is
primarily attributable to increased maintenance associated with the Clean Coal
Project which began commercial operation in November 1995. Increased
transmission and distribution costs also contributed to the higher level of
maintenance expenses.
Maintenance costs decreased $7 million (7.1%) in 1995, as compared to 1994,
primarily due to improved scheduling of routine maintenance on generating
units and lower maintenance costs on transmission and distribution facilities.
Increased maintenance on a number of PSI's generating stations and the initial
costs of a new distribution line clearing program resulted in increased
maintenance expenses of $10 million (12.1%) in 1994 when compared to 1993.
DEPRECIATION
In 1995, depreciation expense decreased $17 million (12.3%), when compared to
1994, due in large part to the adoption of lower depreciation rates effective
in March 1995. This decrease was partially offset by the effect of additions
to utility plant.
Additions to electric utility plant led to increases in depreciation expense
of $11 million (8.6%) in 1994 as compared to 1993.
POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET
Post-in-service deferred operating expenses - net reflect the deferral of
depreciation on certain major projects, primarily environmental in nature,
from the in-service date until the related projects are reflected in retail
rates, net of amortization of these deferrals as they are recovered. (See
Note 1(h) of the "Notes to Financial Statements" in "Item 8. Financial
Statements and Supplementary Data.")
TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes increased $6 million (11.9%) in 1995, as
compared to 1994, primarily due to increased property taxes resulting from a
greater investment in taxable property.
Other Income and Expenses - Net
ALLOWANCE FOR EQUITY FUNDS USED DURING CONSTRUCTION
In 1995, allowance for equity funds used during construction decreased $4
million (95.9%), as compared to 1994, primarily due to a decrease in the
average balance of CWIP.
A decrease of $7 million (62.1%) in allowance for equity funds used during
construction in 1994, as compared to 1993, was due to an increase in
borrowings of short-term debt which resulted in a decrease in the equity rate.
POST-IN-SERVICE CARRYING COSTS
Post-in-service carrying costs reflect the deferral of carrying costs on
certain major projects, primarily environmental in nature, from the in-service
date until the related projects are reflected in retail rates. (See Note 1(h)
of the "Notes to Financial Statements" in "Item 8. Financial Statements and
Supplementary Data.")
Interest
INTEREST ON LONG-TERM DEBT
Interest on long-term debt decreased $4 million (5.1%) in 1996, as compared to
1995, due to the redemption of $135 million of long-term debt during the
period from August 1995 through December 1996.
ALLOWANCE FOR BORROWED FUNDS USED DURING CONSTRUCTION
Allowance for borrowed funds used during construction decreased $2 million
(44.8%) in 1996, as compared to 1995. This decrease is primarily attributable
to a decrease in the average balance of CWIP resulting from the Clean Coal
Project being completed at the end of 1995.
Allowance for borrowed funds used during construction decreased $5 million
(55.0%) in 1995, as compared to 1994, primarily as a result of a decrease in
the average balance of CWIP which was partially offset by an increase in the
debt component of the AFUDC rate.
<PAGE>
The Union Light, Heat and Power Company
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Revenues
Electric $190 900 $187 180 $177 564
Gas 76 868 70 288 71 971
267 768 257 468 249 535
Operating Expenses
Electricity purchased from parent
company for resale 143 839 142 308 134 887
Gas purchased 41 185 36 745 40 508
Other operation 30 934 30 712 32 289
Maintenance 4 997 4 580 5 473
Depreciation 11 909 11 438 10 644
Income taxes (Note 11) 9 834 7 887 5 342
Taxes other than income taxes 4 036 3 968 4 002
246 734 237 638 233 145
Operating Income 21 034 19 830 16 390
Other Income and Expenses - Net
Allowance for equity funds used
during construction (8) 71 78
Income taxes (Note 11) (352) (44) 56
Other - net (1 417) 6 236
(1 777) 33 370
Income Before Interest 19 257 19 863 16 760
Interest
Interest on long-term debt 4 016 7 161 8 161
Other interest 703 728 395
Allowance for borrowed funds used
during construction (58) (198) (183)
4 661 7 691 8 373
Net Income $ 14 596 $ 12 172 $ 8 387
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
ASSETS
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Utility Plant - Original Cost
In service
Electric $195 053 $188 508
Gas 148 203 140 604
Common 19 285 19 068
362 541 348 180
Accumulated depreciation 122 310 112 812
240 231 235 368
Construction work in progress 9 050 7 863
Total utility plant 249 281 243 231
Current Assets
Cash and temporary cash investments 1 197 1 750
Notes receivable from affiliated companies 100 -
Accounts receivable less accumulated provision
for doubtful accounts of $1,024 in 1996 and
$1,035 in 1995 (Note 6) 12 763 37 895
Accounts receivable from affiliated companies 620 -
Materials, supplies, and fuel - at average cost
Gas stored for current use 6 351 4 513
Other materials and supplies 716 1 215
Property taxes applicable to subsequent year 2 600 2 350
Prepayments and other 370 485
24 717 48 208
Other Assets
Regulatory assets (Note 1(f))
Deferred merger costs 5 218 1 785
Unamortized costs of reacquiring debt 3 764 2 526
Other 2 357 2 548
Other 5 146 1 499
16 485 8 358
$290 483 $299 797
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
CAPITALIZATION AND LIABILITIES
December 31
1996 1995
(dollars in thousands)
<S> <C> <C>
Common Stock Equity (Note 2)
Common stock - $15.00 par value;
authorized shares - 1,000,000;
outstanding shares - 585,333 in 1996
and 1995 $ 8 780 $ 8 780
Paid-in capital 18 839 18 839
Retained earnings 92 484 82 863
Total common stock equity 120 103 110 482
Long-term Debt (Note 4) 44 617 54 377
Total capitalization 164 720 164 859
Current Liabilities
Long-term debt due within one year (Note 4) - 15 000
Notes payable to affiliated companies 30 649 23 043
Accounts payable 12 018 11 814
Accounts payable to affiliated companies 16 771 21 665
Accrued taxes 1 014 1 993
Accrued interest 1 284 1 549
Other 5 248 4 748
66 984 79 812
Other Liabilities
Deferred income taxes (Note 11) 33 463 23 728
Unamortized investment tax credits 4 797 5 079
Accrued pension and other postretirement
benefit costs (Notes 9 and 10) 12 983 12 202
Income taxes refundable through rates 5 121 4 717
Other 2 415 9 400
58 779 55 126
Commitments and Contingencies (Note 12)
$290 483 $299 797
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance December 31, 1993 $8 780 $18 839 $69 327 $ 96 946
Net income 8 387 8 387
Dividends on common stock (3 511) (3 511)
Balance December 31, 1994 8 780 18 839 74 203 101 822
Net income 12 172 12 172
Dividends on common stock (3 512) (3 512)
Balance December 31, 1995 8 780 18 839 82 863 110 482
Net income 14 596 14 596
Dividends on common stock (4 975) (4 975)
Balance December 31, 1996 $8 780 $18 839 $92 484 $120 103
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net income $ 14 596 $ 12 172 $ 8 387
Items providing (using) cash currently:
Depreciation 11 909 11 438 10 644
Deferred income taxes and investment
tax credits - net 9 857 652 2 042
Allowance for equity funds used during
construction 8 (71) (78)
Regulatory assets (1 500) 170 (1 615)
Changes in current assets and current
liabilities
Accounts and notes receivable, net
of reserves on receivables sold 20 758 (4 003) 8 801
Materials, supplies, and fuel (1 339) 1 894 1 043
Accounts payable (4 690) 11 824 (2 377)
Accrued taxes and interest (1 244) (1 457) 3 307
Other items - net (6 804) 4 262 2 780
Net cash provided by operating activities 41 551 36 881 32 934
Financing Activities
Issuance of long-term debt - 14 704 -
Redemption of long-term debt (26 083) (37 036) -
Change in short-term debt 7 606 8 543 (10 500)
Dividends on common stock (4 975) (3 512) (3 511)
Net cash used in financing activities (23 452) (17 301) (14 011)
Investing Activities
Construction expenditures (less allowance for
equity funds used during construction) (18 652) (18 901) (20 329)
Net cash used in investing activities (18 652) (18 901) (20 329)
Net increase (decrease) in cash and temporary
cash investments (553) 679 (1 406)
Cash and temporary cash investments at beginning
of period 1 750 1 071 2 477
Cash and temporary cash investments at end of
period $ 1 197 $ 1 750 $ 1 071
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized) $ 4 667 $ 8 121 $ 8 281
Income taxes 1 240 7 727 4 714
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - ULH&P
Kwh Sales
In 1996, ULH&P's total kwh sales increased 5.8% as compared to 1995,
reflecting increased sales to all customer classes. The increase in retail
sales, which reflects a higher average number of residential and commercial
customers, was partially offset by the return to more normal weather in 1996.
The increased industrial sales primarily reflect growth in the food products
sector.
ULH&P's total kwh sales in 1995, as compared to 1994, increased 7.2%
reflecting increased sales to all customer classes. The increase in
residential and commercial kwh sales was due to warmer weather during the 1995
summer cooling season and colder weather during the fourth quarter of 1995 and
an increase in the average number of customers. The increased industrial
sales primarily reflect growth in the primary metals sector.
Total kwh sales increased 2.8% in 1994, as compared to 1993, primarily due to
increased retail sales to commercial and industrial customers. Industrial
sales reflected a higher level of economic activity, including growth in the
primary metals, industrial machinery, food products, and rubber and plastic
products sectors. The increase in commercial sales was due, in part, to new
customers. A decrease in residential sales resulted from the milder weather
experienced during the third and fourth quarters of 1994.
ULH&P currently forecasts a 3% annual compound growth rate in kwh sales over
the 1997 through 2001 period. This forecast does not reflect the effects of
DSM programs and excludes any potential new off-system, long-term firm power
sales.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes increased 6.6%, as compared to 1995.
Colder weather in the first quarter of 1996, cooler than normal weather early
in the second quarter of 1996, and increases in the average number of
customers led to increased sales to residential and commercial customers. This
increase was partially offset by a decrease in industrial sales as customers
continued to purchase gas directly from suppliers using transportation
services provided by ULH&P. The increase in transportation volumes mainly
reflects demand for gas transportation services in the chemicals and primary
metals sectors.
Total gas sales and transportation volumes increased 8.6% in 1995, as compared
to 1994. The colder weather during the fourth quarter of 1995 primarily
attributed to the increase in residential and commercial sales. These
increases were partially offset by a decline in industrial sales resulting
from customers electing to purchase directly from suppliers, creating
additional demand for transportation services. The increased transportation
volumes mainly reflect industrial demand for gas transportation services in
the paper products sector.
The milder weather experienced in 1994 contributed to a decrease in
residential gas sales volumes and led to the decrease in total Mcf sales and
transportation of 4.3%, as compared to 1993. The increase in gas
transportation more than offset the decrease in industrial sales volumes and
was attributable to additional demand for gas transportation services by
industrial customers mainly in the primary metals, paper products, and food
products sectors.
Operating Revenues
ELECTRIC OPERATING REVENUES
Electric operating revenues increased $3.7 million (2.0%) in 1996, $9.6
million (5.4%) in 1995, and $1.9 million (1.1%) in 1994. These increases
reflect higher kwh sales, as previously discussed. Partially offsetting the
1996 increase was a lower average cost of electricity purchased due, in part,
to an order issued by the Kentucky Public Service Commission (KPSC) on July 3,
1996 (July 1996 Order). The July 1996 Order authorized a decrease in electric
rates, retroactive to July 3, 1995, reflecting a reduction in the cost of
electricity purchased from CG&E.
GAS OPERATING REVENUES
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing ULH&P facilities to transport the gas (see the "Mcf
Sales and Transportation" section) continues to put downward pressure on gas
operating revenues. When ULH&P sells gas, the sales price reflects the cost
of gas purchased by ULH&P to support the sale plus the costs to deliver the
gas. When gas is transported, ULH&P does not incur any purchased gas costs
but delivers gas the customer has purchased from other sources. Since
providing transportation services does not necessitate recovery of gas
purchased costs, the revenue per Mcf transported is less than the revenue per
Mcf sold. As a result, a higher relative volume of gas transported to gas
sold translates into lower gas operating revenues.
Gas operating revenues increased $6.6 million (9.4%) in 1996, as compared to
1995. The increase was primarily attributable to the operation of the fuel
adjustment clause reflecting an increase in the cost of gas purchased and an
increase in total volumes sold and transported.
In 1995, gas operating revenues declined $1.7 million (2.3%), as compared to
1994 as a result of the aforementioned trend toward increased transportation
services and the operation of fuel adjustment clauses reflecting a lower
average cost of gas purchased.
Gas operating revenues decreased $3.8 million (5.0%) in 1994, as compared to
1993, primarily as a result of a decline in total volumes sold and transported
of 4.3%. This decrease was partially offset by the effect of a gas rate
increase which became effective in mid-1993.
Operating Expenses
ELECTRICITY PURCHASED FROM PARENT COMPANY FOR RESALE
Electricity purchased increased $7.4 million (5.5%) in 1995, as compared to
1994, due to an increase in volumes purchased.
GAS PURCHASED
Gas purchased increased $4.4 million (12.1%) in 1996, as compared to 1995, due
to an increase in volumes purchased and a higher average cost per Mcf of gas
purchased, as previously discussed.
In 1995, gas purchased expense decreased $3.8 million (9.3%) from 1994
primarily due to a 13.7% decrease in the average cost per Mcf of gas
purchased.
Gas purchased expense in 1994 decreased $2.9 million (6.6%) due to a 5.2%
decrease in volumes purchased.
OTHER OPERATION
In 1995, other operation expense decreased $1.6 million (4.9%), as compared to
1994, due, in part, to decreased gas and electric distribution expenses and
decreased gas production expenses.
Other operation expense in 1994 increased $1.9 million (6.2%), as compared to
1993, due primarily to increased gas and electric distribution expenses and
increased wages and benefits.
MAINTENANCE
Maintenance expenses increased $.4 million (9.1%) as compared to 1995,
primarily as a result of increased transmission and distribution costs.
Maintenance expense decreased $.9 million (16.3%) and $.8 million (12.7%) in
1995 and 1994, respectively, primarily as a result of reduced maintenance
costs on gas and electric distribution facilities.
DEPRECIATION
Depreciation expense increased $.8 million (7.5%) in 1995, as compared to
1994, primarily due to additions to electric and gas plant in service.
The increase in 1994 of $.8 million (8.5%) was due to increases in depreciable
plant in service and a full year's effect of the adoption of higher
depreciation rates on gas and common plant in accordance with a KPSC rate
order issued in 1993.
OTHER INCOME AND EXPENSES - NET
Other - Net
The decrease in other - net of $1.4 million in 1996, as compared to 1995, is
primarily attributable to expenses associated with the sales of accounts
receivables in 1996.
INTEREST AND OTHER CHARGES
Interest on Long-term Debt
Interest on long-term debt decreased $3.1 million (43.9%) as compared to 1995
due to the redemption of $25 million and $35 million of long-term debt in 1996
and 1995, respectively.
<PAGE.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Cinergy, CG&E, PSI, and ULH&P
(a) Consolidation Policy The accompanying Financial Statements include the
accounts of Cinergy Corp., a Delaware corporation (Cinergy or Company), and
its wholly-owned subsidiaries. Investments in business entities in which the
Company does not have control, but has the ability to exercise significant
influence over operating and financial policies (generally, 20% to 50%
ownership) are accounted for using the equity method. All significant
intercompany transactions and balances have been eliminated.
Cinergy, CG&E, PSI, and ULH&P
(b) Nature of Operations Cinergy is a registered holding company under the
Public Utility Holding Company Act of 1935 (PUHCA). Cinergy's subsidiaries
are The Cincinnati Gas & Electric Company (CG&E), PSI Energy, Inc. (PSI),
Cinergy Investments, Inc. (Investments), and Cinergy Services, Inc.
(Services). CG&E, an Ohio combination electric and gas utility, and its five
wholly-owned utility subsidiaries (including The Union Light, Heat and Power
Company, a Kentucky combination electric and gas utility (ULH&P)) are
primarily engaged in the production, transmission, distribution, and sale of
electric energy and/or the sale and transportation of natural gas in the
southwestern portion of Ohio and adjacent areas in Kentucky and Indiana. PSI,
an Indiana electric utility and previously PSI Resources, Inc.'s (Resources)
utility subsidiary, is engaged in the production, transmission, distribution,
and sale of electric energy in north central, central, and southern Indiana.
Investments, a Delaware corporation, is a non-utility subholding company that
was formed to hold and operate Cinergy's non-utility businesses and interests.
Investments' principal activities include investments in Midlands Electricity
plc (Midlands) and Trigen-Cinergy Solutions LLC (Trigen-Cinergy) (see Note
1(e) for a further discussion of these investments). Services, a Delaware
corporation, is the service company for the Cinergy system, providing member
companies with a variety of administrative, management, and support services.
The majority of Cinergy's operating revenues are derived from the sale of
electricity and the sale and transportation of natural gas.
Cinergy, CG&E, PSI, and ULH&P
(c) Management's Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities. Estimates are also required with respect to the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. (See
Note 12.)
Cinergy, CG&E, PSI, and ULH&P
(d) Merger Cinergy was created in the October 1994 merger of Resources and
CG&E. At merger consummation, each outstanding share of common stock of
Resources and CG&E was exchanged for 1.023 shares and one share, respectively,
of Cinergy common stock, resulting in the issuance of approximately 148
million shares of Cinergy common stock, par value $.01 per share. The
outstanding preferred stock and debt securities of CG&E, its utility
subsidiaries, and PSI were not affected by the merger. The merger was
accounted for as a pooling of interests, and the Financial Statements, along
with the related notes, are presented as if the merger was consummated as of
the beginning of the earliest period presented.
Resources' and CG&E's consolidated operating revenues and net income for the
nine months ended September 30, 1994, were as follows:
Resources CG&E Eliminations(i) Cinergy
(in millions)
Nine months ended September
30, 1994 (unaudited)
Operating revenues $844(ii) $1 363 $(7) $2 200(ii)
Net income 60 146 - 206
(i) Eliminations of intercompany sales of electric power.
(ii) Reflects reclassifications from previously reported amounts to conform
to the 1996 presentation.
Cinergy
(e) Investment in Unconsolidated Subsidiaries
(i) Midlands In May 1996, Cinergy and GPU, Inc. (GPU), a Pennsylvania
corporation, entered into a 50%/50% joint venture agreement and formed Avon
Energy Partners Holdings (Avon Energy), incorporated in London, England. Avon
Energy, through a wholly-owned subsidiary, immediately began acquiring the
outstanding common stock of Midlands, a United Kingdom (U.K.) regional
electric company. During the third quarter of 1996, Avon Energy completed the
acquisition of substantially all of the outstanding common stock of Midlands.
The total consideration paid by Avon Energy was approximately 1.7 billion
pounds sterling ($2.6 billion at then existing currency exchange rates). The
funds for the acquisition were obtained from Cinergy's and GPU's investment in
Avon Energy of approximately 330 million pounds sterling each ($500 million
each), with the remainder being obtained by Avon Energy through the issuance
of non-recourse debt. Cinergy has used dollar denominated debt to fund its
entire investment in Avon Energy. As a result of the allocation of the
purchase price, Avon Energy has recorded goodwill of approximately 1.4 billion
pounds sterling ($2 billion) in connection with its acquisition of Midlands.
The goodwill is being amortized on a straight-line basis over 40 years. (See
Note 12(g) regarding a contingency with respect to the investment in
Midlands.)
Cinergy accounts for its investment in Avon Energy using the equity method of
accounting. For the year ended December 31, 1996, Cinergy's 50% share of the
equity in earnings of Avon Energy was approximately $25 million.
The pro forma financial information presented below assumes 100% of Midlands
was acquired on the first day of the indicated period. The pro forma
adjustments include recognition of equity in the estimated earnings of Avon
Energy, an adjustment for interest expense on debt associated with Cinergy's
investment in Avon Energy, and related income taxes. The estimated earnings
of Avon Energy include the historical earnings of Midlands prior to its
acquisition by Avon Energy, adjusted for the estimated effect of purchase
accounting (including the amortization of goodwill) and conversion to United
States (U.S.) GAAP, interest expense on debt issued by Avon Energy associated
with the acquisition, and related income taxes. The equity in earnings of
Avon Energy has been converted from pounds sterling to dollars using the
average exchange rate for 1996 of $1.53/ and 1995 of $1.58/ .
Year Ended Year Ended
December 31, 1996 December 31, 1995
Net Earnings Net Earnings
Income Per Share(1) Income Per Share(1)
(in millions, except per share amounts)
Cinergy $335 $2.00(2) $347 $2.22
Pro forma adjustments:
Equity in earnings
of Avon Energy 20 50
Interest expense (14) (34)
Income taxes 6 16
Pro forma results $347 $2.08 $379 $2.42
(1) Based on the average number of common shares outstanding for the period.
(2) Earnings per share after a charge of $.12 per share for the cost of
reacquiring preferred stock of CG&E through a tender offer.
The following selected financial information for Avon Energy was prepared from
Avon Energy's books and records, which are maintained in accordance with U.K.
GAAP and denominated in pounds sterling. This selected financial information
has been converted to U.S. GAAP and dollars.
Assets December 31, 1996
(in millions)
Property, plant, and equipment $1 586
Current assets 651
Other assets 2 564
Total assets $4 801
Capitalization and Liabilities
Total common shareholders' equity $1 184
Long-term debt 1 834
Current liabilities 1 783
Total capitalization and
liabilities $4 801
Cinergy's investment in Avon Energy $ 593
Year Ended December 31, 1996
(in millions)
Operating revenues $1 132
Operating profit 101
Net income $ 50
Cinergy's equity in earnings of Avon Energy $ 25
(ii) Trigen-Cinergy In December 1996, Cinergy and Trigen Energy Corporation,
a Delaware corporation, formed a joint venture, Trigen-Cinergy. The joint
venture company will build, own, and operate cogeneration and trigeneration
facilities for industrial plants, office buildings, shopping centers,
hospitals, universities, and other major energy users that can benefit from
combined heat and power production economies. It will also provide energy and
asset management services, including fuel procurement, ancillary to the joint
venture company's activities.
Cinergy, CG&E, PSI, and ULH&P
(f) Regulation Cinergy, its utility subsidiaries (CG&E, together with its
subsidiaries, and PSI), and certain of its non-utility subsidiaries are
subject to regulation by the Securities and Exchange Commission (SEC) under
the PUHCA. Cinergy's utility subsidiaries are also subject to regulation by
the Federal Energy Regulatory Commission (FERC) and the state utility
commissions of Ohio, Kentucky, and Indiana. The accounting policies of
Cinergy's utility subsidiaries conform to the accounting requirements and
ratemaking practices of these regulatory authorities and to GAAP, including
the provisions of Statement of Financial Accounting Standards No. 71,
Accounting for the Effects of Certain Types of Regulation (Statement 71).
Under the provisions of Statement 71, regulatory assets represent probable
future revenue associated with deferred costs to be recovered from customers
through the ratemaking process. The following regulatory assets of PSI and
CG&E and its utility subsidiaries are reflected in the Balance Sheets as of
December 31:
1996 1995__ _______
PSI CG&E 1/ Cinergy PSI CG&E 1/ Cinergy
(in millions)
Amounts due from customers -
income taxes $ 33 $344 $ 377 $ 27 $397 $ 424
Post-in-service carrying
costs and deferred
operating expenses 45 141 186 39 148 187
Coal contract buyout costs 138 - 138 - - -
Deferred demand-side
management (DSM) costs 102 33 135 110 19 129
Phase-in deferred return
and depreciation - 95 95 - 100 100
Deferred merger costs 76 18 94 42 15 57
Unamortized costs of
reacquiring debt 32 39 71 34 40 74
Coal gasification
services expenses 25 - 25 - - -
Other 28 20 48 34 41 75
Total $479 $690 $1 169 $286 $760 $1 046
1/ Includes $11 million and $7 million related to ULH&P at December 31, 1996
and 1995, respectively.
PSI has previously received regulatory orders authorizing the recovery of $408
million of its total regulatory assets at December 31, 1996. CG&E has
previously received regulatory orders authorizing the recovery of $651 million
(including $4 million for UHL&P) of its total regulatory assets at December
31, 1996. Both PSI and CG&E (including ULH&P) will request recovery of
additional amounts in future proceedings, which could include proceedings, if
any, related to transition to customer choice in each applicable jurisdiction.
See Note 1(g), (h), (i), (j), (k), (l), (m), and (n) for additional
information regarding amounts due from customers - income taxes, post-in-
service carrying costs and deferred operating expenses, coal contract buyout
costs, deferred DSM costs, phase-in deferred return and depreciation, deferred
merger costs, costs of reacquiring debt, and coal gasification services
expenses, respectively.
Certain criteria must be met for the continued application of the provisions
of Statement 71, including regulated rates designed to recover the specific
utility's costs. Failure to satisfy the criteria in Statement 71 would
eliminate the basis for recognition of regulatory assets.
The provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of (Statement 121), became effective in January 1996 for
Cinergy. Statement 121, which addresses the identification and measurement of
asset impairments for all enterprises, is particularly relevant for electric
utilities as a result of the potential for deregulation of the generation
component of the business. Statement 121 requires the recognition of
impairment losses on long-lived assets when book values exceed expected future
cash flows. In addition, Statement 121 imposes a stricter criterion for
recognition of regulatory assets by requiring that future recovery be probable
at each balance sheet date.
Based on Cinergy's current regulatory orders and the regulatory environment in
which it currently operates, the recognition of its regulatory assets as of
December 31, 1996, is fully supported. In addition, the application of the
provisions of Statement 121 did not have an effect on reported amounts for
regulatory assets and long-lived assets at December 31, 1996.
The ultimate outcome of the changing competitive environment discussed in the
"Competitive Pressures" section of "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," including the
potential for customer choice legislation discussed below, could result in
Cinergy discontinuing the application of Statement 71 for its generation,
transmission, and/or distribution businesses. As a result, regardless of
whether such previously deferred costs would be recoverable (i.e., covered by
revenues) in a competitive environment, Cinergy would be required to write-off
the portion of any regulatory asset for which sufficient regulatory assurance
of future recovery no longer exists. In addition, the outcome of applying the
provisions of Statement 121 could change significantly as a result of future
competitive pressures and the effect on Cinergy of the restructuring of the
electric utility industry.
In January 1997, customer choice legislation was introduced in the Indiana
legislature. Under the proposed legislation, there would be a transition
period from October 1, 1999, through June 30, 2004, during which customers
would have the right to choose their electric supplier. Those customers not
selecting a supplier would continue to buy their electric power from the
franchise utility at a total "bundled" price. The total bundled price would
be frozen at the rate in effect as of July 1, 1999, subject to certain
adjustments during the transition period, including limited adjustments for
specific material cost changes and a downward trending of the retail electric
production component of the total frozen price to the current statewide
average. Trending of the frozen price would not be applicable to those
utilities, such as PSI, whose retail electric production price is currently
below the statewide average. Those customers choosing a supplier would pay
that supplier's open market price for power and would pay the franchise
utility the portion of the bundled price applicable to transmission and
distribution services, and an access charge (designed to compensate the
franchise utility for its loss in revenues, if any, during the transition
period, after giving effect to the revenues which would be realized by the
franchise utility from sales of the power in the open market). After June 30,
2004, all customers would continue to have the right to choose their supplier
and would continue to pay the franchise utility for transmission and
distribution services which would continue to be regulated as to price by the
Indiana Utility Regulatory Commission (IURC). The access charge would no
longer be paid by any customer.
The proposed legislation provides for each utility to file a transition plan
with the IURC which would include, among other things, a proposed amortization
period for regulatory asset balances as of the beginning of the transition
period. Recovery of regulatory assets during the transition period would be
included in retail rates as a charge for transmission and distribution
services. However, any regulatory assets, as well as other stranded costs, at
the end of the transition period which are applicable to retail electric
production, would be the responsibility of the shareholders.
Customer choice legislation has also been introduced during 1997 in the Ohio
legislature. The proposed legislation is similar to legislation introduced in
1996 which is discussed in the "Competitive Pressures" section of "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Although Cinergy is aggressively pursuing customer choice legislation in
Indiana and Ohio, the time frame for passage of legislation providing for
customer choice is uncertain due to the complex issues and numerous
stakeholder interests involved.
Cinergy, CG&E, PSI, and ULH&P
(g) Federal and State Income Taxes Deferred tax assets and liabilities are
recognized for the expected future tax consequences of existing differences
between the financial reporting and tax reporting bases of assets and
liabilities. Investment tax credits utilized to reduce Federal income taxes
payable have been deferred for financial reporting purposes and are being
amortized over the useful lives of the property which gave rise to such
credits.
Income tax provisions reflected in customer rates are regulated by the various
regulatory commissions overseeing the regulated business operations of PSI,
CG&E, and CG&E's utility subsidiaries. Deferred income taxes not reflected in
rates charged to customers are recovered from customers as paid. The future
revenues associated with these amounts are reflected in the accompanying
Financial Statements as a regulatory asset. Conversely, to the extent
deferred income taxes recovered in rates exceed amounts payable in future
periods, such amounts are reflected in the accompanying Financial Statements
as "Income taxes refundable through rates" on the basis of their probable
repayment in future years.
Cinergy, CG&E, and PSI
(h) Post-in-service Carrying Costs and Deferred Operating Expenses CG&E
received various orders from the Public Utilities Commission of Ohio (PUCO)
which permitted the deferral of carrying costs and non-fuel operating expenses
(including depreciation) for the Wm. H. Zimmer Generating Station (Zimmer) and
Woodsdale Generating Station (Woodsdale) units. Effective with the dates of
the PUCO's orders reflecting the units in customer rates, the deferrals of
post-in-service carrying costs are being recovered over the lives of the
applicable units and the deferred non-fuel operating expenses are being
recovered over a 10-year period.
PSI received authority from the IURC for the accrual of the debt component of
carrying costs (to the extent not recovered currently in retail rates) and the
deferral of depreciation expense on certain major projects, primarily
environmental in nature, including a 262-megawatt clean coal power generating
facility located at the Wabash River Generating Station (Clean Coal Project)
and a scrubber at Gibson Generating Station (Gibson). In a February 1995
order (February 1995 Order) and a September 1996 order (September 1996 Order),
the IURC authorized the recovery of deferred costs incurred prior to August
31, 1995, over the remaining lives of the related assets. Deferrals incurred
after this date will be requested for recovery in future proceedings, which
could include proceedings, if any, related to transition to customer choice.
Cinergy and PSI
(i) Coal Contract Buyout Costs In August 1996, PSI entered into a coal
supply agreement with Eagle Coal Company (Eagle) for the supply of
approximately three million tons of coal per year. The agreement, which
terminates December 31, 2000, provides for a buyout fee of $179 million
(including interest) to be included in the price of coal to PSI over the term
of the contract. This fee represents the costs to Eagle of the buyout of the
coal supply agreement between PSI and Exxon Coal and Minerals Company. The
retail jurisdictional portion of the buyout charge, excluding the portion
applicable to joint owners, will be recovered through the quarterly fuel
adjustment clause, with carrying costs on unrecovered amounts, through
December 2002. PSI has also filed a petition at the FERC for recovery of the
wholesale jurisdictional portion of the buyout costs through the wholesale
fuel adjustment clause. Generally, the FERC will allow recovery if the
utility can demonstrate there will be net benefits to customers during the
buyout cost recovery period. The FERC is expected to issue an order on PSI's
petition during 1997. PSI cannot predict what action the FERC may take with
respect to this petition.
Cinergy, CG&E, PSI, and ULH&P
(j) DSM A settlement agreement between PSI and certain intervenors in a
proceeding established to review PSI's current and proposed DSM programs was
approved by the IURC in December 1996. The settlement agreement allows PSI to
recover $35 million per year over the next four years, which is designed to
recover all previously incurred, but as yet unrecovered, DSM costs and all
costs related to satisfying remaining commitments associated with a previous
DSM settlement agreement, together with carrying costs thereon, through a non-
bypassable charge in PSI's retail rates. The new agreement also authorizes
PSI to spend up to $8 million annually on ongoing DSM programs through the
year 1999 and to collect such amounts currently in retail rates.
Additionally, in December 1996, the PUCO issued an order applicable to CG&E's
DSM programs. The order requires CG&E to spend up to one-half of the annual
$5 million currently included in retail rates on PUCO-sanctioned low-income
residential programs. The remaining portion of the $5 million is to be
applied to the recovery of DSM cost deferrals. CG&E's participation in the
low-income programs will be a factor considered by the PUCO in setting future
rates of return and approving competitive transition plans.
In addition, the Kentucky Public Service Commission (KPSC) has authorized
concurrent recovery of costs related to various DSM programs of ULH&P.
Cinergy and CG&E
(k) Phase-in Deferred Return and Depreciation In the first three years of a
rate phase-in plan for Zimmer, included in a May 1992 order (May 1992 Order)
by the PUCO, rates charged to customers did not fully recover depreciation
expense and return on investment. In accordance with the provisions of the
May 1992 Order, this deficiency has been recognized as a regulatory asset and
is being recovered over a seven-year period which began in May 1995.
Cinergy, CG&E, PSI, and ULH&P
(l) Merger Costs CG&E and its utility subsidiaries have deferred the non-
PUCO jurisdictional portion of merger transaction costs and costs to achieve
merger savings (collectively, Merger Costs) incurred through December 31,
1996, for future recovery in customer rates.
In accordance with the February 1995 Order and the September 1996 Order, PSI
has deferred Merger Costs incurred through October 31, 1996, and is recovering
approximately $40 million of these deferrals in retail rates over a 10-year
period. The September 1996 Order also provides for a "true-up" in a future
regulatory proceeding to reflect recovery of the difference between the costs
being recovered in retail rates and the actual costs incurred through October
31, 1996.
CG&E and PSI completed voluntary workforce reduction and severance programs in
1996 and 1994. The pretax costs of these programs and the related accounting
were as follows:
1996 Programs 1994 Programs
(in millions)
CG&E 1/ PSI CG&E 1/ PSI
Costs expensed $30 $ 5 $15 $ -
Costs deferred 9 33 2 11
$39 $38 $17 $11
1/ Includes $2 million and $1 million related to ULH&P for the 1996 Programs
and 1994 Programs, respectively.
The above amounts reflect approximately $61 million ($31 million for CG&E and
$30 million for PSI) and $16 million (for CG&E) for 1996 and 1994,
respectively, of costs associated with additional pension benefits further
discussed in Note 9.
Cinergy, CG&E, PSI, and ULH&P
(m) Debt Discount, Premium, and Issuance Expenses and Costs of Reacquiring
Debt Debt discount, premium, and issuance expenses on outstanding long-term
debt of Cinergy's utility subsidiaries are amortized over the lives of the
respective issues.
In accordance with established ratemaking practices, Cinergy's utility
subsidiaries have deferred costs (principally call premiums) from the
reacquisition of long-term debt and are amortizing such amounts over periods
ranging from one to 24 years (five to 24 years for CG&E and its subsidiaries,
one to 16 years for PSI, and 12 to 24 years for ULH&P).
Cinergy and PSI
(n) Coal Gasification Services Expenses In November 1995, upon commercial
operation of the Clean Coal Project, PSI and Destec Energy, Inc. (Destec)
began a 25-year contractual agreement for the provision of coal gasification
services. The agreement requires PSI to pay Destec a base monthly fee
including certain monthly operating expenses. Over the next five years (1997
through 2001), the base monthly fees and expenses are expected to total $186
million. PSI received authorization in the September 1996 Order for the
inclusion of the costs of the Clean Coal Project in retail rates. PSI also
received authorization to defer, for subsequent recovery in retail rates, the
base monthly fees and expenses incurred prior to the effective date of the
September 1996 Order.
Cinergy, CG&E, PSI, and ULH&P
(o) Utility Plant Utility plant is stated at the original cost of
construction, which includes an allowance for funds used during construction
(AFUDC) and a proportionate share of overhead costs. Construction overhead
costs include salaries, payroll taxes, fringe benefits, and other expenses.
Substantially all utility plant is subject to the lien of each applicable
company's first mortgage bond indenture.
Cinergy, CG&E, PSI, and ULH&P
(p) AFUDC Cinergy's utility subsidiaries capitalize AFUDC, a non-cash income
item, which is defined in the regulatory system of accounts prescribed by the
FERC as including "the net cost for the period of construction of borrowed
funds used for construction purposes and a reasonable rate on other funds when
so used." AFUDC accrual rates were as follows and are compounded semi-
annually:
1996 1995 1994_
Cinergy average 7.1% 7.9% 6.9%
CG&E and its utility
subsidiaries average 8.7 8.8 9.1
ULH&P average 8.8 7.0 5.9
PSI average 5.4 7.0 6.4
Cinergy, CG&E, PSI, and ULH&P
(q) Depreciation and Maintenance Provisions for depreciation are determined
by using the straight-line method applied to the cost of depreciable plant in
service. The rates are based on periodic studies of the estimated service
lives and net cost of removal of the properties. The average depreciation
rates for utility plant are:
1996 1995 1994_
PSI 3.0% 3.1% 3.8%
CG&E and its utility subsidiaries
Electric 2.9 2.9 2.9
Gas 2.8 2.8 2.8
Common 3.0 3.4 3.4
ULH&P
Electric 3.3 3.3 3.3
Gas 3.1 3.1 3.1
Common 5.1 5.1 5.1
In accordance with the February 1995 Order, revised depreciation rates for PSI
were implemented in March 1995. This change, excluding the effect of
additions to utility plant, resulted in a decrease in annual depreciation
expense of approximately $30 million.
For Cinergy's utility subsidiaries, maintenance and repairs of property units
and replacements of minor items of property are charged to maintenance
expense. The costs of replacements of property units are capitalized. The
original cost of the property retired and the related costs of removal, less
salvage recovered, are charged to accumulated depreciation.
Cinergy, CG&E, PSI, and ULH&P
(r) Operating Revenues and Fuel Costs Cinergy's utility subsidiaries
recognize revenues for electric and gas service rendered during the month,
which include revenues for sales unbilled at the end of each month. The costs
of electricity and gas purchased and the cost of fuel used in electric
production are expensed as recovered through revenues, and any portion of
these costs recoverable or refundable in future periods is deferred in the
accompanying Balance Sheets. PSI's recovery of fuel costs is subject to a
determination that such recovery will not result in PSI earning a return in
excess of that allowed in the September 1996 Order. This earnings test is in
accordance with the settlement agreement approved in the February 1995 Order
and the Indiana statute in effect at the time of the settlement agreement.
Cinergy, CG&E, and ULH&P
(s) Order 636 In 1992, the FERC issued order 636 (Order 636) which
restructured operations between interstate gas pipelines and their customers
for gas sales and transportation services. Order 636 also allowed pipelines
to recover from customers, including CG&E and its utility subsidiaries,
transition costs incurred in complying with the order. In July 1994, the PUCO
issued an order approving a stipulation between CG&E and its residential and
industrial customer groups providing for recovery of these pipeline transition
costs. CG&E is presently recovering its Order 636 transition costs pursuant
to a PUCO-approved tariff. CG&E's utility subsidiaries, including ULH&P,
recover such costs through their gas cost recovery mechanisms. These costs
are deferred as incurred by CG&E and its utility subsidiaries and amortized as
recovered from customers.
Cinergy, CG&E, PSI, and ULH&P
(t) Statements of Cash Flows All temporary cash investments with maturities
of three months or less, when acquired, are reported as cash equivalents. See
Notes 3(b) and 8(a)(i) for information concerning non-cash financing and
investing transactions during 1996.
Cinergy
(u) Translation of Foreign Currency All assets and liabilities reported in
the balance sheets of foreign subsidiaries whose functional currency is other
than the U.S. dollar are translated at year end exchange rates; income and
expense are translated at the average exchange rate prevailing during the
month the respective transactions occur. Translation gains and losses are
accumulated as a separate component of common stock equity.
Cinergy, CG&E, PSI, and ULH&P
(v) Reclassification Certain amounts in the 1994 and 1995 Financial
Statements have been reclassified to conform to the 1996 presentation.
2. Common Stock
(a) Changes in Common Stock Outstanding
Cinergy
The following table reflects the shares of Cinergy common stock reserved for
issuance at December 31, 1996, and shares issued in 1996, 1995, and 1994 for
the Company's stock-based plans, including previous plans of Resources and
CG&E. Shares issued prior to merger consummation have been adjusted for
Resources' merger conversion ratio of 1.023.
Shares
Reserved at Shares Issued
Dec. 31, 1996 1996 1995 1994
401(k) Savings Plans 6 469 373 - 1 222 379 1 458 631
Dividend Reinvestment and
Stock Purchase Plan 1 798 486 - 935 711 1 127 881
Directors' Deferred
Compensation Plan 200 000 - - 77
Performance Shares Plan 771 301 492 28 207 27 116
Employee Stock Purchase
and Savings Plan 1 932 384 - 1 010 140 039
Stock Option Plan 4 580 996 15 007 403 997 25 575
1996 Long-term Incentive
Compensation Plan 7 000 000 - - -
In addition to the issuances of common stock shown in the above table,
Resources issued 1,118,671 shares of common stock in 1993 to the trustee of
its two Master Trust Agreements as required as a result of the announcement of
the merger. Prior to consummation of the merger in October 1994, Resources
issued an additional 16,518 shares to the trustee and distributed 98,400
shares (reflected in the above table as shares issued in 1994) to participants
of certain benefit plans. As a result of the merger consummation, in December
1994, Cinergy retired the remaining 1,036,789 shares held by the trustee.
In December 1994, Cinergy publicly issued 7,089,000 shares of common stock
under a shelf registration statement for the sale of up to eight million
shares. In addition, upon consummation of the merger, Cinergy awarded five
shares of common stock to all non-officer employees for additional issuances
under this shelf registration statement of 43,605 shares and 10 shares in 1994
and 1995, respectively.
Cinergy retired 6,511 and 119,211 shares of common stock in 1996 and 1995
respectively, primarily representing shares tendered as payment for the
exercise of previously granted stock options.
CG&E
CG&E issued 1,601,003 shares of common stock in 1994 (prior to the merger) for
its stock-based compensation and dividend reinvestment plans. After merger
consummation, the common stock issued to CG&E's 401(k) Savings Plans is
Cinergy common stock rather than CG&E common stock, and CG&E's Dividend
Reinvestment and Stock Purchase Plan was merged into and replaced by Cinergy's
Dividend Reinvestment and Stock Purchase Plan.
ULH&P
All of ULH&P's common stock is held by CG&E.
Cinergy, CG&E, and PSI
(b) Dividend Restrictions Cinergy owns all of the common stock of CG&E and
PSI. The ability of Cinergy to pay dividends to holders of its common stock
is principally dependent on the ability of CG&E and PSI to pay common
dividends to Cinergy. CG&E and PSI cannot purchase or otherwise acquire for
value or pay dividends on their common stock if dividends are in arrears on
their preferred stock. The amount of common stock dividends that each company
can pay also may be limited by certain capitalization and earnings
requirements. Currently, these requirements do not impact the ability of
either company to pay dividends on common stock.
Cinergy
(c) Stock-based Compensation Plans Cinergy has four stock-based compensation
plans, the Stock Option Plan, the Performance Shares Plan, the Employee Stock
Purchase and Savings Plan, and the 1996 Long-term Incentive Compensation Plan.
The Stock Option Plan, the Performance Shares Plan, and the Employee Stock
Purchase and Savings Plan succeeded similar plans of Resources. Accordingly,
information reported in the ensuing sections has been adjusted for Resources'
merger conversion ratio of 1.023 as appropriate. Effective January 1, 1997,
Cinergy implemented the 1996 Long-term Incentive Compensation Plan and ceased
accrual of incentive compensation under the Performance Shares Plan as of
December 31, 1996. No stock-based awards were made under the 1996 Long-term
Incentive Compensation Plan as of December 31, 1996.
Cinergy accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
under which stock option-type awards are recorded at intrinsic value. For
1996, 1995, and 1994, compensation cost related to Cinergy's stock-based
compensation plans, before income taxes, recognized in the Consolidated
Statements of Income was $2 million, $1 million, and $1 million, respectively.
Net income and earnings per share for 1996 and 1995, assuming compensation
cost for these plans had been determined at fair value, consistent with the
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (Statement 123), would have been as follows:
1996 1995
(in millions, except per share amounts)
Net income - as reported $335 $347
- pro forma $334 $346
Earnings per share - as reported $2.00 $2.22
- pro forma $1.99 $2.21
In accordance with the provisions of Statement 123, in estimating the pro
forma amounts, the fair value method of accounting was not applied to options
granted prior to January 1, 1995. As a result, the pro forma effect on net
income and earnings per share may not be representative of future years. In
addition, the pro forma amounts reflect certain assumptions used in estimating
fair values. These fair value assumptions are described under each applicable
plan discussion below.
(i) Stock Option Plan The Cinergy Stock Option Plan is designed to align
executive compensation with shareholder interests. Under the Stock Option
Plan, incentive and non-qualified stock options, stock appreciation rights
(SARs), and SARs in tandem with stock options may be granted to key employees,
officers, and outside directors. Options are granted at the fair market value
of the shares on the date of grant. Options vest over five years at a rate of
20% per year and expire 10 years from the date of grant. All options granted
prior to November 1993, but not previously vested, became vested upon approval
of the merger by Resources' shareholders. The total number of shares of
common stock available under the Stock Option Plan may not exceed 5,000,000
shares. No stock options may be granted under the plan after October 24,
2004.
Stock Option Plan activity for 1996, 1995, and 1994 is summarized as follows
(no SARs have been granted under this plan):
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 3 652 956 $22.47 2 409 453 $19.74 1 047 528 $15.45
Granted 220 000 29.75 1 672 500 24.91 1 387 500 22.88
Exercised (604 706) 18.87 (403 997) 16.16 (25 575) 13.96
Forfeited - - (25 000) 24.31 ____- -
Outstanding, end of year 3 268 250 $23.93 3 652 956 22.47 2 409 453 $19.74
Exercisable, end of year 897 750 $20.93 895 456 $17.47 1 021 953 $15.48
Weighted average fair value of
options granted during the year $3.07 $2.41 $1.94
</TABLE>
The fair values of options granted were estimated as of the date of grant
using a Black-Scholes option pricing model. The weighted averages for the
assumptions used in determining the fair values of options granted were as
follows:
1996 1995 1994
Risk-free interest rate 6.3% 7.3% 7.5%
Expected dividend yield 5.8% 6.9% 7.4%
Expected lives 6.5 yrs. 6.5 yrs. 6.5 yrs.
Expected common stock variance 1.8% 1.8% 1.7%
Price ranges, along with certain other information, for options outstanding
under the Stock Option Plan at December 31, 1996, are as follows:
Outstanding Exercisable
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Contractual Exercise
Price Range Number Price Life Number Price
$13.14 - $17.35 313 650 $15.36 2.9 yrs. 313 650 $15.36
$22.88 - $25.19 2 519 600 $23.69 8.0 yrs. 291 751 $22.87
$28.44 - $31.56 435 000 $29.29 9.0 yrs. 292 349 $24.99
(ii) Performance Shares Plan Cinergy's Performance Shares Plan is a long-
term incentive plan developed to reward officers and other key employees for
achieving corporate and individual goals. Under the Performance Shares Plan,
participants are granted contingent shares of common stock. A percentage of
these contingent shares is earned with respect to each participant based on
the level of goal attainment at the completion of a performance cycle.
Performance cycles consist of overlapping four-year periods, beginning every
two years. Previous performance cycles of Resources became performance cycles
under the Cinergy Performance Shares Plan. Awards earned under the
Performance Shares Plan are paid in two installments: one-half of the award
is paid in the year immediately following the end of the performance cycle and
one-half of the award is paid in the subsequent year. The most recently
commenced four-year performance cycle under the Performance Shares Plan began
January 1, 1996, and was scheduled to end December 31, 1999. As previously
discussed, Cinergy implemented the 1996 Long-term Incentive Compensation Plan
effective January 1, 1997, and ceased accrual of incentive compensation under
the Performance Shares Plan as of December 31, 1996. The total number of
shares of common stock available under this plan may not exceed 800,000
shares.
The following table provides certain information regarding contingent shares
granted under the Performance Shares Plan for the performance cycle which
began January 1, 1996:
1996_
Number of contingent shares granted 166 280
Fair value at date of grant (dollars in thousands) $3 508
Weighted average per share amounts $24.47
The fair values of contingent shares and weighted average per share amounts
are measured at the market price of a share of common stock as if it were
vested and issued on the date of grant, adjusted for expected forfeitures and
the estimated present value of dividends foregone during the related
performance cycle.
(iii) Employee Stock Purchase and Savings Plan Cinergy's Employee Stock
Purchase and Savings Plan allows essentially all full-time, regular employees
to purchase shares of common stock pursuant to a stock option feature. Under
the Employee Stock Purchase and Savings Plan, after-tax funds are withheld
from a participant's compensation during a 26-month offering period and are
deposited in an interest-bearing account. At the end of the offering period,
participants may apply amounts deposited in the account, plus interest, toward
the purchase of shares of common stock at a purchase price equal to the fair
market value of a share of common stock on the first date of the offering
period, less five percent. Any funds not applied toward the purchase of
shares are returned to the participant. A participant may elect to terminate
participation in the plan at any time. Participation also will terminate if
the participant's employment with Cinergy ceases. Upon termination of
participation, all funds, including interest, are returned to the participant
without penalty. The most recently completed offering period ended December
31, 1996. The purchase price under this offering was $21.7312. A new
offering period began January 1, 1997, and will end February 28, 1999. The
purchase price under this offering is $31.825. The total number of shares of
common stock available under the Employee Stock Purchase and Savings Plan may
not exceed 2,000,000.
Employee Stock Purchase and Savings Plan activity for 1996, 1995, and 1994 is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994_______
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 490 787 $21.73 217 604 $21.73 175 299 $17.64
Granted - - 328 362 21.73 219 335 21.73
Exercised (414 284) 21.73 (1 010) 21.73 (140 039) 17.65
Forfeited (76 503) 21.73 (54 169) 21.73 (36 991) 17.83
Outstanding, end of year - $ - 490 787 $21.73 217 604 $21.73
Weighted average fair value of
options granted during the year $ - $2.42 $1.97
</TABLE>
The fair values of options granted were estimated as of the date of grant
using a Black-Scholes option pricing model. The weighted averages for the
assumptions used in determining the fair values of options granted were as
follows:
1995 1994
Risk-free interest rate 7.7% 6.8%
Expected dividend yield 7.3% 7.4%
Expected lives 2.0 yrs. 2.2 yrs.
Expected common stock variance 1.7% 1.7%
(iv) 1996 Long-term Incentive Compensation Plan In 1996, Cinergy adopted
and shareholders approved a new incentive compensation plan, the 1996 Long-
term Incentive Compensation Plan. Under the 1996 Long-term Incentive
Compensation Plan, certain key employees may be granted stock options, SARs,
restricted stock, cash awards, performance shares, performance awards,
dividend equivalents, and other stock-based awards. As previously mentioned,
no stock-based awards were made under the 1996 Long-term Incentive
Compensation Plan as of December 31, 1996; however, in January 1997, 348,056
performance-based restricted shares subject to specified target performance
objectives and 330,100 stock options at an option price of $33.50 per share
were granted to certain key employees. Stock options awarded under the 1996
Long-term Incentive Compensation Plan are granted at the fair market value of
the shares on the date of grant and may not have a purchase term of more than
10 years from the date of grant. The number of shares of common stock to be
awarded under the 1996 Long-term Incentive Compensation Plan is limited in the
aggregate to 7,000,000 shares.
3. Preferred Stock of Subsidiaries
Cinergy, CG&E, and PSI
(a) Schedule of Cumulative Preferred Stock
<TABLE>
<CAPTION>
December 31
CG&E 1996 1995
<S> <C> <C>
Authorized 6,000,000 shares (dollars in thousands)
Not subject to mandatory redemption
Par value $100 per share - outstanding
4% Series 169,835 shares in 1996 and 270,000 shares
in 1995 $ 16 984 $ 27 000
4 3/4% Series 41,621 shares in 1996 and 130,000 shares in 1995 4 162 13 000
Total 21 146 40 000
Subject to mandatory redemption
Par value $100 per share - outstanding
7 7/8% Series 800,000 shares in 1995 - 80 000
7 3/8% Series 800,000 shares in 1995 ____-___ 80 000
Total - 160 000
PSI
Not subject to mandatory redemption
Par value $25 per share - authorized 5,000,000 shares - outstanding
4.32% Series 169,162 shares in 1996 and 1995 4 229 4 229
4.16% Series 148,763 shares in 1996 and 1995 3 719 3 719
7.44% Series 3,408,712 shares in 1996 and 4,000,000 shares in 1995 85 218 100 000
Par value $100 per share - authorized 5,000,000 shares - outstanding
3 1/2% Series 40,567 shares in 1996 and 40,843 shares in 1995 4 056 4 085
6 7/8% Series 600,000 shares in 1996 and 1995 60 000 60 000
7.15% Series 158,640 shares in 1996 and 1995 15 864 15 864
Total 173 086 187 897
Total - Cinergy
Total not subject to mandatory redemption $194 232 $227 897
Total subject to mandatory redemption $ - $160 000
</TABLE>
Cinergy, CG&E, and PSI
(b) Changes in Cumulative Preferred Stock Outstanding Changes in cumulative
preferred stock outstanding during 1996, 1995, and 1994, were as follows:
Shares Par
Retired Value_
(dollars in
thousands)
1996
Not subject to mandatory redemption
Par value $100 per share
CG&E
4% Series 100 165 $10 016
4 3/4% Series 88 379 8 838
PSI
3 1/2% Series 276 29
Par value $25 per share
PSI
7.44% Series 591 288 14 782
Subject to mandatory redemption
Par value $100 per share
CG&E
7 7/8% Series 800 000 80 000
7 3/8% Series 800 000 80 000
1995
Not subject to mandatory redemption
Par value $100 per share
CG&E
7.44 % Series 400 000 $40 000
PSI
3 1/2% Series 329 32
Subject to mandatory redemption
Par value $100 per share
CG&E
9.15 % Series 500 000 50 000
1994
Not subject to mandatory redemption
Par value $100 per share
CG&E
9.28 % Series 400 000 $40 000
PSI
3 1/2% Series 598 60
Cinergy and CG&E
During the third quarter of 1996, Cinergy commenced an offer to purchase any
and all outstanding shares of preferred stock of CG&E. Cinergy purchased
1,788,544 shares of preferred stock and made a capital contribution to CG&E of
all the shares it acquired and CG&E canceled the shares. The cost of
reacquiring the preferred stock, totaling $18 million, represents the
difference between the par value of the preferred stock purchased and the
price paid (including fees paid to tender agents) and is reflected as a charge
to "Retained Earnings" in the Consolidated Statements of Changes in Common
Stock Equity and as a deduction from "Net Income" in the Consolidated
Statements of Income for purposes of determining net income and earnings per
share applicable to common stock for Cinergy. The 4 3/4% Series no longer
meets listing requirements of the New York Stock Exchange (NYSE) and has been
delisted.
Cinergy, CG&E, PSI, and ULH&P
4. Long-term Debt
(a) Schedule of Long-term Debt (excluding amounts due within one year)
<TABLE>
<CAPTION>
December 31
1996 1995
CG&E and Subsidiaries (dollars in thousands)
<S> <C> <C>
CG&E
First Mortgage Bonds
5 7/8% Series due July 1, 1997 $ - $ 30 000
6 1/4% Series due September 1, 1997 - 100 000
5.80% Series due February 15, 1999 110 000 110 000
7 3/8% Series due May 1, 1999 50 000 50 000
7 3/8% Series due November 1, 2001 60 000 60 000
7 1/4% Series due September 1, 2002 100 000 100 000
8 1/8% Series due August 1, 2003 60 000 60 000
6.45% Series due February 15, 2004 110 000 110 000
8.95% Series due December 15, 2021 100 000 100 000
8 1/2% Series due September 1, 2022 100 000 100 000
7.20% Series due October 1, 2023 300 000 300 000
5.45% Series due January 1, 2024 (Pollution Control) 46 700 46 700
5 1/2% Series due January 1, 2024 (Pollution Control) 48 000 48 000
Total first mortgage bonds 1 084 700 1 214 700
Pollution Control Notes
Variable rate due August 1, 2013 and December 1, 2015 100 000 100 000
Variable rate due September 1, 2030 84 000 84 000
6.50% due November 15, 2022 12 721 12 721
Total pollution control notes 196 721 196 721
Other Long-term Debt
6.90% Debentures due June 1, 2025
(Redeemable at the option of the holders on June 1, 2005) 150 000 150 000
8.28% Junior subordinated debentures due July 1, 2025 100 000 100 000
Total other long-term debt 250 000 250 000
Unamortized Premium and Discount - Net (12 130) (14 348)
Total - CG&E 1 519 291 1 647 073
ULH&P
First Mortgage Bonds
6 1/2% Series due August 1, 1999 20 000 20 000
8% Series due October 1, 2003 10 000 10 000
9 1/2% Series due December 1, 2008 - 10 000
Total first mortgage bonds 30 000 40 000
Other Long-term Debt
7.65% Debentures due July 15, 2025 15 000 15 000
Unamortized Premium and Discount - Net (383) (623)
Total - ULH&P 44 617 54 377
Lawrenceburg Gas Company (Lawrenceburg)
First Mortgage Bonds
9 3/4% Series due October 1, 2001 1 200 1 200
Total - CG&E and subsidiaries $1 565 108 $1 702 650
PSI
First Mortgage Bonds
Series S, 7%, due January 1, 2002 $ 26 429 $ 26 429
Series Y, 7 5/8%, due January 1, 2007 24 140 24 140
Series BB, 6 5/8%, due March 1, 2004 (Pollution Control) - 5 000
Series NN, 7.60%, due March 15, 2012 (Pollution Control) 35 000 35 000
Series QQ, 8 1/4%, due June 15, 2013 (Pollution Control) 23 000 23 000
Series TT, 7 3/8%, due March 15, 2012 (Pollution Control) 10 000 10 000
Series UU, 7 1/2%, due March 15, 2015 (Pollution Control) 14 250 14 250
Series YY, 5.60%, due February 15, 2023 (Pollution Control) 29 945 29 945
Series ZZ, 5 3/4%, due February 15, 2028 (Pollution Control) 50 000 50 000
Series AAA, 7 1/8%, due February 1, 2024 50 000 50 000
Total first mortgage bonds 262 764 267 764
Secured Medium-term Notes
Series A, 6.65% to 8.88%, due January 3, 1997 to June 1, 2022 290 000 300 000
Series B, 5.22% to 8.26%, due September 17, 1998
to August 22, 2022 230 000 230 000
(Series A and B, 7.66% weighted average interest rate
and 15 year weighted average remaining life)
Total secured medium-term notes 520 000 530 000
Pollution Control Notes
5 3/4%, due December 15, 1997 to December 15, 2003 - 19 200
Variable rate due January 1, 2014 and March 1, 2019 24 600 -___
Total pollution control notes 24 600 19 200
Other Long-term Debt
Series 1994A Promissory Note, non-interest bearing,
due January 3, 2001 19 825 19 825
6.25%, due December 15, 2005
(Notes are callable and/or putable on December 15, 1998) 50 000 -
6.35% Debentures due November 15, 2006
(Redeemable in whole or in part at the option of the
holders on November 15, 2000) 100 000 -___
Total other long-term debt 169 825 19 825
Unamortized Premium and Discount - Net (7 319) (8 673)
Total - PSI $ 969 870 $ 828 116
Total - Cinergy
First Mortgage Bonds $1 378 664 $1 523 664
Secured Medium-term Notes 520 000 530 000
Pollution Control Notes 221 321 215 921
Other Long-term Debt 434 825 284 825
Unamortized Premium and Discount - Net (19 832) (23 644)
Total long-term debt $2 534 978 $2 530 766
</TABLE>
(b) Mandatory Redemption and Other Requirements Long-term debt maturities
for the next five years are as follows:
Cinergy and CG&E and
Subsidiaries Subsidiaries PSI ULH&P
(in millions)
1997 $140 $130 $ 10 $ -
1998 35 - 35 -
1999 186 180 6 20
2000 31 - 31 -
2001 100 61 39 -
$492 $371 $121 $20
Maintenance and replacement fund provisions contained in CG&E's, PSI's, and
ULH&P's first mortgage bond indentures require cash payments, bond
retirements, or pledges of unfunded property additions each year based on an
amount related to the net revenues of the respective company.
5. Notes Payable
Cinergy, CG&E, PSI, and ULH&P
Cinergy's subsidiaries had regulatory authority to borrow up to $838 million
($438 million for CG&E and its subsidiaries, including $35 million for ULH&P,
and $400 million for PSI) as of December 31, 1996. In connection with this
authority, unsecured lines of credit (Committed Lines) have been established
which permit borrowings of up to $280 million ($80 million for CG&E and $200
million for PSI), of which $181 million ($65 million for CG&E and $116 million
for PSI) remained unused at December 31, 1996. CG&E and PSI also have the
capability to issue commercial paper which must be supported by Committed
Lines of the respective company. Neither CG&E nor PSI issued commercial paper
in 1996 and none remained outstanding as of December 31, 1996. Additionally,
pursuant to this authority, additional short-term borrowings with various
banks are arranged on an "as offered" basis (Uncommitted Lines).
Amounts outstanding under the Committed Lines would become immediately due
upon an event of default which includes non-payment, default under other
agreements governing company indebtedness, bankruptcy, or insolvency. Certain
of the Uncommitted Lines have similar default provisions. The Committed Lines
are maintained by commitment fees. Commitment fees for the Committed Lines
were immaterial during the 1994 through 1996 period.
To better manage cash and working capital requirements, Cinergy's utility
subsidiaries, including CG&E, PSI, and ULH&P, participate in a money pooling
arrangement. Under this money pooling arrangement, Cinergy system companies
with surplus short-term funds, whether from internal or external sources,
provide short-term loans to other system companies at rates that reflect (1)
the actual costs of the external borrowing and/or (2) the costs of the
internal funds which are set at the 30-day Federal Reserve "AA" industrial
commercial paper rate. The SEC's approval of the money pool, pursuant to the
PUHCA, extends through May 31, 1997. (See Note 16 for an event subsequent to
the date of the auditor's report.)
Additionally, Cinergy has established a $600 million credit facility, which
expires in May 2001, of which $91 million remained unused as of December 31,
1996. This new credit facility was established, in part, to fund the
acquisition of Midlands through Avon Energy and its wholly-owned subsidiary
($500 million has been designated for this purpose) with the remaining portion
available for general corporate purposes. The prior $100 million credit
facility, which would have expired in September 1997, has been terminated.
In addition, Cinergy U.K., a subsidiary of Investments, which holds Cinergy's
50% investment in Avon Energy, entered into a $40 million non-recourse credit
agreement, of which $27 million is outstanding as of December 31, 1996. This
new credit agreement was also used to fund the acquisition of Midlands.
The weighted average interest rates on short-term borrowings outstanding at
December 31, 1996 and 1995, were as follows:
1996 1995_
Cinergy and subsidiaries 5.96% 5.97%
CG&E 5.98 -
PSI 5.97 5.97
Cinergy, CG&E, PSI, and ULH&P
6. Sale of Accounts Receivable
In January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on a
revolving basis, undivided percentage interests in certain of their accounts
receivable up to an aggregate maximum of $350 million, of which $246 million
has been sold as of December 31, 1996. Of this amount, $164 million, has been
sold by CG&E, including $23 million sold by ULH&P, and $82 million has been
sold by PSI. Accounts receivable on the Consolidated Balance Sheets of
Cinergy, CG&E, and PSI and the Balance Sheet of ULH&P are net of the amounts
sold at December 31, 1996. PSI had a similar agreement, which expired in
January 1996, to sell up to $90 million of its accounts receivable. Accounts
receivable on the Consolidated Balance Sheets of Cinergy and PSI are net of
$90 million sold at December 31, 1995.
7. Leases
Cinergy, CG&E, PSI, and ULH&P
(a) Operating Leases Cinergy and its subsidiaries have entered into
operating lease agreements covering various facilities and properties,
including office space and computer, communications, and transportation
equipment. Total rental payments on operating leases for each of the past
three years were as follows:
1996 1995 1994
(in millions)
Cinergy and subsidiaries $31 $36 $36
CG&E and subsidiaries 18 22 22
PSI 13 14 14
ULH&P 2 5 5
Future minimum lease payments required under operating leases with remaining,
non-cancelable lease terms in excess of one year as of December 31, 1996, are
as follows:
Cinergy and CG&E and
Subsidiaries Subsidiaries PSI ULH&P*
(in millions, ULH&P in thousands)
1997 $ 31 $12 $11 $24
1998 23 7 8 12
1999 16 6 5 -
2000 10 5 3 -
2001 7 4 2 -
After 2001 19 18 1 -
$106 $52 $30 $36
* Excludes amounts applicable to CG&E's non-cancelable leases allocated to
ULH&P.
Cinergy and CG&E
(b) Capital Lease In November 1996, CG&E entered into a sale-leaseback
agreement for certain equipment at Woodsdale. The lease is a capital lease
with an initial lease term of five years. At the end of the initial lease
term, the lease may be renewed at mutually agreed upon terms or the equipment
may be repurchased by CG&E at the original sale amount. The monthly lease
payment, comprised of interest only, is based on the applicable London
Interbank Offered Rate (LIBOR) and, therefore, the capital lease obligation
will not be amortized over the initial lease term. The property under the
capital lease is depreciated at the same rate as if the property were still
owned by CG&E. CG&E recorded a capital lease obligation of $22 million, which
represented the net book value of the equipment at the beginning of the lease.
8. Financial Instruments
Cinergy, CG&E, and PSI
(a) Financial Derivatives Cinergy has entered into financial derivative
contracts for the purposes described below.
(i) Forward Exchange Hedging Activity Cinergy has hedged its pound
sterling denominated investment in Midlands through forward exchange
contracts. Translation losses on these contracts have been recorded in the
cumulative foreign currency translation adjustment which is reported as a
separate component of common stock equity in the Consolidated Financial
Statements. The contract existing at December 31, 1996, required Cinergy to
exchange 330 million pounds sterling for $500 million. The estimated fair
value ($65 million) of this contract, which is based on the cost that would
have been incurred to terminate the contract at December 31, 1996, has been
reflected in "Current Liabilities - Other" in the Consolidated Balance
Sheets. (See Note 16 for an event subsequent to the date of the auditor's
report.)
(ii) Interest Rate Risk Management Cinergy and its subsidiaries enter
into interest rate swaps to lower funding costs and reduce exposures to
fluctuations in interest rates. Under these interest rate swaps, Cinergy
and its subsidiaries agree with counterparties to exchange, at specified
intervals, the difference between fixed-rate and floating-rate interest
amounts calculated on an agreed notional principal amount. At December 31,
1996, PSI had two interest rate swap agreements outstanding with notional
amounts of $100 million each. One contract, with a four-year term
beginning in November 1996, requires PSI to pay a floating rate and receive
a fixed rate. The second contract, with a six-month term beginning in May
1997, requires PSI to pay a fixed rate and receive a floating rate. In each
case the floating rate is based on the applicable LIBOR. The interest
differential paid or received is recognized in the Consolidated Statements
of Income as a component of interest expense. The fair values of the
interest rate swap agreements at December 31, 1996, were not significant.
Cinergy, CG&E, PSI, and ULH&P
(b) Fair Value of Other Financial Instruments The estimated fair values of
Cinergy's and its subsidiaries' other financial instruments were as follows
(this information does not purport to be a valuation of the companies as a
whole):
December 31 December 31
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value_
(in millions; ULH&P in thousands)
Financial Instruments
Cinergy and Subsidiaries
First mortgage bonds and
other long-term debt (includes
amounts due within one year) $ 2 675 $ 2 676 $ 2 733 $ 2 837
Cumulative preferred stock of
subsidiary - subject to
mandatory redemption - - 160 163
CG&E and Subsidiaries
First mortgage bonds and
other long-term debt (includes
amounts due within one year) $ 1 695 $ 1 688 $ 1 855 $ 1 912
Cumulative preferred stock -
subject to mandatory redemption - - 160 163
PSI
First mortgage bonds and
other long-term debt (includes
amounts due within one year) $ 980 $ 988 $ 878 $ 925
ULH&P
First mortgage bonds and
other long-term debt (includes
amounts due within one year) $44 617 $44 668 $69 377 $72 804
The following methods and assumptions were used to estimate the fair values of
each major class of financial instruments:
Cash and temporary cash investments, restricted deposits, and notes payable
Due to the short period to maturity, the carrying amounts reflected on the
Balance Sheets approximate fair values.
First mortgage bonds and other long-term debt The fair values of long-term
debt issues were estimated based on the latest quoted market prices or, if not
listed on the NYSE, on the present value of future cash flows. The discount
rates used approximate the incremental borrowing costs for similar
instruments.
Cumulative preferred stock - subject to mandatory redemption The aggregate
fair value of preferred stock subject to mandatory redemption was based on the
latest closing prices quoted on the NYSE for each series or, if no trades
occurred during the period, on the present value of future cash flows using
discount rates that approximate the incremental borrowing costs for similar
instruments.
Cinergy, CG&E, PSI, and ULH&P
(c) Concentrations of Credit Risk Credit risk represents the risk of loss
which would occur as a result of nonperformance by counterparties pursuant to
the terms of their contractual obligations with the Company. Concentrations
of credit risk relate to significant customers or counterparties, or groups of
customers or counterparties, possessing similar economic or industry
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions. The
Company does not have a significant loss exposure to any individual customer
or counterparty.
Concentration of credit risk with respect to Cinergy's trade accounts
receivable from electric and gas retail customers is limited due to Cinergy's
large number of customers and diversified customer base of residential,
commercial, and industrial customers. Sales for resale customers on Cinergy's
electric system include traditional electric cooperatives and municipalities
with which CG&E and PSI have long-standing relationships. Contracts for sales
of electricity for resale outside of Cinergy's system are principally with
other investor owned utilities, electric cooperatives, municipalities, and a
few large power marketers. The majority of these contracts are for terms of
one year or less. While no significant exposure to any one counterparty
exists at December 31, 1996, as discussed in the "Power Marketing and Trading"
section of "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," Cinergy's exposure to credit risk could
increase as the competitive market for electricity expands.
Potential exposure to credit risk also exists from Cinergy's use of financial
derivatives such as forward foreign exchange contracts, currency swaps, and
interest rate swaps. Because these financial instruments are transacted only
with highly rated financial institutions, Cinergy does not anticipate
nonperformance by any of the counterparties.
9. Pension Plans
Cinergy, CG&E, PSI, and ULH&P
The defined benefit pension plans of Cinergy's subsidiaries cover
substantially all employees meeting certain minimum age and service
requirements. Plan benefits are determined under a final average pay formula
with consideration of years of participation, age at retirement, and the
applicable average Social Security wage base or benefit amount.
The funding policies of the operating subsidiaries are to contribute annually
to the plans an amount which is not less than the minimum amount required by
the Employee Retirement Income Security Act of 1974 and not more than the
maximum amount deductible for income tax purposes. Contributions applicable
to the 1996, 1995, and 1994 plan years were $7 million, $18 million, and $4
million, respectively. Of these amounts, CG&E and its subsidiaries
contributed $7 million for each of the 1996 and 1995 plan years. There were
no contributions made for the 1994 plan year by CG&E and its subsidiaries.
PSI's contributions were $11 million and $4 million, for the 1995 and 1994
plan years, respectively. There were no contributions made for the 1996 plan
year by PSI. The plans' assets consist of investments in equity and fixed
income securities.
Cinergy
Cinergy's pension cost for 1996, 1995, and 1994 included the following
components:
1996 1995 1994
(in millions)
Benefits earned during the period $ 21.2 $ 18.5 $ 19.4
Interest accrued on projected
benefit obligations 61.6 61.4 54.9
Actual (return) loss on plans' assets (75.6) (119.3) 8.0
Net amortization and deferral 17.3 61.1 (66.3)
Net periodic pension cost $ 24.5 $ 21.7 $ 16.0
CG&E and ULH&P
CG&E's and its subsidiaries' (including ULH&P's) pension cost for 1996, 1995,
and 1994 included the following components:
1996 1995 1994
(in millions)
Benefits earned during the period $ 11.2 $ 9.8 $ 10.7
Interest accrued on projected
benefit obligations 38.6 38.8 35.1
Actual (return) loss on plans' assets (53.8) (71.9) 5.6
Net amortization and deferral 19.3 35.5 (43.2)
Net periodic pension cost $ 15.3 $ 12.2 $ 8.2
PSI
PSI's pension cost for 1996, 1995, and 1994 included the following components:
1996 1995 1994
(in millions)
Benefits earned during the period $ 10.0 $ 8.7 $ 8.7
Interest accrued on projected
benefit obligation 23.0 22.6 19.8
Actual (return) loss on plan assets (21.8) (47.4) 2.4
Net amortization and deferral (2.0) 25.6 (23.1)
Net periodic pension cost $ 9.2 $ 9.5 $ 7.8
Cinergy, CG&E, PSI, and ULH&P
During 1996 and 1994, CG&E and its subsidiaries (including ULH&P) recognized
an additional $31 million and $16 million, respectively, of accrued pension
cost in accordance with Statement of Financial Accounting Standards No. 88,
Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits (Statement 88). Additionally,
during 1996, PSI recognized an additional $30 million of accrued pension cost
in accordance with Statement 88. These amounts represent the costs associated
with additional benefits extended in connection with voluntary workforce
reduction programs (see Note 1(l)).
1996 1995 1994
Actuarial Assumptions:
For determination of projected benefit
obligations
Discount rate 8.00% 7.50% 8.50%
Rate of increase in future compensation
PSI 5.00 4.50 5.50
CG&E and subsidiaries 5.00 4.50 5.50
For determination of pension cost
Rate of return on plans' assets
PSI 9.00 9.00 9.00
CG&E and subsidiaries 9.00 9.50 9.50
Cinergy
The following table reconciles the plans' funded status with amounts recorded
in the Consolidated Financial Statements. Under the provisions of Statement
of Financial Accounting Standards No. 87, Employers' Accounting for Pensions
(Statement 87), certain assets and obligations of the plans are deferred and
recognized in the Consolidated Financial Statements in subsequent periods.
<TABLE>
<CAPTION>
1996 1995
Plans' Plan's Plans' Plan's
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
(in millions)
<S> <C> <C> <C> <C>
Actuarial present value
of benefits
Vested benefits $(423.1) $(241.6) $(376.9) $(227.3)
Non-vested benefits (33.5) (10.1) (35.1) (16.0)
Accumulated benefit
obligations (456.6) (251.7) (412.0) (243.3)
Effect of future
compensation
increases (121.7) (53.3) (120.3) (53.2)
Projected benefit
obligations (578.3) (305.0) (532.3) (296.5)
Plans' assets at fair value 531.6 234.1 500.6 220.0
Projected benefit
obligations in excess of
plans' assets (46.7) (70.9) (31.7) (76.5)
Remaining balance of plans'
net assets existing at
date of initial application
of Statement 87 to be
recognized as a reduction
of pension cost in future
periods (6.7) (3.1) (7.7) (3.4)
Unrecognized net gain
resulting from experience
different from that
assumed and effects of
changes in assumptions (48.4) (28.1) (14.1) (1.3)
Prior service cost not
yet recognized in net
periodic pension cost 33.6 23.2 35.2 16.8
Accrued pension cost at
December 31 $ (68.2) $ (78.9) $ (18.3) $ (64.4)
</TABLE>
CG&E and ULH&P
The following table reconciles the plans' funded status with amounts recorded
in the Consolidated Financial Statements of CG&E. Under the provisions of
Statement 87, certain assets and obligations of the plans are deferred and
recognized in the Financial Statements in subsequent periods.
<TABLE>
<CAPTION>
1996 1995
Plan's Plan's Plan's Plan's
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
(in millions)
<S> <C> <C> <C> <C>
Actuarial present value
of benefits
Vested benefits $(160.3) $(241.6) $(138.3) $(227.3)
Non-vested benefits (17.0) (10.1) (25.5) (16.0)
Accumulated benefit
obligations (177.3) (251.7) (163.8) (243.3)
Effect of future
compensation
increases (53.2) (53.3) (54.8) (53.2)
Projected benefit
obligations (230.5) (305.0) (218.6) (296.5)
Plans' assets at fair
value 223.3 234.1 209.3 220.0
Projected benefit
obligations in excess of
plans' assets (7.2) (70.9) (9.3) (76.5)
Remaining balance of plans'
net assets existing at
date of initial application
of Statement 87 to be
recognized as a reduction
of pension cost in future
periods (2.4) (3.1) (2.7) (3.4)
Unrecognized net gain
resulting from experience
different from that
assumed and effects of
changes in assumptions (40.1) (28.1) (18.9) (1.3)
Prior service cost not
yet recognized in net
periodic pension cost 16.1 23.2 19.5 16.8
Accrued pension cost at
December 31 $ (33.6) $ (78.9) $ (11.4) $ (64.4)
</TABLE>
PSI
The following table reconciles the plan's funded status with amounts recorded
in the Consolidated Financial Statements of PSI. Under the provisions of
Statement 87, certain assets and obligations of the plan are deferred and
recognized in the Consolidated Financial Statements in subsequent periods.
1996 1995
(in millions)
Actuarial present value of benefits
Vested benefits $(262.8) $(238.6)
Non-vested benefits (16.5) (9.6)
Accumulated benefit obligation (279.3) (248.2)
Effect of future compensation
increases (68.5) (65.5)
Projected benefit obligation (347.8) (313.7)
Plan's assets at fair value 308.3 291.3
Projected benefit obligation in
excess of plan's assets (39.5) (22.4)
Remaining balance of plan's net
assets existing at date of initial
application of Statement 87 to be
recognized as a reduction of
pension cost in future periods (4.3) (5.0)
Unrecognized net (gain) loss resulting
from experience different from that
assumed and effects of changes in
assumptions (8.3) 4.8
Prior service cost not yet recognized
in net periodic pension cost 17.5 15.7
Accrued pension cost
at December 31 $ (34.6) $ (6.9)
10. Other Postretirement Benefits
Cinergy, CG&E, PSI, and ULH&P
Cinergy provides certain health care and life insurance benefits to retired
employees and their eligible dependents. The health care benefits include
medical coverage, dental coverage, and prescription drugs. The health care
benefits provided are subject to certain limitations, such as deductibles and
co-payments. Additionally, all employees must meet minimum age and service
requirements to be eligible for these postretirement benefits. Prior to
January 1, 1997, CG&E and PSI employees were covered under separate plans.
Effective January 1, 1997, all Cinergy active employees are eligible to
receive essentially the same postretirement health care benefits. Certain
classes of employees, based on age, as well as all retirees, have been
grandfathered under benefit provisions in place prior to January 1, 1997.
Neither CG&E and its subsidiaries nor PSI currently pre-fund their obligations
for these postretirement benefits; however, PSI, in connection with the
settlement which resulted in the February 1995 Order, agreed to begin pre-
funding. Implementation of pre-funding is subject to the outcome of
negotiations with The Office of the Utility Consumer Counselor and approval by
the IURC.
Postretirement benefit cost for 1996, 1995, and 1994 included the following
components:
Cinergy
Health Life
Care Insurance Total
(in millions)
1996
Benefits earned during the period $ 5.7 $ .1 $ 5.8
Interest accrued on Accumulated Post-
retirement Benefit Obligation (APBO) 16.5 2.2 18.7
Net amortization and deferral .3 - .3
Amortization of transition obligations 8.1 .3 8.4
Net periodic postretirement benefit cost $30.6 $2.6 $33.2
1995
Benefits earned during the period $ 4.4 $ .1 $ 4.5
Interest accrued on APBO 15.6 2.2 17.8
Amortization of transition obligations 8.1 .3 8.4
Net periodic postretirement benefit cost $28.1 $2.6 $30.7
1994
Benefits earned during the period $ 5.2 $ .2 $ 5.4
Interest accrued on APBO 13.8 2.2 16.0
Net amortization and deferral .1 - .1
Amortization of transition obligations 8.1 .3 8.4
Net periodic postretirement benefit cost $27.2 $2.7 $29.9
CG&E and ULH&P
Health Life
Care Insurance Total
(in millions)
1996
Benefits earned during the period $ .7 $ .1 $ .8
Interest accrued on APBO 4.9 2.0 6.9
Amortization of transition obligation 2.6 .4 3.0
Net periodic postretirement benefit cost $8.2 $2.5 $10.7
1995
Benefits earned during the period $ .4 $ .1 $ .5
Interest accrued on APBO 4.5 2.0 6.5
Amortization of transition obligation 2.6 .4 3.0
Net periodic postretirement benefit cost $7.5 $2.5 $10.0
1994
Benefits earned during the period $ .9 $ .1 $ 1.0
Interest accrued on APBO 3.9 2.0 5.9
Amortization of transition obligation 2.6 .4 3.0
Net periodic postretirement benefit cost $7.4 $2.5 $ 9.9
PSI
Health Life
Care Insurance Total
(in millions)
1996
Benefits earned during the period $ 5.0 $ - $ 5.0
Interest accrued on APBO 11.6 .2 11.8
Net amortization and deferral .3 - .3
Amortization of transition obligation 5.5 (.1) 5.4
Net periodic postretirement benefit cost $22.4 $ .1 $22.5
1995
Benefits earned during the period $ 4.0 $ - $ 4.0
Interest accrued on APBO 11.1 .2 11.3
Amortization of transition obligation 5.5 (.1) 5.4
Net periodic postretirement benefit cost $20.6 $ .1 $20.7
1994
Benefits earned during the period $ 4.3 $ .1 $ 4.4
Interest accrued on APBO 9.9 .2 10.1
Net amortization and deferral .1 - .1
Amortization of transition obligation 5.5 (.1) 5.4
Net periodic postretirement benefit cost $19.8 $ .2 $20.0
Cinergy, CG&E, PSI, and ULH&P
The following table reconciles the APBO of the health care and life insurance
plans with amounts recorded in the Financial Statements. Under the provisions
of Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions certain obligations of the
plans are deferred and recognized in the Financial Statements in subsequent
periods.
Cinergy
Health Life
Care Insurance Total_
(in millions)
1996
Actuarial present value of benefits
Fully eligible active plan participants $ (13.7) $ (1.6) $ (15.3)
Other active plan participants (49.8) (1.5) (51.3)
Retirees and beneficiaries (118.0) (26.4) (144.4)
Projected APBO (181.5) (29.5) (211.0)
Unamortized transition obligations 75.4 .4 75.8
Unrecognized net loss (gain) resulting from
experience different from that assumed
and effects of changes in assumptions 19.5 (.5) 19.0
Accrued postretirement benefit obligations
at December 31, 1996 $ (86.6) $(29.6) $(116.2)
1995
Actuarial present value of benefits
Fully eligible active plan participants $ (11.7) $ (1.1) $ (12.8)
Other active plan participants (112.0) (2.7) (114.7)
Retirees and beneficiaries (99.2) (26.4) (125.6)
Projected APBO (222.9) (30.2) (253.1)
Unamortized transition obligations 137.1 .7 137.8
Unrecognized prior service cost (.3) - (.3)
Unrecognized net loss resulting from
experience different from that assumed
and effects of changes in assumptions 26.1 .5 26.6
Accrued postretirement benefit obligations
at December 31, 1995 $ (60.0) $(29.0) $ (89.0)
Increasing the health care cost trend rate by one percentage point in each
year would increase the APBO by approximately $21 million and $37 million for
1996 and 1995, respectively, and the aggregate of the service and interest
cost components of the postretirement benefit cost for each of 1996, 1995, and
1994 by approximately $4 million, $3 million, and $4 million, respectively.
CG&E and ULH&P
Health Life
Care Insurance Total_
(in millions)
1996
Actuarial present value of benefits
Fully eligible active plan participants $ (10.8) $ (1.6) $ (12.4)
Other active plan participants (24.2) (1.3) (25.5)
Retirees and beneficiaries (28.7) (23.6) (52.3)
Projected APBO (63.7) (26.5) (90.2)
Unamortized transition obligation 24.5 2.5 27.0
Unrecognized prior service cost - .3 .3
Unrecognized net loss (gain) resulting from
experience different from that assumed
and effects of changes in assumptions 11.5 (1.4) 10.1
Accrued postretirement benefit obligation
at December 31, 1996 $ (27.7) $(25.1) $ (52.8)
1995
Actuarial present value of benefits
Fully eligible active plan participants $ (2.7) $ (.9) $ (3.6)
Other active plan participants (32.0) (2.0) (34.0)
Retirees and beneficiaries (30.5) (24.5) (55.0)
Projected APBO (65.2) (27.4) (92.6)
Unamortized transition obligation 43.4 2.9 46.3
Unrecognized net loss resulting from
experience different from that assumed
and effects of changes in assumptions 4.4 .1 4.5
Accrued postretirement benefit obligation
at December 31, 1995 $ (17.4) $(24.4) $ (41.8)
Increasing the health care cost trend rate by one percentage point in each
year would increase the APBO by approximately $7 million and $13 million for
1996 and 1995 respectively, and the aggregate of the service and interest cost
components of the postretirement benefit cost by approximately $1 million for
1996, 1995, and 1994.
PSI
Health Life
Care Insurance _Total_
(in millions)
1996
Actuarial present value of benefits
Fully eligible active plan participants $ (2.9) $ - $ (2.9)
Other active plan participants (25.6) (.2) (25.8)
Retirees and beneficiaries (89.3) (2.8) (92.1)
Projected APBO (117.8) (3.0) (120.8)
Unamortized transition obligation 50.9 (2.1) 48.8
Unrecognized prior service cost - (.3) (.3)
Unrecognized net loss resulting from
experience different from that assumed
and effects of changes in assumptions 8.0 .9 8.9
Accrued postretirement benefit obligation
at December 31, 1996 $ (58.9) $ (4.5) $ (63.4)
1995
Actuarial present value of benefits
Fully eligible active plan participants $ (9.0) $ (.2) $ (9.2)
Other active plan participants (80.0) (.7) (80.7)
Retirees and beneficiaries (68.7) (1.9) (70.6)
Projected APBO (157.7) (2.8) (160.5)
Unamortized transition obligation 93.7 (2.2) 91.5
Unrecognized prior service cost (.3) - (.3)
Unrecognized net loss resulting from
experience different from that assumed
and effects of changes in assumptions 21.7 .4 22.1
Accrued postretirement benefit obligation
at December 31, 1995 $ (42.6) $ (4.6) $ (47.2)
Increasing the health care cost trend rate by one percentage point in each
year would increase the APBO by approximately $14 million and $24 million for
1996 and 1995, respectively, and the aggregate of the service and interest
cost components of the postretirement benefit cost for each of 1996, 1995, and
1994 by approximately $3 million, $2 million, and $3 million, respectively.
Cinergy, CG&E, PSI, and ULH&P
The following assumptions were used to determine the APBO:
1996 1995 1994___
Discount rate 8.00% 7.50% 8.50%
Health care cost trend rate,
gradually declining to 5%
CG&E and subsidiaries 7.00-9.00% 8.00-11.00% 9.00-12.00%
PSI 7.00-9.00 8.00-10.00 8.00-12.00
Year ultimate trend rates achieved
CG&E and subsidiaries 2004 2002 2002
PSI 2004 2007 2007
11. Income Taxes
Cinergy
Cinergy complies with the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (Statement 109). Statement 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of existing differences between the financial
reporting and tax reporting bases of assets and liabilities.
The significant components of Cinergy's net deferred income tax liability at
December 31, 1996, and 1995, are as follows:
1996 1995__
(in millions)
Deferred Income Tax Liability
Utility plant $1 042.1 $ 981.8
Unamortized costs of reacquiring debt 23.5 28.8
Deferred operating expenses
and carrying costs 86.2 86.6
Amounts due from customers - income taxes 129.5 143.4
Deferred DSM costs 43.5 47.3
Investment in unconsolidated subsidiary 13.5 -
Other 46.2 36.4
Total deferred income tax liability 1 384.5 1 324.3
Deferred Income Tax Asset
Unamortized investment tax credits 63.9 67.5
Litigation settlement - 29.8
Deferred fuel costs 12.0 13.0
Accrued pension and other benefit costs 60.4 43.3
Other 101.9 49.8
Total deferred income tax asset 238.2 203.4
Net Deferred Income Tax Liability $1 146.3 $1 120.9
CG&E
CG&E and its subsidiaries comply with the provisions of Statement 109.
Statement 109 requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of existing differences between the
financial reporting and tax reporting bases of assets and liabilities.
The significant components of CG&E's net deferred income tax liability at
December 31, 1996, and 1995, are as follows:
1996 1995
(in millions)
Deferred Income Tax Liability
Utility plant $671.6 $663.8
Unamortized costs of reacquiring debt 11.2 14.2
Deferred operating expenses
and carrying costs 73.5 76.2
Amounts due from customers - income taxes 120.7 139.8
Deferred DSM costs 6.0 5.6
Other 40.9 25.5
Total deferred income tax liability 923.9 925.1
Deferred Income Tax Asset
Unamortized investment tax credits 43.9 46.1
Deferred fuel costs 5.8 8.1
Accrued pension and other benefit costs 31.4 28.7
Other 75.7 46.8
Total deferred income tax asset 156.8 129.7
Net Deferred Income Tax Liability $767.1 $795.4
PSI
PSI and its subsidiaries comply with the provisions of Statement 109.
Statement 109 requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of existing differences between the
financial reporting and tax reporting bases of assets and liabilities.
The significant components of PSI's net deferred income tax liability at
December 31, 1996, and 1995, are as follows:
1996 1995_
(in millions)
Deferred Income Tax Liability
Electric utility plant $370.5 $315.7
Unamortized costs of reacquiring debt 12.3 14.6
Amounts due from customers - income taxes 8.8 3.6
Deferred operating expenses
and accrued carrying costs 12.7 12.5
Deferred DSM costs 37.5 41.7
Other 4.9 9.4
Total deferred income tax liability 446.7 397.5
Deferred Income Tax Asset
Unamortized investment tax credits 20.0 21.4
Litigation settlement - 29.8
Accrued pension and other benefit costs 29.0 15.6
Deferred fuel costs 6.2 4.9
Other 18.5 (6.1)
Total deferred income tax asset 73.7 65.6
Net Deferred Income Tax Liability $373.0 $331.9
ULH&P
ULH&P complies with the provisions of Statement of Statement 109. Statement
109 requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing differences between the financial
reporting and tax reporting bases of assets and liabilities.
The significant components of ULH&P's net deferred income tax liability at
December 31, 1996, and 1995, are as follows:
1996 1995
(in thousands)
Deferred Income Tax Liability
Utility plant $33 872 $32 104
Unamortized costs of reacquiring debt 996 1 034
Deferred fuel costs 5 459 -
Other 3 732 2 817
Total deferred income tax liability 44 059 35 955
Deferred Income Tax Asset
Unamortized investment tax credits 1 946 2 060
Amounts due to customers - income taxes 2 067 1 904
Deferred fuel costs - 1 822
Accrued pension and other benefit costs 2 482 2 365
Other 4 101 4 076
Total deferred income tax asset 10 596 12 227
Net Deferred Income Tax Liability $33 463 $23 728
Cinergy, CG&E, PSI, and ULH&P
Cinergy and its subsidiaries will participate in the filing of a consolidated
Federal income tax return for the year ended December 31, 1996. The current
tax liability is allocated among the members of the group pursuant to a tax
sharing agreement consistent with Rule 45(c) of the PUHCA.
A summary of Federal and state income taxes charged (credited) to income and
the allocation of such amounts is as follows:
Cinergy
1996 1995 1994_
(in millions)
Current Income Taxes
Federal $143.4 $175.3 $104.1
State 7.5 10.4 6.5
Total current income taxes 150.9 185.7 110.6
Deferred Income Taxes
Federal
Depreciation and other utility plant-
related items 61.6 53.8 62.2
Property taxes - - (13.3)
DSM costs (1.9) 12.0 14.5
Pension and other benefit costs (28.2) (21.8) (12.4)
Litigation settlement 26.2 - -
Fuel costs 8.8 .3 (.7)
Other items - net (15.4) (7.5) (11.6)
Total deferred Federal income taxes 51.1 36.8 38.7
State 6.5 1.7 2.7
Total deferred income taxes 57.6 38.5 41.4
Investment Tax Credits - Net (9.8) (10.1) (10.4)
Total Income Taxes $198.7 $214.1 $141.6
Allocated to:
Operating income $218.2 $221.4 $154.5
Other income and expenses - net (19.5) (7.3) (12.9)
$198.7 $214.1 $141.6
CG&E
1996 1995 1994_
(in millions)
Current Income Taxes
Federal $115.5 $102.4 $ 82.3
State 1.5 2.5 1.5
Total current income taxes 117.0 104.9 83.8
Deferred Income Taxes
Federal
Depreciation and other utility plant-
related items 36.6 33.9 42.9
Property taxes - - (11.3)
Pension and other benefit costs (17.0) (10.7) (8.4)
Fuel costs 10.8 6.3 (1.4)
Other items - net (7.5) (2.6) (2.6)
Total deferred Federal income taxes 22.9 32.1 19.2
State 2.2 .8 .6
Total deferred income taxes 25.1 32.9 19.8
Investment Tax Credits - Net (6.2) (6.0) (6.1)
Total Income Taxes $135.9 $131.8 $ 97.5
Allocated to:
Operating income 145.0 $136.4 $104.1
Other income and expenses - net (9.1) (4.6) (6.6)
$135.9 $131.8 $ 97.5
PSI
1996 1995 1994
(in millions)
Current Income Taxes
Federal $41.3 $71.4 $22.0
State 6.0 7.5 5.5
Total current income taxes 47.3 78.9 27.5
Deferred Income Taxes
Federal
Depreciation and other electric utility
plant-related items 25.0 19.9 19.2
DSM costs (2.5) 8.4 12.6
Pension and other benefit costs (11.2) (11.1) (1.8)
Litigation settlement 26.2 - -
Fuel costs (2.0) (6.0) .7
Other items - net (6.3) (3.0) (4.4)
Total deferred Federal income taxes 29.2 8.2 26.3
State 4.3 1.1 2.2
Total deferred income taxes 33.5 9.3 28.5
Investment Tax Credits - Net (3.6) (4.1) (4.3)
Total Income Taxes $77.2 $84.1 $51.7
Allocated to:
Operating income $73.2 $85.0 $50.4
Other income and expenses - net 4.0 (.9) 1.3
$77.2 $84.1 $51.7
ULH&P
1996 1995 1994_
(in thousands)
Current Income Taxes
Federal $ 416 $5 955 $2 746
State (87) 1 324 498
Total current income taxes 329 7 279 3 244
Deferred Income Taxes
Federal
Depreciation and other utility plant-
related items 1 506 1 382 1 727
Pension and other benefit costs (277) (381) (349)
Fuel costs 6 111 (534) 23
Uncollectible accounts - net (119) (16) 300
Unamortized costs of reacquiring debt 458 808 -
Other items - net 410 (540) (20)
Total deferred Federal income taxes $ 8 089 719 1 681
State
Depreciation and other utility plant-
related items 425 390 656
Fuel costs 1 570 (137) -
Other items - net 55 (35) (8)
Total deferred state income taxes 2 050 218 648
Total deferred income taxes 10 139 937 2 329
Investment Tax Credits - Net (282) (285) (287)
Total Income Taxes $10 186 $7 931 $5 286
Allocated to:
Operating income $ 9 834 $7 887 $5 342
Other income and expenses - net 352 44 (56)
$10 186 $7 931 $5 286
Cinergy, CG&E, PSI, and ULH&P
Federal income taxes, computed by applying the statutory Federal income tax
rate to book income before Federal income tax, are reconciled to Federal
income tax expense reported in the Statements of Income for each registrant as
follows:
Cinergy
1996 1995 1994_
(in millions)
Statutory Federal income tax provision $181.8 $192.2 $113.2
Increases (Reductions) in taxes resulting from:
Amortization of investment tax credits (9.8) (10.1) (10.4)
Depreciation and other utility plant-
related differences 14.1 9.0 13.5
Preferred dividend requirements of
subsidiaries 8.5 10.8 12.4
Foreign tax credit (11.1) - -
Other - net 1.2 .1 3.7
Federal income tax expense $184.7 $202.0 $132.4
CG&E
Statutory Federal income tax provision $125.8 $127.6 $88.8
Increases (Reductions) in taxes resulting from:
Amortization of investment tax credits (6.2) (6.0) (6.1)
Depreciation and other utility plant-
related differences 11.7 9.0 8.2
Preferred dividends - 6.2 7.8
Other - net .9 (8.3) (3.3)
Federal income tax expense $132.2 $128.5 $95.4
PSI
1996 1995 1994
(in millions)
Statutory Federal income tax provision $ 67.4 $ 77.5 $ 44.2
Increases (Reductions) in taxes resulting from:
Amortization of investment tax credits (3.6) (4.1) (4.3)
Other - net 3.1 2.1 4.1
Federal income tax expense $ 66.9 $ 75.5 $ 44.0
ULH&P
1996 1995 1994_
(in thousands)
Statutory Federal income tax provision $7 987 $6 496 $4 385
Increases (Reductions) in taxes resulting from:
Amortization of investment tax credits (283) (285) (287)
Depreciation and other utility plant-
related differences 358 219 138
Other - net 161 (41) (96)
Federal income tax expense $8 223 $6 389 $4 140
12. Commitments and Contingencies
(a) Construction
Cinergy, CG&E, PSI, and ULH&P
Cinergy will have commitments in connection with its forecasted construction
programs. Aggregate expenditures for Cinergy's construction program for the
1997 through 2001 period are currently forecasted to be $1.7 billion. Of
these projected expenditures, approximately $817 million relates to CG&E and
its subsidiaries, including $111 million for ULH&P, and $908 million relates
to PSI.
(b) Manufactured Gas Plant (MGP) Sites
Cinergy, CG&E, PSI, and ULH&P
(i) General Prior to the 1950s, gas was produced at MGP sites through a
process that involved the heating of coal and/or oil. The gas produced from
this process was sold for residential, commercial, and industrial uses.
Cinergy and PSI
(ii) PSI Coal tar residues, related hydrocarbons, and various metals
associated with MGP sites have been found at former MGP sites in Indiana,
including, but not limited to, Shelbyville and Lafayette, two sites previously
owned by PSI. PSI has identified at least 21 MGP sites which it or its
predecessors previously owned, including 19 it sold in 1945 to Indiana Gas and
Water Company, Inc. (now Indiana Gas Company, Inc. (IGC)), including the
Shelbyville and Lafayette sites. IGC has informed PSI of the basis for its
claim that PSI, as a Potentially Responsible Party (PRP) under the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
should contribute to IGC's response costs related to investigating and
remediating contamination at 18 of the 19 MGP sites which PSI sold to IGC
(excluding the Shelbyville site).
The Shelbyville site has been the subject of an investigation and cleanup
enforcement action by the Indiana Department of Environmental Management
(IDEM) against IGC and PSI. Without admitting liability, PSI and IGC have
conducted an investigation and remediation activities at the Shelbyville site.
Recently, PSI and IGC submitted a proposed agreed order to IDEM relative to
the Shelbyville site, which, if accepted by IDEM, will result in a
determination of whether the activities previously undertaken at the site are
sufficient to adequately protect human health and the environment. PSI and
IGC are sharing the costs of the Shelbyville site, and based upon
environmental investigations and remediation completed to date, PSI believes
that any further required investigation and remediation for this site will not
have a material adverse effect on its financial condition or results of
operations.
In 1992, the IDEM issued an order to IGC, naming IGC as a PRP as defined in
the CERCLA, which requires investigation and remediation of the Lafayette MGP
site. IGC entered into an agreed order with the IDEM for the removal of MGP
contamination at that site.
During 1995, PSI received notification from Northern Indiana Public Service
Company (NIPSCO) alleging PSI is a PRP under the CERCLA with respect to
contamination associated with MGP sites previously owned and/or operated by
both PSI and NIPSCO (or their predecessors). The notification included seven
sites, five of which PSI acquired from NIPSCO and subsequently sold to IGC.
The other two sites are located in Goshen and Warsaw, Indiana. Recently,
NIPSCO demanded that PSI reimburse NIPSCO for its costs incurred to date
(approximately $400,000) for investigating the Goshen MGP site as well as
costs to be incurred by NIPSCO for remediation of that site, estimated by
NIPSCO to be as high as $3 million. PSI is investigating this claim.
PSI has placed its insurance carriers on notice of IGC's and NIPSCO's claims.
IGC and PSI have entered into negotiations regarding IGC's claim; however, it
is premature, at this time, to predict the nature, extent, and ultimate costs
of, or PSI's responsibility for, environmental investigations and remediations
at MGP sites owned or previously owned by PSI. Information available to PSI
regarding the current status of investigation and/or remediation at the sites
identified in IGC's claim indicates PSI's potential exposure to probable and
reasonably estimable liabilities associated with these MGP sites would not be
material to its financial condition or results of operations. However,
further investigation and remediation activities at these sites and the
additional sites identified in NIPSCO's claim may indicate that the potential
liability for MGP sites could be material.
In May 1995, the IURC denied IGC's request for recovery of costs incurred in
complying with Federal, state, and local environmental regulations related to
MGP sites in which IGC has an interest, including sites acquired from PSI.
IGC appealed this decision, which IGC contended was contrary to decisions made
by other state utility commissions with respect to this issue. In January
1997, the Indiana Court of Appeals (Court of Appeals) affirmed the IURC's
decision denying IGC's request for recovery of MGP costs. IGC has petitioned
the Indiana Supreme Court to review the Court of Appeals decision. The IURC
granted PSI's motion establishing a sub-docket to PSI's last retail rate
proceeding, in which the IURC issued an order in September 1996, to consider
its request for rate recovery of any MGP site-related costs it may incur. PSI
is unable to predict the extent to which it will be able to recover through
rates any MGP site investigation and remediation costs ultimately incurred.
Cinergy, CG&E, and ULH&P
(iii) CG&E and its Utility Subsidiaries Lawrenceburg, a wholly-owned
subsidiary of CG&E, also has a MGP site. In May 1995, Lawrenceburg and the
IDEM reached an agreement to include the Lawrenceburg MGP site in the IDEM's
voluntary cleanup program. Lawrenceburg implemented a remediation plan, and,
on September 20, 1996, received a certificate of completion on the cleanup
from the IDEM. The total costs incurred for the cleanup program in 1995 and
1996 and expected to be incurred in 1997, are approximately $280,000.
CG&E and its utility subsidiaries are aware of other potential sites where MGP
activities may have occurred at some time in the past. None of these sites is
known to present a risk to the environment. Except for the Lawrenceburg site,
neither CG&E nor its utility subsidiaries have undertaken responsibility for
investigating other potential MGP sites.
Cinergy and CG&E
(c) United Scrap Lead Site The United States Environmental Protection Agency
(EPA) alleges that CG&E is a PRP under the CERCLA liable for cleanup of the
United Scrap Lead site in Troy, Ohio. CG&E was one of approximately 200
companies so named. CG&E believes it is not a PRP and should not be
responsible for cleanup of the site. Under the CERCLA, CG&E could be jointly
and severally liable for costs incurred in cleaning up the site, estimated by
the EPA to be $27 million, of which CG&E estimates its portion to be
immaterial to its financial condition or results of operations.
Cinergy, CG&E, and PSI
(d) Enertech Associates, Inc. (Enertech) Litigation On October 25, 1995, a
suit was filed in the Federal District Court for the Southern District of Ohio
by three former employees of Enertech, formerly named Power International,
Inc., a subsidiary of Investments, naming as defendants Enertech, Cinergy,
Investments, CG&E, PSI, James E. Rogers, and William J. Grealis. (Mr. Rogers
and/or Mr. Grealis are officers and/or directors of the foregoing companies.)
The lawsuit, which stems from the termination of employment of the three
former employees, alleges that they entered into employment contracts with
Enertech based on the opportunity to participate in potential profits from
future investments in energy projects in central and eastern Europe. The suit
alleges causes of action based upon, among other theories, breach of contract
related to the events surrounding the termination of their employment and
fraud and misrepresentation related to the level of financial support for
future projects. The suit alleges compensatory damages of $154 million based
upon assumed future success of potential future investments and punitive
damages of three times that amount. All defendants are vigorously defending
against the charges based upon meritorious defenses. Cinergy, CG&E, and PSI
are currently unable to predict the outcome of this litigation.
Cinergy and PSI
(e) Wabash Valley Power Association, Inc. (WVPA) In February 1989, PSI and
WVPA entered into a settlement agreement to resolve all claims related to
Marble Hill, a nuclear project canceled in 1984. Implementation of the
settlement agreement was contingent upon a number of events, including the
conclusion of WVPA's bankruptcy proceeding and certain regulatory approvals.
In December 1996, following the resolution of issues associated with WVPA's
bankruptcy proceeding, PSI, on behalf of itself and its officers, paid $80
million on behalf of WVPA to the Rural Utilities Service (RUS) and the
National Rural Utilities Cooperative Finance Corporation (CFC). The $80
million obligation, net of insurance proceeds, other credits, and applicable
income tax effects, was charged to income in 1988. On January 2, 1997, an
order dismissing the WVPA litigation against PSI and its officers with
prejudice was entered by the United States District Court for the Southern
District of Indiana.
In accordance with the terms of the settlement agreement, PSI will enter into
a take-or-pay power supply agreement for the sale of firm power to WVPA. The
difference between revenues received from WVPA and costs of the power supplied
under the power supply agreement (the Margin) will be paid annually to the RUS
and CFC to satisfy a $90 million obligation. To the extent the Margin is
insufficient to satisfy the obligation, the deficiency would be recognized as
a loss by PSI. Implementation of the take-or-pay power supply agreement is
subject to completion of negotiations with the RUS regarding the rate of
interest and other payment terms and approval by the FERC of the power supply
agreement.
Cinergy, CG&E, and ULH&P
(f) Potential Divestiture of Gas Operations Under the PUHCA, the divestiture
of CG&E's gas operations may be required. In its order approving the merger,
the SEC reserved judgment over Cinergy's ownership of the gas operations for a
period of three years. In June 1995, the SEC endorsed recommendations for
reform/repeal of the PUHCA, including allowing registered holding companies to
own combination electric and gas utility companies, provided the affected
states agree. It is expected that legislation addressing repeal of the PUHCA
and industry restructuring will be introduced in Congress during 1997.
Regardless of the outcome of the proposals to reform/repeal the PUHCA, Cinergy
believes it has a justifiable basis for retention of its gas operations and
will continue its pursuit of SEC approval. If divestiture is ultimately
required, the SEC has historically allowed companies sufficient time to
accomplish divestitures in a manner that protects shareholder value. (See
Note 15 for financial information by business segment.)
Cinergy
(g) Windfall Profits Levy As of December 31, 1996, a contingency involving
Midlands, which existed as of the date of its acquisition by Avon Energy,
remains unresolved. Certain members of the British Parliament are calling for
a windfall profits levy against businesses which had previously been owned and
operated by the government. The manner in which this levy would be calculated
and paid, as well as which privatized companies would be included in such a
levy remain unclear, although it is almost certain that companies such as
Midlands would be included. Because of the uncertainty surrounding this
issue, as of December 31, 1996, no liability for the levy has been recorded by
either Midlands or Avon Energy.
General elections in Great Britain are required to be held no later than May
1997. If those individuals calling for the windfall profits levy gain control
of government in the general elections, it is probable that Midlands and Avon
Energy will have sufficient information to determine the form of the levy,
quantify the amount, and determine the appropriate accounting treatment during
the second quarter of 1997. Although the total amount to be raised by such a
levy has not been quantified by those suggesting it, estimates of the amount
made by members of the British press and financial community have ranged from
3 billion to 5 billion pounds sterling (approximately $5 billion to $9
billion). These same estimates have indicated Midlands' apportionment to be
in the range of 60 million to 210 million pounds sterling (approximately $100
million to $350 million), depending on the manner in which the levy is
calculated and which companies are included in the levy.
Cinergy, CG&E, and PSI
13. Jointly Owned Plant
PSI is a joint owner of Gibson Unit 5 with WVPA and the Indiana Municipal
Power Agency (IMPA). Additionally, PSI is a co-owner with WVPA and IMPA of
certain transmission property and local facilities. These facilities
constitute part of the integrated transmission and distribution systems which
are operated and maintained by PSI. CG&E, Columbus Southern Power Company,
and The Dayton Power and Light Company have constructed electric generating
units and related transmission facilities on varying common ownership bases.
The Consolidated Statements of Income reflect PSI's and CG&E's portions of all
operating costs associated with the commonly owned facilities.
PSI's and CG&E's investments in jointly owned plant are as follows:
<TABLE>
<CAPTION>
1996
Utility Plant Accumulated Construction
Share in Service Depreciation Work in Progress
(dollars in millions)
<S> <C> <C> <C> <C>
PSI
Production
Gibson (Unit 5) 50.05% $ 206 $ 92 $ 1
Transmission and local
facilities 94.22 1 824 635 43
CG&E
Production
Miami Fort Station
(Units 7 and 8) 64 208 111 1
W.C. Beckjord Station
(Unit 6) 37.5 41 24 -
J.M. Stuart Station 39 269 11 4
Conesville Station
(Unit 4) 40 72 35 2
Zimmer 46.5 1 215 204 2
East Bend Station 69 331 157 1
Killen Station 33 186 81 -
Transmission Various 62 30 -
</TABLE>
14. Quarterly Financial Data (unaudited)
Cinergy
Operating Operating Net Earnings
Quarter Ended Revenues Income Income Per Share
(in millions, except per share amounts)
1996
March 31 $ 884 $169 $110 $ .70
June 30 717 113 56(a) .35(a)
September 30 766 150 98 .51(b)
December 31 876 126 71(a) .44(a)
Total $3 243 $558 $335(a) $2.00(a)(b)
1995
March 31 $ 808 $163 $102 $ .65
June 30 666 120 60 .39
September 30 765 169 109 .69
December 31 784 135 76 .49
Total $3 023 $587 $347 $2.22
(a) In 1996, Cinergy recognized charges to earnings of approximately $55
million ($38 million, net of taxes or 24 cents per share) primarily for
charges related to voluntary early retirement and severance programs and
disallowances associated with the PUCO's December 1996 Order in CG&E's
gas rate proceeding. Of these charges, approximately $11 million, net of
taxes or 7 cents per share, was recognized in the second quarter, and
approximately $27 million, net of taxes or 17 cents per share, was
recognized in the fourth quarter. Of the total $55 million charge, $41
million is reflected in "Operating Expenses - Other operation" and $14
million is reflected in "Other Income and Expenses - Net."
(b) In the third quarter of 1996, Cinergy incurred costs of $18 million
or 12 cents per share related to the reacquisition of 90% of CG&E's
preferred stock through a tender offer. (See Note 3(b).)
CG&E
Operating Operating Net
Quarter Ended Revenues Income Income
(in millions)
1996
March 31 $ 575 $120 $ 92
June 30 437 69(a) 39(a)
September 30 431 90 62
December 31 533 73(a) 34(a)
Total $1 976 $352 $227
1995
March 31 $ 525 $109 $ 77
June 30 393 71 40
September 30 435 98 69
December 31 495 82 50
Total $1 848 $360 $236
(a) In 1996, CG&E recognized charges to earnings of approximately $50
million ($35 million, net of taxes) primarily for charges related to
voluntary early retirement and severance programs and disallowances
associated with the PUCO's December 1996 Order in CG&E's gas rate
proceeding. Of these charges, approximately $10 million, net of taxes,
was recognized in the second quarter, and approximately $25 million, net
of taxes, was recognized in the fourth quarter. Of the total $50 million
charge, $36 million is reflected in "Operating Expenses - Other
operation" and $14 million is reflected in "Other Income and Expenses -
Net."
PSI
Operating Operating Net
Quarter Ended Revenues Income Income
(in millions)
1996
March 31 $ 328 $ 50 $ 27
June 30 290 44(a) 25(a)
September 30 348 61 43
December 31 366 51(a) 31(a)
Total $1 332 $206 $126
1995
March 31 $ 299 $ 53 $ 33
June 30 290 49 29
September 30 343 70 50
December 31 316 55 34
Total $1 248 $227 $146
(a) In 1996, PSI recognized charges to earnings of approximately $5
million ($3 million, net of taxes) primarily for charges related to
voluntary early retirement and severance programs. Of these charges,
approximately $1 million, net of taxes, was recognized in the second
quarter, and approximately $2 million, net of taxes, was recognized in
the fourth quarter. The $5 million charge is reflected in "Operating
Expenses - Other operation."
15. Financial Information by Business Segment
Cinergy
Operating
Operating Operating Income Provision for Construction
Year Ended Revenues Income Taxes Depreciation Expenditures
(in millions)
1996
Electric $2 769 $520 $204 $260 $276
Gas 474 38 14 23 32
Total $3 243 $558 $218 $283 $308
1995
Electric $2 612 $548 $209 $258 $286
Gas 411 39 12 22 36
Total $3 023 $587 $221 $280 $322
1994
Electric $2 446 $416 $146 $274 $432
Gas 442 28 8 20 42
Total $2 888 $444 $154 $294 $474
December 31
1996 1995 1994_
(in millions)
Property, Plant, and Equipment - net
Electric $5 737 $5 718 $5 680
Gas 553 532 519
6 290 6 250 6 199
Other Corporate Assets 2 559 1 970 1 951
Total Assets $8 849 $8 220 $8 150
For a discussion of the potential divestiture of CG&E's, including ULH&P's,
gas operations, see Note 12(f).
CG&E
Operating
Operating Operating Income Provision for Construction
Year Ended Revenues Income Taxes Depreciation Expenditures
(in millions)
1996
Electric $1 502 $314 $131 $138 $109
Gas 474 38 14 23 32
Total $1 976 $352 $145 $161 $141
1995
Electric $1 437 $321 $124 $137 $101
Gas 411 39 12 22 36
Total $1 848 $360 $136 $159 $137
1994
Electric $1 346 $263 $ 96 $137 $138
Gas 442 28 8 20 42
Total $1 788 $291 $104 $157 $180
CG&E Continued
December 31
1996 1995 1994_
(in millions)
Property, Plant, and Equipment - net
Electric $3 205 $3 244 $3 277
Gas 553 532 519
3 758 3 776 3 796
Other Corporate Assets 1 209 1 421 1 386
Total Assets $4 967 $5 197 $5 182
For a discussion of the potential divestiture of CG&E's, including ULH&P's,
gas operations, see Note 12(f).
ULH&P
Operating
Operating Operating Income Provision for Construction
Year Ended Revenues Income Taxes Depreciation Expenditures
(in thousands)
1996
Electric $190 900 $12 558 $5 644 $ 6 935 $ 9 571
Gas 76 868 8 476 4 190 4 974 9 073
Total $267 768 $21 034 $9 834 $11 909 $18 644
1995
Electric $187 180 $11 425 $4 500 $ 6 679 $10 909
Gas 70 288 8 405 3 387 4 759 8 063
Total $257 468 $19 830 $7 887 $11 438 $18 972
1994
Electric $177 564 $ 9 736 $3 007 $ 6 213 $12 127
Gas 71 971 6 654 2 335 4 431 8 277
Total $249 535 $16 390 $5 342 $10 644 $20 404
December 31
1996 1995 1994
(in thousands)
Property, Plant, and Equipment - net
Electric $142 490 $138 482 $134 508
Gas 106 791 104 749 102 340
249 281 243 231 236 848
Other Corporate Assets 41 202 56 566 50 280
Total Assets $290 483 $299 797 $287 128
For a discussion of the potential divestiture of ULH&P's gas operations, see
Note 12(f).
16. Subsequent Events (unaudited)
(a) Money Pool In March 1997, Cinergy's utility subsidiaries, including CG&E,
PSI, and ULH&P and other Cinergy system companies, which participate in the
money pooling arrangement, filed an application with the SEC under the PUHCA
requesting reauthorization of the money pool through December 31, 2002. (See
Note 5.)
(b) Forward Exchange Hedging Activity In February 1997, Cinergy entered into
a five year currency swap for the purpose of hedging its pound sterling
denominated investment in Midlands. This transaction closed out the forward
exchange contract in existence at December 31, 1996. (See Note 8(a)(i).)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Cinergy, CG&E, PSI, and ULH&P
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Board of Directors
Cinergy
Reference is made to Cinergy Corp.'s, a Delaware corporation (Cinergy or
Company) 1997 Proxy Statement with respect to identification of directors and
their current principal occupations.
CG&E
The directors of The Cincinnati Gas & Electric Company (CG&E) at February 28,
1997, included:
Jackson H. Randolph Mr. Randolph, age 66, is Chairman of CG&E. He has served
as a director of CG&E since 1983, and his current term as director expires
April 16, 1997.
James E. Rogers Mr. Rogers, age 49, is Vice Chairman and Chief Executive
Officer of CG&E. He has served as a director of CG&E since October 24, 1994,
and his current term as director expires April 16, 1997.
William J. Grealis Mr. Grealis, age 51, is President of CG&E. He has served
as a director of CG&E since September 1, 1995, and his current term expires
April 16, 1997.
PSI
Reference is made to PSI Energy, Inc.'s (PSI) 1997 Information Statement with
respect to identification of directors and their current principal
occupations.
ULH&P
Omitted pursuant to Instruction I(2)(c).
Executive Officers
Cinergy, CG&E, and PSI
The information included in Part I of this report on pages 17 through 19 under
the caption "Executive Officers of the Registrants" is referenced in reliance
upon General Instruction G to Form 10-K and Instruction 3 to Item 401(b) of
Regulation S-K.
ULH&P
Omitted pursuant to Instruction I(2)(c).
ITEM 11. EXECUTIVE COMPENSATION
Cinergy
Reference is made to Cinergy's 1997 Proxy Statement with respect to executive
compensation.
CG&E
Reference is made to Cinergy's 1997 Proxy Statement with respect to executive
compensation, except as to information pertaining to the compensation of
directors and to the performance graph, which information is set forth below.
Compensation of Directors
Directors who are not employees (the "non-employee directors") receive an
annual retainer fee of $8,000 plus a fee of $1,000 for each CG&E board of
directors' meeting attended; however, any non-employee director of CG&E who
also serves as a non-employee director of Cinergy or any of its affiliates
shall neither receive such annual retainer fee, nor any compensation for
attendance at any CG&E board meeting that is held concurrently or consecutively
with a meeting of the board of directors of Cinergy. Directors who are also
employees of Cinergy or any of its subsidiaries (Messrs. Randolph, Rogers, and
Grealis) will receive no remuneration for their services as directors.
Under Cinergy's Directors' Deferred Compensation Plan, each non-employee
director of Cinergy or any of its subsidiaries may defer fees and have them
accrued either in cash or in units representing shares of Cinergy common stock.
If deferred in such units, the stock will be distributed to the director at the
time of retirement from the appropriate board. Amounts deferred in cash will
be paid at the same time.
Under Cinergy's Retirement Plan for Directors, non-employee directors with
five or more years of service will receive annual retirement compensation in
an amount equal to the annual Cinergy board retainer fee in effect at the time
of termination of service as a director, plus the product of the fee paid for
attendance at a Cinergy board meeting multiplied by five. Retirement
compensation is paid for as many years as the director served on the Cinergy
board. This plan covers non-employee directors serving on the boards of
directors of Cinergy, Services, CG&E, or PSI. Prior service by non-employee
directors of CG&E, PSI, or Resources is credited under this plan.
Performance Graph
The following line graph compares the cumulative total shareholder return of
the common stock of CG&E with the cumulative total returns during the same
time period of the Standard & Poor's (S&P) Electric Utilities Index and the
S&P 500 Stock Index. The graph tracks performance from January 1, 1992,
through October 24, 1994, the final trading date of CG&E's common stock. The
graph assumes a $100 investment on January 1, 1992, and reinvestment of all
dividends.
[Omitted is a line graph illustrating the following data.]
1/1/92 1/1/93 1/1/94 10/24/94
CG&E Common Stock $100.00 $ 99.50 $117.20 $103.10
S&P Electric Utilities Index $100.00 $105.90 $119.20 $ 98.40
S&P 500 Stock Index $100.00 $107.60 $118.40 $119.50
PSI
Reference is made to PSI's 1997 Information Statement with respect to
executive compensation.
ULH&P
Omitted pursuant to Instruction I(2)(c).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Cinergy
Reference is made to Cinergy's 1997 Proxy Statement with respect to security
ownership of certain beneficial owners and management.
CG&E
Cinergy owns all the outstanding shares of common stock of CG&E. Pursuant to
Section 13(d) of the Securities Exchange Act of 1934, a beneficial owner of a
security is any person who directly or indirectly has or shares voting or
investment power over such security. No person or group is known by management
of CG&E to be the beneficial owner of more than 5% of CG&E's class of
cumulative preferred stock as of December 31, 1996.
CG&E's directors and executive officers did not beneficially own any shares of
any series of the class of CG&E's cumulative preferred stock as of December
31, 1996. The beneficial ownership of Cinergy's common stock held by each
director and named executive officer as of December 31, 1996 is set forth in
the following table.
Amount and Nature
Name of Beneficial Owner(1) of Beneficial Ownership (2)
William J. Grealis 22,710 shares
J. Wayne Leonard 96,651 shares
Jackson H. Randolph 129,893 shares
James E. Rogers 218,171 shares
Larry E. Thomas 88,441 shares
All directors and executive 736,563 shares (2)
officers as a group (representing 0.47% of the class)
(1) No individual listed beneficially owned more than 0.14% of the
outstanding shares of Cinergy common stock.
(2) Includes shares which there is a right to acquire within 60 days
pursuant to the exercise of stock options in the following amounts: Mr.
Grealis - 15,887; Mr. Leonard - 77,611; Mr. Randolph - 50,000; Mr.
Rogers - 95,629; Mr. Thomas - 54,104; and all directors and executive
officers as a group - 414,861.
PSI
Reference is made to PSI's 1997 Information Statement with respect to security
ownership of certain beneficial owners and management.
ULH&P
Omitted pursuant to Instruction I(2)(c).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cinergy, CG&E, and PSI
None.
ULH&P
Omitted pursuant to Instruction I(2)(c).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules.
Cinergy, CG&E, PSI, and ULH&P
Refer to the page captioned "Index to Financial Statements and Financial
Statement Schedules", pages 48 and 49 of this report, for an index of the
financial statements and financial statement schedules included in this
report.
(b) Reports on Form 8-K.
Cinergy, CG&E, PSI, and ULH&P
None
Copies of the documents listed below which are identified with an asterisk (*)
have heretofore been filed with the SEC and are incorporated herein by
reference and made a part hereof. Exhibits identified with a pound sign (#)
are being filed herewith by the registrant identified in the exhibit
discussion below and are incorporated herein by reference with respect to any
other designated registrant. Exhibits not so identified are filed herewith
Exhibit
Designation Nature of Exhibit_______________
Cinergy
3-a *Certificate of Incorporation of Cinergy Corp.,
a Delaware corporation (Cinergy or Company).
(Exhibit to Cinergy's 1993 Form 10-K in File No.
1-11377.)
3-b *By-laws of Cinergy as amended January 25, 1996.
(Exhibit to Cinergy's Form U-1 Declaration filed
February 23, 1996, in File No. 70-8807.)
Exhibit
Designation Nature of Exhibit_______________
CG&E
3-c *Amended Articles of Incorporation of The
Cincinnati Gas & Electric Company (CG&E) effective
October 23, 1996. (Exhibit to CG&E's September
30, 1996, Form 10-Q in File No. 1-1232.)
3-d *Regulations of CG&E as amended, adopted April
25, 1996. (Exhibit to CG&E's March 31, 1996, Form
10-Q in File No. 1-1232.)
PSI
3-e *Amended Articles of Consolidation of PSI
Energy, Inc. (PSI), as amended to April 20, 1995.
(Exhibit to PSI's June 30, 1995, Form 10-Q in
File No. 1-3543.)
3-f *By-laws of PSI, as amended October 22, 1996.
(Exhibit to PSI's September 30, 1996, Form 10-Q in
File No. 1-3543.)
ULH&P
3-g *Restated Articles of Incorporation made
effective May 7, 1976. (Exhibit to The Union
Light, Heat and Power Company's (ULH&P) Form 8-K,
May 1976.)
3-h *By-laws of ULH&P as amended, adopted May 8,
1996. (Exhibit to ULH&P's March 31, 1996,
1997. Form 10-Q in File No. 2-7793.)
Cinergy and PSI
4-a *Original Indenture (First Mortgage Bonds) dated
September 1, 1939, between PSI and The First
National Bank of Chicago, as Trustee (Exhibit A-
Part 3 in File No. 70-258), and LaSalle National
Bank as Successor Trustee (Supplemental Indenture
dated March 30, 1984).
4-b *Nineteenth Supplemental Indenture between PSI
and The First National Bank of Chicago dated
January 1, 1972. (Exhibit to File No. 2-42545.)
4-c *Twenty-third Supplemental Indenture between PSI
and The First National Bank of Chicago dated
January 1, 1977. (Exhibit to File No. 2-57828.)
Exhibit
Designation Nature of Exhibit_______________
4-d *Twenty-fifth Supplemental Indenture between PSI
and The First National Bank of Chicago dated
September 1, 1978. (Exhibit to File No. 2-62543.)
4-e *Twenty-seventh Supplemental Indenture between
PSI and The First National Bank of Chicago dated
March 1, 1979. (Exhibit to File No. 2-63753.)
4-f *Thirty-fifth Supplemental Indenture between PSI
and The First National Bank of Chicago dated March
30, 1984. (Exhibit to PSI's 1984 Form 10-K in
File No. 1-3543.)
4-g *Thirty-ninth Supplemental Indenture between PSI
and The First National Bank of Chicago dated March
15, 1987. (Exhibit to PSI's 1987 Form 10-K in
File No. 1-3543.)
4-h *Forty-first Supplemental Indenture between PSI
and The First National Bank of Chicago dated June
15, 1988. (Exhibit to PSI's 1988 Form 10-K in
File No. 1-3543.)
4-i *Forty-second Supplemental Indenture between PSI
and The First National Bank of Chicago dated
August 1, 1988. (Exhibit to PSI's 1988 Form 10-K
in File No. 1-3543.)
4-j *Forty-fourth Supplemental Indenture between PSI
and The First National Bank of Chicago dated March
15, 1990. (Exhibit to PSI's 1990 Form 10-K in
File No. 1-3543.)
4-k *Forty-fifth Supplemental Indenture between PSI
and The First National Bank of Chicago dated March
15, 1990. (Exhibit to PSI's 1990 Form 10-K in
File No. 1-3543.)
4-l *Forty-sixth Supplemental Indenture between PSI
and The First National Bank of Chicago dated June
1, 1990. (Exhibit to PSI's 1991 Form 10-K in File
No. 1-3543.)
4-m *Forty-seventh Supplemental Indenture between
PSI and The First National Bank of Chicago dated
July 15, 1991. (Exhibit to PSI's 1991 Form 10-K
in File No. 1-3543.)
4-n *Forty-eighth Supplemental Indenture between PSI
and The First National Bank of Chicago dated July
15, 1992. (Exhibit to PSI's 1992 Form 10-K in
File No. 1-3543.)
Exhibit
Designation Nature of Exhibit_______________
4-o *Forty-ninth Supplemental Indenture between
PSI and The First National Bank of Chicago
dated February 15, 1993. (Exhibit to PSI's
1992 Form 10-K in File No. 1-3543.)
4-p *Fiftieth Supplemental Indenture between PSI and
The First National Bank of Chicago dated February
15, 1993. (Exhibit to PSI's 1992 Form 10-K in
File No. 1-3543.)
4-q *Fifty-first Supplemental Indenture between PSI and
The First National Bank of Chicago dated February
1, 1994. (Exhibit to PSI's 1993 Form 10-K in File
No. 1-3543.)
4-r *Indenture (Secured Medium-term Notes, Series
A), dated July 15, 1991, between PSI and The First
National Bank of Chicago, as Trustee. (Exhibit to
PSI's Form 10-K/A, Amendment No. 2, dated July 15,
1993, in File No. 1-3543.)
4-s *Indenture (Secured Medium-term Notes, Series
B), dated July 15, 1992, between PSI and The First
National Bank of Chicago, as Trustee. (Exhibit to
PSI's Form 10-K/A, Amendment No. 2, dated July 15,
1993, in File No. 1-3543.)
4-t *Loan Agreement between PSI and the City of
Princeton, Indiana dated as of November 7, 1996.
(Exhibit to PSI's September 30, 1996, Form 10-Q in
File No. 1-3543.)
4-u #Loan Agreement between PSI and the City of
Princeton, Indiana dated as of February 1, 1997.
(Exhibit to Cinergy's 1996 Form 10-K in File No.
1-11377.)
4-v #Indenture dated November 15, 1996, between PSI
and The Fifth Third Bank, as Trustee. (Exhibit to
Cinergy's 1996 Form 10-K in File No. 1-11377.)
4-w #First Supplemental Indenture (6.35% due 2006)
dated November 15, 1996, between PSI and The Fifth
Third Bank, as Trustee. (Exhibit to Cinergy's 1996
Form 10-K in File No. 1-11377.)
4-x #Second Supplemental Indenture (6.25% due 2005)
dated December 15, 1996, between PSI and The Fifth
Third Bank, as Trustee. (Exhibit to Cinergy's 1996
Form 10-K in File No. 1-11377.)
Exhibit
Designation Nature of Exhibit_______________
4-y *Original Indenture (First Mortgage Bonds) between
CG&E and The Bank of New York (as Trustee) dated
as of August 1, 1936. (Exhibit to CG&E's
Registration Statement No. 2-2374.)
4-z *Tenth Supplemental Indenture between CG&E and The
Bank of New York dated as of July 1, 1967.
(Exhibit to CG&E's Registration Statement No. 2-
26549.)
4-aa *Eleventh Supplemental Indenture between CG&E and
The Bank of New York dated as of May 1, 1969.
(Exhibit to CG&E's Registration Statement No. 2-
32063.)
4-bb *Thirteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of November 1,
1971. (Exhibit to CG&E's Registration Statement
No. 2-41974.)
4-cc *Fourteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of November 2,
1972. (Exhibit to CG&E's Registration Statement
No. 2-60961.)
4-dd *Fifteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of August 1,
1973. (Exhibit to CG&E's Registration Statement
No. 2-60961.)
4-ee *Thirty-second Supplemental Indenture between
CG&E and The Bank of New York dated as of December
15, 1991. (Exhibit to CG&E's Registration
Statement No. 33-45115.)
4-ff *Thirty-third Supplemental Indenture between
CG&E and The Bank of New York dated as of
September 1, 1992. (Exhibit to CG&E's
Registration Statement No. 33-53578.)
4-gg *Thirty-fourth Supplemental Indenture between
CG&E and The Bank of New York dated as of October
1, 1993. (Exhibit to CG&E's September 30, 1993,
Form 10-Q in File No. 1-1232.)
Exhibit
Designation Nature of Exhibit_______________
4-hh *Thirty-fifth Supplemental Indenture between
CG&E and The Bank of New York dated as of January
1, 1994. (Exhibit to CG&E's Registration
Statement No. 33-52335.)
4-ii *Thirty-sixth Supplemental Indenture between
CG&E and The Bank of New York dated as of February
15, 1994. (Exhibit to CG&E's Registration
Statement No. 33-52335.)
4-jj #Thirty-seventy Supplemental Indenture between
CG&E and The Bank of New York dated as of October
4, 1996. (Exhibit to Cinergy's 1996 Form 10-K in
File No. 1-11377.)
4-kk *Loan Agreement between CG&E and County of
Boone, Kentucky dated as of February 1, 1985.
(Exhibit to CG&E's 1984 Form 10-K in File No. 1-
1232.)
4-ll *Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
December 1, 1985. (Exhibit to CG&E's 1985 Form
10-K in File No. 1-1232.)
4-mm *Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
December 1, 1985. (Exhibit to CG&E's 1985 Form
10-K in File No. 1-1232.)
4-nn *Repayment Agreement between CG&E and The Dayton
Power and Light Company dated as of December 23,
1992. (Exhibit to CG&E's 1992 Form 10-K in File
No. 1-1232.)
4-oo *Loan Agreement between CG&E and State of Ohio
Water Development Authority dated as of January 1,
1994. (Exhibit to CG&E's 1993 Form 10-K in File
No. 1-1232.)
4-pp *Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
January 1, 1994. (Exhibit to CG&E's 1993 Form 10-
K in File No. 1-1232.)
4-qq *Loan Agreement between CG&E and County of
Boone, Kentucky dated as of January 1, 1994.
(Exhibit to CG&E's 1993 Form 10-K in File No. 1-
1232.)
Exhibit
Designation Nature of Exhibit_______________
4-rr *Original Indenture (Unsecured Debt Securities)
between CG&E and The Fifth Third Bank dated as of
May 15, 1995. (Exhibit to CG&E's Form 8-A dated
July 24, 1995, in File No. 1-1232.)
4-ss *First Supplemental Indenture between CG&E and
The Fifth Third Bank dated as of June 1, 1995.
(Exhibit to CG&E's June 30, 1995, Form 10-Q in
File No. 1-1232.)
4-tt *Second Supplemental Indenture between CG&E and
The Fifth Third Bank dated as of June 30, 1995.
(Exhibit to CG&E's Form 8-A dated July 24, 1995,
in File No. 1-1232.)
4-uu *Loan Agreement between CG&E and the State of
Ohio Air Quality Development Authority dated as of
September 13, 1995. (Exhibit to CG&E's September
30, 1995, Form 10-Q in File No. 1-1232.)
4-vv *Loan Agreement between CG&E and the State of
Ohio Air Quality Development Authority dated as
of September 13, 1995. (Exhibit to CG&E's
September 30, 1995, Form 10-Q in File No.
1-1232.)
Cinergy, CG&E, and ULH&P
4-ww *Original Indenture (First Mortgage Bonds)
between ULH&P and The Bank of New York dated as of
February 1, 1949. (Exhibit to ULH&P's
Registration Statement No. 2-7793.)
4-xx *Fifth Supplemental Indenture between ULH&P and
The Bank of New York dated as of January 1, 1967.
(Exhibit to CG&E's Registration Statement No. 2-
60961.)
4-yy *Seventh Supplemental Indenture between ULH&P
xand The Bank of New York dated as of October 1,
1973. (Exhibit to CG&E's Registration Statement
No. 2-60961.)
4-zz *Eighth Supplemental Indenture between ULH&P and
The Bank of New York dated as of December 1, 1978.
(Exhibit to CG&E's Registration Statement No. 2-
63591.)
Exhibit
Designation Nature of Exhibit_______________
4-aaa *Thirteenth Supplemental Indenture between ULH&P
and The Bank of New York dated as of August 1,
1992. (Exhibit to ULH&P's 1992 Form 10-K in File
No. 2-7793.)
4-bbb *Original Indenture (Unsecured Debt
Securities) between ULH&P and the Fifth Third
Bank dated as of July 1, 1995. (Exhibit to
ULH&P's June 30, 1995, Form 10-Q in File No. 2-
7793)
4-ccc *First Supplemental Indenture between ULH&P
and The Fifth Third Bank dated as of July 15,
(Exhibit to ULH&P's June 30, 1995, Form 10-Q
in File No. 2-7793.)
Cinergy, CG&E, and PSI
10-a *+Amended and Restated Employment Agreement
dated October 24, 1994, among CG&E, Cinergy Corp.
(an Ohio corporation), Cinergy (a Delaware
corporation), PSI Resources, Inc., PSI, and
Jackson H. Randolph. (Exhibit to Cinergy's 1994
Form 10-K in File No. 1-11377.)
10-b *+Amended and Restated Employment Agreement
dated July 2, 1993, among PSI Resources, Inc.,
PSI, CG&E, Cinergy, Cinergy Sub, Inc., and James
E. Rogers, Jr. (Exhibit to Cinergy's Amendment
No. 3 to Form S-4, filed October 8, 1993.)
10-c *+First Amendment to Amended and Restated
Employment Agreement dated December 12, 1995,
retroactively effective to October 24, 1994,
amended and restated July 2, 1993, among Cinergy,
Cinergy Services, Inc. (Services), CG&E, PSI, and
James E. Rogers. (Exhibit to Cinergy's, 1995 Form
10-K in File No. 1-11377.)
10-d *+Employment Agreement dated January 1, 1995,
among Cinergy, CG&E, Services, Investments, PSI,
and William J. Grealis. (Exhibit to Cinergy's 1994
Form 10-K in File No. 1-11377.)
10-e *+Employment Agreement dated October 24, 1994,
among Cinergy, Services, CG&E, PSI, and Larry E.
Thomas. (Exhibit to Cinergy's 1995 Form 10-K in
File No. 1-11377.)
Exhibit
Designation Nature of Exhibit_______________
10-f *+First Amendment to Employment Agreement dated
October 24, 1994, among Cinergy, Services, CG&E,
PSI, and Larry E. Thomas. (Exhibit to Cinergy's
1995 Form 10-K in File No. 1-11377.)
10-g *+Employment Agreement dated October 24, 1994,
among Cinergy, Services, CG&E, PSI, and J. Wayne
Leonard. (Exhibit to Cinergy's 1995 Form 10-K in
File No. 1-11377.)
10-h *+First Amendment to Employment Agreement dated
October 24, 1994, among Cinergy, Services, CG&E,
PSI, and J. Wayne Leonard. (Exhibit to Cinergy's
1995 Form 10-K in File No. 1-11377.)
10-I *+Employment Agreement dated October 24, 1994,
among Cinergy, Services, CG&E, PSI, and Cheryl M.
Foley. (Exhibit to Cinergy's, 1995 Form 10-K in
File No. 1-11377.)
10-j *+First Amendment to Employment Agreement dated
October 24, 1994, among Cinergy, Services, CG&E,
PSI, and Cheryl M. Foley. (Exhibit to Cinergy's
1995 Form 10-K in File No. 1-11377.)
10-k #+Employment Agreement dated June 1, 1996, among
Cinergy, Services, CG&E, PSI, and Elizabeth K.
Lanier. (Exhibit to Cinergy's 1996 Form 10-K in
File No. 1-11377.)
Cinergy and PSI
10-l #PSI Union Employees' 401(k) Savings Plan,
amended and restated December 17, 1996, with
various effective dates. (Exhibit to Cinergy's
1996 Form 10-K in File No. 1-11377.)
10-m #PSI Employees' 401(k) Savings Plan, amended and
restated December 17, 1996, with various effective
dates. (Exhibit to Cinergy's 1996 Form 10-K in
File No. 1-11377.)
10-n *+First Amendment to the PSI Union Employees'
401(k) Savings Plan, dated December 31, 1995.
(Exhibit to Cinergy's 1995 Form 10-K in File No.
1-11377.)
Exhibit
Designation Nature of Exhibit_______________
10-o *+First Amendment to the PSI Employees' 401(k)
Savings Plan, dated December 31, 1995. (Exhibit to
Cinergy's 1995 Form 10-K in File No. 1-11377.)
10-p *+Employment Agreement dated October 4, 1993,
among Cinergy, PSI, and John M. Mutz. (Exhibit to
PSI Resources, Inc.'s September 30, 1993, Form 10-
Q, File No. 1-9941.)
10-q +First Amendment to Employment Agreement dated
August 30, 1996, among Cinergy, PSI, and John M.
Mutz.
10-r *+Deferred Compensation Agreement, effective as
of January 1, 1992, between Cinergy and James E.
Rogers, Jr. (Exhibit to PSI's Form 10-K/A in File
No. 1-3543, Amendment No. 1, dated April 29,
1993.)
10-s *+Split Dollar Life Insurance Agreement,
effective as of January 1, 1992, between Cinergy
and James E. Rogers, Jr. (Exhibit to PSI's Form
10-K/A in File No. 1-3543, Amendment No. 1, dated
April 29, 1993.)
10-t *+First Amendment to Split Dollar Life Insurance
Agreement between Cinergy and James E. Rogers,
Jr. dated December 11, 1992. (Exhibit to PSI's
Form 10-K/A in File No. 1-3543, Amendment No. 1,
dated April 29, 1993.)
10-u *+PSI Supplemental Retirement Plan amended and
restated December 16, 1992, retroactively
effective January 1, 1989. (Exhibit to PSI's 1992
Form 10-K in File No. 1-3543.)
10-v *+PSI Excess Benefit Plan, formerly named the
Supplemental Pension Plan, amended and restated
December 16, 1992, retroactively effective January
1, 1989. (Exhibit to PSI's 1992 Form 10-K in File
No. 1-3543.)
Cinergy and CG&E
10-w #CG&E Deferred Compensation and Investment Plan,
as amended, retroactively effective January 1,
1995. (Exhibit to Cinergy's 1996 Form 10-K in
File No. 1-11377.)
Exhibit
Designation Nature of Exhibit_______________
10-x #CG&E Savings Incentive Plan, amended,
retroactively effective January 1, 1995. (Exhibit
to Cinergy's 1996 Form 10-K in File No. 1-11377.)
10-y *+Deferred Compensation Agreement between
Jackson H. Randolph and Cinergy dated January 1,
1992. (Exhibit to CG&E's 1992 Form 10-K in File
No. 1-1232.)
10-z *+Supplemental Executive Retirement Income Plan
between CG&E and certain executive officers.
(Exhibit to CG&E's 1988 Form 10-K in File No. 1-
1232.)
10-aa *+Amendment to Supplemental Executive Retirement
Income Plan between CG&E and certain executive
officers. (Exhibit to CG&E's 1992 Form 10-K in
File No 1-1232.)
10-bb *+Amended and Restated Supplemental Retirement
Income Plan between CG&E and Jackson H. Randolph.
(Exhibit to Cinergy's, 1995 Form 10-K in File No.
1-11377.)
10-cc *+Amendment to Executive Severance Agreement
between CG&E and certain executive officers.
(Exhibit to CG&E's 1992 Form 10-K in File No. 1-
1232.)
10-dd *+Executive Severance Agreement between CG&E and
certain executive officers. (Exhibit to CG&E's
1989 Form 10-K in File No. 1-1232.)
Cinergy
10-ee *+Cinergy Stock Option Plan, amended October 22,
1996, effective November 1, 1996. (Exhibit to
Cinergy's September 30, 1996, Form 10-Q in File
No. 1-11377.)
10-ff *+Cinergy Performance Shares Plan, amended
October 22, 1996, effective November 1, 1996.
(Exhibit to Cinergy's September 30, 1996, Form 10-
Q in File No. 1-11377.)
10-gg +Cinergy Annual Incentive Plan, amended January
25, 1996, effective January 1, 1996.
Exhibit
Designation Nature of Exhibit_______________
10-hh *Cinergy Employee Stock Purchase and Savings
Plan, adopted October 18, 1994, effective October
24, 1994. (Exhibit to Cinergy's Form S-8, filed
October 19, 1994.)
10-ii *Amendment to Cinergy's Employee Stock Purchase
and Savings Plan, adopted April 26, 1996.
(Exhibit to Cinergy's June 30, 1996 Form 10-Q in
File No. 1-11377.)
10-jj *Amendment to Cinergy's Employee Stock Purchase
and Savings Plan, adopted October 22, 1996.
(Exhibit to Cinergy's September 30, 1996, Form 10-
Q in File No. 1-11377.)
10-kk *+Cinergy Directors' Deferred Compensation Plan,
adopted October 18, 1994, effective October 24,
1994. (Exhibit to Cinergy's Form S-8, filed
October 19, 1994.)
10-ll *+Amendment to Cinergy's Directors' Deferred
Compensation Plan, adopted October 22, 1996.
(Exhibit to Cinergy's September 30, 1996, Form
10-Q in File No. 1-11377.)
10-mm *+Cinergy Retirement Plan for Directors, adopted
October 18, 1994, effective October 24, 1994.
(Exhibit to Cinergy's 1994 Form 10-K in File No.
1-11377.)
10-nn *+Cinergy Executive Supplemental Life Insurance
Program adopted October 18, 1994, effective
October 24, 1994, consisting of Defined Benefit
Deferred Compensation Agreement, Executive
Supplemental Life Insurance Program Split Dollar
Agreement I, and Executive Supplemental Life
Insurance Program Split Dollar Agreement II.
(Exhibit to Cinergy's 1994 Form 10-K in File No.
1-11377.)
10-oo *+Split Dollar Insurance Agreement, effective as
of May 1, 1993, between Cinergy and Jackson H.
Randolph. (Exhibit to Cinergy's 1994 Form 10-K in
File No. 1-11377.)
10-pp *+Cinergy's 1996 Long-Term Incentive
Compensation Plan, adopted April 26, 1996.
(Exhibit to Cinergy's Schedule 14A Definitive
Proxy Statement filed March 13, 1996, in File No.
1-11377.)
Exhibit
Designation Nature of Exhibit_______________
10-qq *+Amendment to Cinergy's 1996 Long-Term
Incentive Compensation Plan, adopted October 22,
1996, (Exhibit to Cinergy's September 30, 1996,
Form 10-Q in File No. 1-11377.)
10-rr +Cinergy's 401(k)Excess Plan, adopted
December 17, 1996.
10-ss +Cinergy's Nonqualified Deferred Incentive
Compensation Plan, adopted December 17,
1996.
Cinergy
21 Subsidiaries of Cinergy
Cinergy, CG&E, PSI, and ULH&P
23 Consent of Independent Public Accountants.
24 Power of Attorney.
27 Financial Data Schedules (included in
electronic submission only).
+ Management contract, compensation plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
<TABLE>
<CAPTION>
CINERGY CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Col. A Col. B Col. C Col. D Col. E _
Additions Deductions
For Purposes
Balance at Charged For Which Balance at
Beginning Charged to to Other Reserves Were Close of
Description of Period Income Accounts Created Other Period _
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Accumulated Provisions Deducted from
Applicable Assets
Allowance for Doubtful Accounts
1996 $94 409 $22 341 $ 9 503 $115 635 $ - $10 618
1995 $90 547 $33 921 $(8 489) $ 21 570 $ - $94 409 1/
1994 $93 735 $31 145 $15 010 $ 49 343 $ - $90 547 2/
<FN>
1/ Includes $84,049 for the WVPA Marble Hill receivable. See Note 12(e) of the "Notes to Financial Statements" in
"Item 8. Financial Statements and Supplementary Data."
2/ Includes $80,832 for the WVPA Marble Hill receivable. See Note 12(e) of the "Notes to Financial Statements" in
"Item 8. Financial Statements and Supplementary Data."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS AND ELECTRIC COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Col. A Col. B Col. C Col. D Col. E _
Additions Deductions
For Purposes
Balance at Charged For Which Balance at
Beginning Charged to to Other Reserves Were Close of
Description of Period Income Accounts Created Other Period _
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Accumulated Provisions Deducted from
Applicable Assets
Allowance for Doubtful Accounts
1996 $9 615 $17 297 $ 6 669 $24 403 $ - $9 178
1995 $8 999 $27 623 $(8 496) $18 511 $ - $9 615
1994 $14 906 $25 598 $15 010 $46 515 $ - $8 999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Col. A Col. B Col. C Col. D Col. E
Additions _ Deductions _ _
For Purposes
Balance at Charged For Which Balance at
Beginning Charged to to Other Reserves Were Close of
Description of Period Income Accounts Created Other Period _
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Accumulated Provisions Deducted from
Applicable Assets
Allowance for Doubtful Accounts
1996 $84 517 $5 041 $2 834 $91 123 $ - $ 1 269
1995 $81 272 $6 100 $ 7 $ 2 862 $ - $84 517 1/
1994 $78 567 $5 495 $ - $ 2 790 $ - $81 272 2/
<FN>
1/ Includes $84,049 for the WVPA Marble Hill receivable. See Note 12(e) of the "Notes to Financial Statements" in "Item
8. Financial Statements and Supplementary Data."
2/ Includes $80,832 for the WVPA Marble Hill receivable. See Note 12(e) of the "Notes to Financial Statements" in "Item
8. Financial Statements and Supplementary Data."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
Col. A Col. B Col. C Col. D Col. E
Additions Deductions
For Purposes
Balance at Charged For Which Balance at
Beginning Charged to to Other Reserves Were Close of
Description of Period Income Accounts Created Other Period _
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Accumulated Provisions Deducted from
Applicable Assets
Allowance for Doubtful Accounts
1996 $1 035 $1 862 $1 577 $3 450 $ - $1 024
1995 $ 457 $3 010 $ - $2 432 $ - $1 035
1994 $1 609 $2 502 $ 11 $3 665 $ - $ 457
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Cinergy Corp., The Cincinnati Gas & Electric Company,
PSI Energy, Inc., and The Union Light, Heat and Power Company have each duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Dated: March 27, 1997
By James E. Rogers
Vice Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrants and in the capacities and on the dates indicated.
Signature Title Date
Cinergy, CG&E, PSI, and ULH&P
Jackson H. Randolph Chairman
Cinergy
Neil A. Armstrong Director
Phillip R. Cox Director
Kenneth M. Duberstein Director
George C. Juilfs Director
Melvin Perelman Director
Thomas E. Petry Director
John J. Schiff, Jr. Director
Philip R. Sharp Director
Dudley S. Taft Director
Oliver W. Waddell Director
Cinergy and PSI
James K. Baker Director
Michael G. Browning Director
John A. Hillenbrand II Director
Van P. Smith Director
CG&E and ULH&P
William J. Grealis President and Director
PSI
John M. Mutz President and Director
ULH&P
Cheryl M. Foley Vice President, General Counsel,
Secretary, and Director
Larry E. Thomas Group Vice President and Director
Cinergy, CG&E, PSI, and ULH&P
James E. Rogers Vice Chairman, Chief March 27, 1997
Attorney-in-fact for all Executive Officer, and Director
the foregoing persons President of Cinergy
(Principal Executive Officer)
J. Wayne Leonard Group Vice President and March 27, 1997
Chief Financial Officer
Director of ULH&P
(Principal Financial Officer)
Charles J. Winger Comptroller March 27, 1997
(Principal Accounting Officer)
LOAN AGREEMENT
between
CITY OF PRINCETON, INDIANA
and
PSI ENERGY, INC.
_______________________________
$35,000,000
City of Princeton, Indiana
Pollution Control
Revenue Refunding Bonds, 1997 Series
(PSI Energy, Inc. Project)
_______________________________
Dated
as of
February 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
Section 1.1. Use of Defined Terms 2
Section 1.2. Definitions 2
Section 1.3. Interpretation 7
Section 1.4. Captions and Headings 8
ARTICLE II REPRESENTATIONS 9
Section 2.1. Representations of the Issuer 9
Section 2.2. No Warranty by Issuer of Condition or
Suitability of the Project 9
Section 2.3. Representations and Covenants of the
Company 9
ARTICLE III COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS 13
Section 3.1. Acquisition, Construction and
Installation 13
Section 3.2. Project Description 13
Section 3.3. Issuance of the Bonds; Application of
Proceeds 13
Section 3.4. Investment of Fund Moneys 14
Section 3.5. Rebate Fund 14
ARTICLE IV LOAN BY ISSUER; LOAN
PAYMENTS; ADDITIONAL PAYMENTS; AND
CREDIT FACILITY 15
Section 4.1. Loan Repayment 15
Section 4.2. Additional Payments 15
Section 4.3. Place of Payments 16
Section 4.4. Obligations Unconditional 16
Section 4.5. Assignment of Revenues and Agreement
16
Section 4.6. Credit Facility; Alternate Credit
Facility; Cancellation 16
Section 4.7. Company's Option to Elect Rate Period
17
Section 4.8. Company's Obligation to Purchase Bonds
17
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS 18
Section 5.1. Right of Inspection 18
Section 5.2. Maintenance 18
Section 5.3. Removal of Portions of the Project
Facilities 18
Section 5.4. Operation of Project Facilities 18
Section 5.5. Insurance 19
Section 5.6. Workers' Compensation Coverage 19
Section 5.7. Damage; Destruction and Eminent Domain
19
Section 5.8. Company to Maintain its
Corporate Existence; Conditions Under
Which Exceptions Permitted 19
Section 5.9. Indemnification 20
Section 5.10. Company Not to
Adversely Affect Exclusion of Interest
on Bonds From Gross Income For Federal
Income Tax Purposes 21
Section 5.11. Use of Project Facilities 21
Section 5.12. Assignment by Company 21
ARTICLE VI REDEMPTION 23
Section 6.1. Optional Redemption 23
Section 6.2. Extraordinary Optional Redemption 23
Section 6.3. Mandatory Redemption 24
Section 6.4. Notice of Redemption 25
Section 6.5. Actions by Issuer 25
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES 26
Section 7.1. Events of Default 26
Section 7.2. Remedies on Default 27
Section 7.3. No Remedy Exclusive 28
Section 7.4. Agreement to Pay Attorneys' Fees and
Expenses 28
Section 7.5. No Waiver 28
Section 7.6. Notice of Default 28
ARTICLE VIII MISCELLANEOUS 29
Section 8.1. Term of Agreement 29
Section 8.2. Amounts Remaining in Funds 29
Section 8.3. Notices 29
Section 8.4. Extent of Covenants of the Issuer; No
Personal Liability 29
Section 8.5. Binding Effect 30
Section 8.6. Amendments and Supplements 30
Section 8.7. References to Credit Facility 30
Section 8.8. Execution Counterparts 30
Section 8.9. Severability 30
Section 8.10. Governing Law 30
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of February
1, 1997 between the CITY OF PRINCETON, INDIANA (the "Issuer"), a
municipal corporation organized and existing under the laws of the
State of Indiana, and PSI ENERGY, INC. (the "Company"), a public
utility and corporation duly organized and validly existing under
the laws of the State of Indiana. Capitalized terms used in the
following recitals are used as defined in Article I of this
Agreement.
Pursuant to Indiana Code, Title 36, Article 7, Chapters 11.9
and 12, and Indiana Code, Title 5, Article 1, Chapter 5
(collectively, the "Act"), the Issuer has determined to issue,
sell and deliver the Bonds, and to lend the proceeds derived from
the sale thereof to the Company to assist in the refunding of the
Refunded Bonds as defined below. The Refunded Bonds were issued
to refund a portion of the Series 1982 Bonds, as defined below,
which were originally issued to provide funds to make a loan to
the Company to assist in the financing of its portion of the costs
of the Project as defined below.
The Company and the Issuer each have full right and lawful
authority to enter into this Agreement and to perform and observe
the provisions hereof on their respective parts to be performed
and observed.
NOW THEREFORE, in consideration of the premises and the
mutual representations and agreements hereinafter contained, the
Issuer and the Company agree as follows (provided that any
obligation of the Issuer or the State created by or arising out of
this Agreement shall never constitute a general debt of the Issuer
or the State or give rise to any pecuniary liability of the Issuer
or the State but shall be payable solely out of Revenues,
including the Loan Payments made pursuant hereto and moneys drawn
under any Credit Facility):
ARTICLE I
DEFINITIONS
Section I.1. Use of Defined Terms. In addition to the words
and terms defined elsewhere in this Agreement or by reference to
another document, the words and terms set forth in Section 1.2
hereof shall have the meanings set forth therein unless the
context or use clearly indicates another meaning or intent. Such
definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.
Section I.2. Definitions. As used herein:
"Act" means, collectively, Indiana Code, Title 36, Article 7,
Chapters 11.9 and 12, and Title 5, Article 1, Chapter 5 as
amended.
"Additional Payments" means the amounts required to be paid
by the Company pursuant to the provisions of Section 4.2 hereof.
"Administration Expenses" means the compensation (which
compensation shall not be greater than that typically charged in
similar circumstances) and reimbursement of reasonable expenses
and advances payable to the Trustee, the Registrar, the
Remarketing Agent, any Paying Agent and any Authenticating Agent.
"Agreement" means this Loan Agreement, as amended or
supplemented from time to time.
"Alternate Credit Facility" means an Alternate Credit
Facility as defined in the Indenture.
"Authenticating Agent" means the Authenticating Agent as
defined in the Indenture.
"Bank" means the Bank as defined in the Indenture.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Purchase Fund" means the Bond Purchase Fund as defined
in the Indenture.
"Bond Resolution" means the ordinance of the Issuer providing
for the issuance of the Bonds and approving this Agreement, the
Indenture and related matters, as amended or supplemented from
time to time.
"Bond Service Charges" means, for any period or time, the
principal of, premium, if any, and interest due on the Bonds for
that period or payable at that time whether due at maturity or
upon acceleration or redemption or otherwise.
"Bonds" means the $35,000,000 Pollution Control Revenue
Refunding Bonds, 1997 Series (PSI Energy, Inc. Project), issued by
the Issuer pursuant to the Bond Resolution and the Indenture.
"Bonds Outstanding" or "Outstanding Bonds" means Outstanding
Bonds as defined in the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to the Code and Sections of the
Code include relevant applicable regulations and proposed
regulations thereunder and under the Internal Revenue Code of
1954, as amended, and any successor provisions to those Sections,
regulations or proposed regulations and, in addition, all
applicable official rulings and judicial determinations under the
foregoing applicable to the Bonds.
"Conversion Date" means the Conversion Date as defined in the
Indenture.
"Credit Facility" means a Credit Facility as defined in the
Indenture.
"Credit Facility Account" means the Credit Facility Account
as defined in the Indenture.
"Credit Facility Issuer" means a Credit Facility Issuer as
defined in the Indenture.
"Eligible Investments" means Eligible Investments as defined
in the Indenture.
"Engineer" means an engineer (who may be an employee of the
Company) or engineering firm qualified to practice the profession
of engineering under the laws of the State and who or which is
acceptable to the Trustee.
"EPA" means the Department of Environmental Management of the
State and any successor body, agency, commission or department.
"Event of Default" means any of the events described as an
Event of Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or
events described as constituting Force Majeure in Section 7.1
hereof.
"Government Obligations" means Government Obligations as
defined in the Indenture.
"Holder" or "Holder of a Bond" means the Person in whose name
a Bond is registered on the Register.
"Indenture" means the Trust Indenture, dated as of the same
date as this Agreement, between the Issuer and the Trustee, as
amended or supplemented from time to time.
"Interest Rate for Advances" means the interest rate per year
payable on the Bonds.
"Letter of Credit" means the Letter of Credit as defined in
the Indenture.
"Loan" means the loan by the Issuer to the Company of the
proceeds received from the sale of the Bonds.
"Loan Payment Date" means any date on which any Bond Service
Charges are due and payable.
"Loan Payments" means the amounts required to be paid by the
Company in repayment of the Loan pursuant to Section 4.1 hereof.
"1954 Code" means the Internal Revenue Code of 1954 as
amended from time to time through the date of enactment of the
Code. References to the 1954 Code and Sections of the 1954 Code
include relevant applicable regulations (including temporary
regulations) and proposed regulations thereunder and any successor
provisions to those Sections, regulations or proposed regulations.
"Notice Address" means:
(a) As to the Issuer: City of Princeton, Indiana
City Building
Princeton, Indiana 47670
Attention: Mayor
(b) As to the Company: PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana 46168
Attention: Treasurer
with a copy to:
PSI Energy, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
Attention: Treasurer
(c) As to the Trustee: The Fifth Third Bank of Central Indiana
Fifth Third Center
38 Fountain Square
Cincinnati, Ohio 45263
Attention: Corporate Trust Administration
or such additional or different address, notice of which is given
under Section 8.3 hereof.
"Opinion of Bond Counsel" means a written opinion of
nationally recognized bond counsel selected by the Company and
acceptable to the Trustee who is experienced in matters relating
to the exclusion from gross income for federal income tax purposes
of interest on obligations issued by states and their political
subdivisions. Bond Counsel may be counsel to the Trustee or the
Company.
"Original Purchaser" means the Original Purchaser as defined
in the Indenture.
"Paying Agent" means the Paying Agent as defined in the
Indenture.
"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited
partnerships), limited liability entities, joint ventures,
societies, estates, trusts, corporations, public or governmental
bodies, other legal entities and natural persons.
"Plant" means the Gibson Generating Station.
"Pollution Control Facility" or "Pollution Control
Facilities" means those facilities which are pollution control
facilities as defined in Section 9 of Chapter 11.9 of the Act.
"Project" or "Project Facilities" means the real, personal or
real and personal property, including undivided or other interests
therein, identified in the Project Description, originally
financed with the proceeds of the Series 1982 Bonds and refinanced
with the proceeds of the Refunded Bonds.
"Project Description" means collectively the description of
the Project Facilities originally financed with the proceeds of
the Series 1982 Bonds and refinanced with the proceeds of the
Refunded Bonds, attached hereto as Exhibit A, as the same may be
amended in accordance with this Agreement.
"Project Purposes" means the purposes of Pollution Control
Facilities as described in the Act and as particularly described
in Exhibit A hereto.
"Project Site" means the Gibson Generating Station in
Princeton, Indiana.
"Rate Period" means a Rate Period as defined in the
Indenture.
"Rebate Fund" means the Rebate Fund created in the Indenture.
"Refunded Bonds" means the $35,000,000 City of Princeton,
Indiana 7.60% Pollution Control Refunding Revenue Bonds 1987
Series (Public Service Company of Indiana, Inc. Project C) issued
on March 31, 1987.
"Refunded Bonds Indenture" means the Trust Indenture dated as
of March 15, 1987 between Bank One, Indianapolis, National
Association (as successor to American Fletcher National Bank and
Trust Company) and the City of Princeton, Indiana.
"Refunded Bonds Loan Agreement" means the Loan Agreement
dated as of March 15, 1987 between the City of Princeton, Indiana
and Public Service Company of Indiana, Inc.
"Refunded Bonds Trustee" means Bank One, Indianapolis,
National Association (as successor to American Fletcher National
Bank and Trust Company), as trustee under the Refunded Bonds
Indenture.
"Refunding Fund" means the Refunding Fund created in the
Indenture.
"Register" means the books kept and maintained for the
registration and transfer of Bonds pursuant to Section 3.05 of the
Indenture.
"Registrar" means the Registrar as defined in the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement
as defined in the Indenture.
"Remarketing Agent" means the Remarketing Agent as defined in
the Indenture.
"Revenues" means (a) the Loan Payments, (b) all other moneys
received or to be received by the Issuer (excluding the Issuer
Fee) or the Trustee in respect of repayment of the Loan, including
without limitation, all moneys and investments in the Bond Fund,
(c) any moneys and investments in the Refunding Fund, and (d) all
income and profit from the investment of the foregoing moneys.
The term "Revenues" does not include any moneys or investments in
the Rebate Fund or the Bond Purchase Fund.
"Series 1982 Bonds" means the $45,000,000 City of Princeton,
Indiana Pollution Control Revenue Bonds 1982 Series A and B
(Public Service Company of Indiana, Inc. Project C) issued on
April 21, 1982.
"Series 1982 B Bonds" means the $35,000,000 1982 Series B
portion of the Series 1982 Bonds which was refunded by the
Refunded Bonds.
"Series 1982 Indenture" means the Trust Indenture dated as of
April 1, 1982 between Bank One, Indianapolis, National Association
(as successor to American Fletcher National Bank and Trust
Company) and the City of Princeton, Indiana.
"Series 1982 Loan Agreement" means the Loan Agreement dated
as of April 1, 1982 between the City of Princeton, Indiana and
Public Service Company of Indiana, Inc.
"State" means the State of Indiana.
"Term Rate Period" means a Term Rate Period as defined in the
Indenture.
"Trustee" means The Fifth Third Bank of Central Indiana
located in Indianapolis, Indiana, a corporation duly organized and
validly existing under the laws of the State, until a successor
Trustee shall have become such pursuant to the applicable
provisions of the Indenture, and thereafter "Trustee" shall mean
the successor Trustee. "Principal Office" of the Trustee shall
mean the principal corporate trust office of the Trustee, which
office at the date of issuance of the Bonds is located at its
Notice Address.
"Unassigned Issuer Rights" means all of the rights of the
Issuer to receive Additional Payments under Section 4.2 hereof, to
inspection pursuant to Section 5.1 hereof, to be held harmless and
indemnified under Section 5.9 hereof, to be reimbursed for
attorney's fees and expenses under Section 7.4 hereof and to give
or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.6
hereof and its right to enforce such rights.
"Variable Rate" means a Variable Rate as defined in the
Indenture.
Section I.3. Interpretation. Any reference herein to the
State, to the Issuer or to any member or officer of either
includes entities or officials succeeding to their respective
functions, duties or responsibilities pursuant to or by operation
of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution
of the State or the Act, or to a section, provision or chapter of
the Indiana Code, or to any statute of the United States of
America, includes that section, provision or chapter as amended,
modified, revised, supplemented or superseded from time to time;
provided, that no amendment, modification, revision, supplement or
superseding section, provision or chapter shall be applicable
solely by reason of this provision, if it constitutes in any way
an impairment of the rights or obligations of the Issuer, the
State, the Holders, the Trustee, the Registrar, an Authenticating
Agent, a Paying Agent, the Credit Facility Issuer, the Remarketing
Agent, or the Company under this Agreement, the Indenture or the
Bonds.
Unless the context indicates otherwise, words importing the
singular number include the plural number, and vice versa; the
terms "hereof", "hereby", "herein", "hereto", "hereunder" and
similar terms refer to this Agreement; and the term "hereafter"
means after, and the term "heretofore" means before, the date of
delivery of the Bonds. Words of any gender include the
correlative words of the other genders, unless the sense indicates
otherwise.
Section I.4. Captions and Headings. The captions and
headings in this Agreement are used solely for convenience of
reference and in no way define, limit or describe the scope or
intent of any Articles, Sections, subsections, paragraphs or
subparagraphs or clauses hereof.
(End of Article I)
ARTICLE II
REPRESENTATIONS
Section II.1. Representations of the Issuer. The Issuer
represents that: (a) it is a municipal corporation duly organized
and validly existing under the laws of the State; (b) it has duly
accomplished all conditions necessary to be accomplished by it
prior to the issuance and delivery of the Bonds and the execution
and delivery of this Agreement and the Indenture; (c) it is not in
violation of or in conflict with any provisions of the laws of the
State which would impair its ability to carry out its obligations
contained in this Agreement or the Indenture; (d) it is empowered
to enter into the transactions contemplated by this Agreement and
the Indenture; (e) it has duly authorized the execution, delivery
and performance of this Agreement and the Indenture; (f) it will
do all things in its power in order to maintain its existence or
assure the assumption of its obligations under this Agreement and
the Indenture by any successor municipal corporation; and (g)
following reasonable notice, a public hearing was held on February
18, 1997 with respect to the issuance of the Bonds as required by
Section 147(f) of the Code.
Section II.2. No Warranty by Issuer of Condition or
Suitability of the Project. The Issuer makes no warranty, either
express or implied, as to the suitability or utilization of the
Project for the Project Purposes, or as to the condition of the
Project Facilities or that the Project Facilities are or will be
suitable for the Company's purposes or needs.
Section II.3. Representations and Covenants of the Company.
The Company represents that:
(a) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State, with power
and authority (corporate and other) to own its properties and
conduct its business, to execute and deliver this Agreement and to
perform its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by the Company and this Agreement constitutes a valid
and legally binding obligation of the Company, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(c) The execution, delivery and performance by the Company
of this Agreement and the consummation of the transactions
contemplated hereby will not violate any provision of law or
regulation applicable to the Company, or of any writ or decree of
any court or governmental instrumentality, or of the Amended
Articles of Consolidation, as amended, or the By-laws of the
Company, or of any mortgage, indenture, contract, agreement or
other undertaking to which the Company is a party or which
purports to be binding upon the Company or upon any of its assets.
(d) Substantially all (at least 90%) of the proceeds of the
Series 1982 Bonds were used to provide "solid waste disposal
facilities" within the meaning of Section 103(b)(4)(E) of the 1954
Code and "pollution control facilities" within the meaning of
Section 103(b)(4)(F) of the 1954 Code, the original use of which
facilities commenced with the Company on October 1, 1982, and
which facilities were described in an inducement resolution
adopted by the Issuer on October 16, 1978. Construction of such
facilities financed with the proceeds of the Series 1982 Bonds was
not commenced prior to October 16, 1978. All of the proceeds of
the Series 1982 Bonds have been spent for the Project pursuant to
the Series 1982 Loan Agreement or to pay costs of issuance of the
Series 1982 Bonds. The proceeds of the Refunded Bonds (other than
any accrued interest thereon) were used exclusively to refund the
Series 1982 B Bonds; any investment earnings on such proceeds of
the Refunded Bonds were used to pay principal, premium or interest
on the Series 1982 B Bonds; and none of the proceeds of the
Refunded Bonds was used to pay for any costs of issuance of the
Refunded Bonds. The Series 1982 B Bonds were issued prior to
August 16, 1986. The principal amount of the Refunded Bonds did
not exceed the then outstanding principal amount of the Series
1982 B Bonds. The proceeds of the Refunded Bonds were used to
retire the Series 1982 B Bonds not later than 90 days after the
date of issuance of the Refunded Bonds. The proceeds of the Bonds
(other than any accrued interest thereon) will be used exclusively
to refund the Refunded Bonds; any investment earnings on such
proceeds of the Bonds will be used to pay principal, premium or
interest on the Refunded Bonds; and none of the proceeds of the
Bonds will be used to pay for any costs of issuance of the Bonds.
The Refunded Bonds are part of a series of refundings of which
the Series 1982 B Bonds are the original bonds. The principal
amount of the Bonds does not exceed the outstanding principal
amount of the Refunded Bonds. The proceeds of the Bonds will be
used to retire the Refunded Bonds not later than 90 days after the
date of issuance of the Bonds.
(e) It has caused the Project to be substantially
completed. The Project constitutes Pollution Control Facilities
under the Act and is consistent with the purposes of the Act. The
Project is being, and the Company will cause the Project to be,
operated and maintained in such manner to conform with all
applicable zoning, planning, building, environmental and other
applicable governmental regulations and all permits, variances and
orders issued or granted pursuant thereto, including the
permit-to-install for the Project, which permits, variances and
orders have not been withdrawn or otherwise suspended, and to be
consistent with the Act.
(f) It has used or operated or has caused to be used or
operated, and presently intends to use or operate or cause to be
used or operated the Project Facilities in a manner consistent
with the Project Purposes until the date on which the Bonds have
been fully paid and knows of no reason why the Project Facilities
will not be so operated. The Company does not intend to sell or
otherwise dispose of the Project or any portion thereof.
(g) None of the proceeds of the Series 1982 Bonds or the
Refunded Bonds were used and none of the proceeds of the Bonds
will be used to provide any airplane, skybox or other private
luxury box, or health club facility, any facility primarily used
for gambling or any store the principal business of which is the
sale of alcoholic beverages for consumption off premises.
(h) Less than 25% of the proceeds of the Series 1982 Bonds
and less than 25% of the proceeds of the Refunded Bonds have been
used and less than 25% of the proceeds of the Bonds will be used
directly or indirectly to acquire land or any interest therein,
and none of such proceeds has been or will be used to provide land
which is to be used for farming purposes.
(i) No portion of the proceeds of the Series 1982 Bonds or
the Refunded Bonds has been used and no portion of the proceeds of
the Bonds will be used to acquire existing property or any
interest therein unless the first use of such property was by the
Company and was pursuant to and followed such acquisition.
(j) After the expiration of any applicable temporary period
under Section 148(d)(3) of the Code, at no time during any bond
year will the aggregate amount of gross proceeds of the Bonds
invested in higher yielding investments (within the meaning of
Section 148(b) of the Code) exceed 150 percent of the debt service
on the Bonds for such bond year and the aggregate amount of gross
proceeds of the Bonds invested in higher yielding investments, if
any, will be promptly and appropriately reduced as the
outstanding amount of the Bonds is reduced, provided however that
the foregoing shall not require the sale or disposition of any
investments in higher yielding investments if such sale or
disposition would result in a loss which exceeds the amount which
would be paid to the United States (but for such sale or
disposition) at the time of such sale or disposition if a payment
were due at such time. At no time will any funds constituting
gross proceeds of the Bonds be used in a manner as would
constitute failure of compliance with Section 148 of the Code.
The terms "bond year", "gross proceeds", "higher yielding
investments", "yield", and "debt service" have the meanings
assigned to them for purposes of Section 148 of the Code.
(k) The Series 1982 Bonds and the Refunded Bonds were not,
and the Bonds will not be, "federally guaranteed" within the
meaning of Section 149(b) of the Code.
(l) It is not anticipated that as of the date hereof, there
will be created any "replacement proceeds", within the meaning of
Section 1.148-1(c) of the Treasury Regulations, with respect to
the Bonds; however, in the event that any such replacement
proceeds are deemed to have been created, such amounts will be
invested in compliance with Section 148 of the Code.
(m) On the date of issuance and delivery of the Series 1982
Bonds, the Company reasonably expected that at least 85% of the
spendable proceeds of the Series 1982 Bonds would be expended to
carry out the governmental purpose of such issue within the 3-year
period beginning on the issue date of such issue. All of the
spendable proceeds of the Series 1982 Bonds were expended as of
the date of issuance of the Refunded Bonds. None of the proceeds
of the Series 1982 Bonds were invested in nonpurpose investments
having a substantially guaranteed yield for four years or more.
(n) The weighted average maturity of the Bonds does not
exceed 120% of the average reasonably expected economic life of
the Project Facilities financed by the proceeds of the Series 1982
Bonds and refinanced by the proceeds of the Refunded Bonds
(determined under Section 147(b) of the Code).
(o) The information furnished by the Company and used by
the Issuer in preparing the certifications and statements pursuant
to Sections 148 and 149(e) of the Code or their statutory
predecessors with respect to the Series 1982 Bonds and the
Refunded Bonds was accurate and complete as of the respective
dates of issuance of the Series 1982 Bonds and the Refunded Bonds,
and the information furnished by the Company and used by the
Issuer in preparing the certification pursuant to Section 148 of
the Code and in preparing the information statement pursuant to
Section 149(e) of the Code, both referred to in the Bond
Resolution, will be accurate and complete as of the date of
issuance of the Bonds.
(p) The Project Facilities do not include any office except
for offices (i) located on the Project Site and (ii) not more than
a de minimis amount of the functions to be performed at which is
not directly related to the day-to-day operations of the Project
Facilities.
(End of Article II)
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
Section III.1. Acquisition, Construction and Installation.
The Company represents that it has caused the Project Facilities
to be acquired, constructed and installed on the Project Site,
substantially in accordance with the Project Description and in
conformance with all applicable zoning, planning, building and
other similar regulations of all governmental authorities having
jurisdiction over the Project and all permits, variances and
orders issued in respect of the Project by EPA, and that the
proceeds derived from the Series 1982 Bonds and Refunded Bonds,
respectively, including any investment thereof, were expended in
accordance with the Series 1982 Indenture and Refunded Bonds
Indenture, respectively, and the Series 1982 Loan Agreement and
Refunded Bonds Loan Agreement, respectively.
Section III.2. Project Description. The Project Description
may be changed from time to time by, or with the consent of, the
Company provided that any such change shall also be filed with the
Issuer and provided further that no change in the Project
Description shall materially change the function of the Project
Facilities unless the Trustee shall have received (i) an
Engineer's certificate that such changes will not impair the
significance or character of the Project Facilities as Pollution
Control Facilities and (ii) an Opinion of Bond Counsel or ruling
of the Internal Revenue Service to the effect that such amendment
will not adversely affect the exclusion of interest on the Bonds
from gross income for federal income tax purposes.
Section III.3. Issuance of the Bonds; Application of
Proceeds. To provide funds to make the Loan to the Company to
assist the Company in the refunding of the Refunded Bonds, the
Issuer will issue, sell and deliver the Bonds to the Original
Purchaser. The Bonds will be issued pursuant to the Indenture in
the aggregate principal amount, will bear interest, will mature
and will be subject to redemption as set forth therein. The
Company hereby approves the terms and conditions of the Indenture
and the Bonds, and the terms and conditions under which the Bonds
will be issued, sold and delivered.
The Company hereby requests that the Issuer notify the
Refunded Bonds Trustee (unless the Refunded Bonds Trustee has
already received such notice), pursuant to the Refunded Bonds
Indenture, that the entire outstanding principal amount of the
Refunded Bonds is to be redeemed on March 28, 1997 at a redemption
price of 102% of the principal amount thereof plus accrued
interest to that redemption date.
The proceeds from the sale of the Bonds (other than any
accrued interest) shall be loaned to the Company to assist the
Company in refunding the Refunded Bonds in order to reduce the
interest cost payable by the Company; those proceeds shall be
deposited in the Refunding Fund. On March 28, 1997 all moneys on
deposit in the Refunding Fund shall be disbursed by the Trustee as
provided in Section 5.02 of the Indenture to the Refunded Bonds
Trustee for deposit in the Bond Fund created in the Refunded Bonds
Indenture and applied by the Refunded Bonds Trustee to the payment
of principal of and interest on the Refunded Bonds on their
redemption on March 28, 1997. The Company shall pay to the
Refunded Bonds Trustee such additional amounts as shall be
required to pay in full on such date the entire amount of
principal of, premium and interest due on the Refunded Bonds.
Pending disbursement pursuant to this Section, the proceeds
so deposited in the Refunding Fund, together with any investment
earnings thereon, shall constitute a part of the Revenues assigned
by the Issuer to the Trustee for the payment of Bond Service
Charges. Any accrued interest shall be deposited in the Bond
Fund.
Section III.4. Investment of Fund Moneys. At the oral
(confirmed promptly in writing) or written request of the Company,
any moneys held as part of the Bond Fund, the Refunding Fund or
the Rebate Fund shall be invested or reinvested by the Trustee in
Eligible Investments; provided, that such moneys shall be invested
or reinvested by the Trustee only in Eligible Investments which
shall mature, or which shall be subject to redemption by the
holder thereof at the option of such holder, not later than the
date upon which the moneys so invested are needed to make payments
from those Funds. The Issuer (to the extent it retained or
retains direction or control) and the Company each hereby
represents that the investment and reinvestment and the use of the
proceeds of the Series 1982 Bonds and of the Refunded Bonds were
restricted in such manner and to such extent as was necessary so
that the Series 1982 Bonds and the Refunded Bonds would not
constitute arbitrage bonds under Section 148 of the Code or its
statutory predecessor and each hereby covenants that it will
restrict that investment and reinvestment and the use of the
proceeds of the Bonds in such manner and to such extent, if any,
as may be necessary so that the Bonds will not constitute
arbitrage bonds under Section 148 of the Code.
The Company shall provide the Issuer with, and the Issuer may
base its certificate and statement, each as authorized by the Bond
Resolution, on a certificate of an appropriate officer, employee
or agent of or consultant to the Company for inclusion in the
transcript of proceedings for the Bonds, setting forth the
reasonable expectations of the Company on the date of delivery of
and payment for the Bonds regarding the amount and use of the
proceeds of the Bonds and the facts, estimates and circumstances
on which those expectations are based.
Section III.5. Rebate Fund. To the extent required by
Section 5.08 of the Indenture, within five days after the end of
the fifth Bond Year (as defined in the Indenture) and every fifth
Bond Year thereafter, and within five days after payment in full
of all outstanding Bonds, the Company shall calculate the amount
of Excess Earnings (as defined in the Indenture) as of the end of
that Bond Year or the date of such payment and shall notify the
Trustee of that amount. If the amount then on deposit in the
Rebate Fund created under the Indenture is less than the amount of
Excess Earnings (computed by taking into account the amount or
amounts, if any, previously paid to the United States pursuant to
Section 5.08 of the Indenture and this Section), the Company
shall, within five days after the date of the aforesaid
calculation, pay to the Trustee for deposit in the Rebate Fund an
amount sufficient to cause the Rebate Fund to contain an amount
equal to the Excess Earnings. The obligation of the Company to
make such payments shall remain in effect and be binding upon the
Company notwithstanding the release and discharge of the
Indenture. The Company shall obtain and keep such records of the
computations made pursuant to this Section as are required under
Section 148(f) of the Code.
(End of Article III)
ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section IV.1. Loan Repayment. Upon the terms and conditions
of this Agreement, the Issuer agrees to make the Loan to the
Company. The proceeds of the Loan shall be deposited with the
Trustee pursuant to Section 3.3 hereof. In consideration of and
in repayment of the Loan, the Company shall make, as Loan
Payments, to the Trustee for the account of the Issuer, payments
which correspond, as to time, and are equal in amount as of the
Loan Payment Date, to the corresponding Bond Service Charges
payable on the Bonds. All Loan Payments received by the Trustee
shall be held and disbursed in accordance with the provisions of
the Indenture and this Agreement for application to the payment of
Bond Service Charges.
The Company shall be entitled to a credit against the Loan
Payments required to be made on any Loan Payment Date to the
extent that the balance of the Bond Fund is then in excess of
amounts required (a) for the payment of Bonds theretofore matured
or theretofore called for redemption, or to be called for
redemption pursuant to Section 6.1 hereof (b) for the payment of
interest for which checks or drafts have been drawn and mailed by
the Trustee or Paying Agent, and (c) to be deposited in the Bond
Fund by the Indenture for use other than for the payment of Bond
Service Charges due on that Loan Payment Date.
The Company's obligation to make Loan Payments shall be
reduced to the extent of any payments made by any Credit Facility
Issuer to the Trustee in respect of the principal of, premium, if
any, or interest on the Bonds when due pursuant to any Credit
Facility, provided, that the Credit Facility Issuer has been
reimbursed for such payments in accordance with the terms of the
Reimbursement Agreement.
Except for such interest of the Company as may hereafter
arise pursuant to Section 8.2 hereof or Sections 5.06 or 5.07 of
the Indenture, the Company and the Issuer each acknowledge that
neither the Company, the State nor the Issuer has any interest in
the Bond Fund or the Bond Purchase Fund, and any moneys deposited
therein shall be in the custody of and held by the Trustee in
trust for the benefit of the Holders.
Section IV.2. Additional Payments. The Company shall pay to
the Issuer, as Additional Payments hereunder, any and all costs
and expenses incurred or to be paid by the Issuer in connection
with the issuance and delivery of the Bonds or otherwise related
to actions taken by the Issuer under this Agreement or the
Indenture.
The Company shall pay the Administration Expenses to the
Trustee, the Registrar, the Remarketing Agent, and any Paying
Agent or Authenticating Agent, as appropriate, as Additional
Payments hereunder.
The Company may, without creating a default hereunder,
contest in good faith the reasonableness of any such cost or
expense incurred or to be paid by the Issuer and any
Administration Expenses claimed to be due to the Trustee, the
Registrar, the Remarketing Agent, any Paying Agent or any
Authenticating Agent.
In the event the Company should fail to pay any Loan
Payments, Additional Payments or Administration Expenses when due,
the payment in default shall continue as an obligation of the
Company until the amount in default shall have been fully paid
together with interest thereon during the default period at the
Interest Rate for Advances.
Section IV.3. Place of Payments. The Company shall make all
Loan Payments directly to the Trustee at its Principal Office.
Additional Payments shall be made directly to the person or entity
to whom or to which they are due.
Section IV.4. Obligations Unconditional. The obligations of
the Company to make Loan Payments, Additional Payments and any
payments required of the Company under Section 5.09 of the
Indenture shall be absolute and unconditional, and the Company
shall make such payments without abatement, diminution or
deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or
counterclaim which the Company may have or assert against the
Issuer, the Trustee, the Registrar, the Remarketing Agent or any
other Person.
Section IV.5. Assignment of Revenues and Agreement. To
secure the payment of Bond Service Charges, the Issuer shall, by
the Indenture, (a) absolutely and irrevocably assign to the
Trustee, its successors in trust and its and their assigns
forever, (1) all right, title and interest of the Issuer in and to
all moneys and investments (including, without limitation, the
proceeds of the Credit Facility) in the Bond Fund and (2) all of
the Issuer's rights and remedies under this Agreement (except for
the Unassigned Issuer Rights), and (b) grant a security interest
to the Trustee, its successors in trust and its and their assigns
forever, in all of its rights to and interest in the Revenues
including, without limitation, all Loan Payments and other amounts
receivable by or on behalf of the Issuer under the Agreement in
respect of repayment of the Loan (other than the Credit Facility
Account, all moneys and investments therein and the proceeds of
the Credit Facility). The Company hereby agrees and consents to
those assignments and that grant of a security interest.
Section IV.6. Credit Facility; Alternate Credit Facility;
Cancellation. (a) The Company agrees to provide for the payment
of the principal of and interest on the Bonds and for payment of
the purchase price of Bonds delivered to the Trustee or Paying
Agent pursuant to the Indenture by causing the Letter of Credit to
be delivered to the Trustee on the date of the delivery of the
Bonds. The Company hereby authorizes and directs the Trustee to
draw moneys under the Letter of Credit, in accordance with its
terms and the terms of the Indenture, to the extent necessary to
pay the principal of and interest on the Bonds when due and to pay
the purchase price of Bonds as provided in the Indenture. The
Company may, at its election and with the consent of the Bank,
provide for one or more extensions of the Letter of Credit beyond
its then stated date of expiration.
(b) Upon satisfaction of the requirements contained in
Section 14.03 of the Indenture, the Company may provide for the
delivery of an Alternate Credit Facility.
(c) Upon satisfaction of the conditions contained in
Section 14.02 of the Indenture, the Company may cancel any Credit
Facility in effect at such time and direct the Trustee in writing
to surrender such Credit Facility to the Credit Facility Issuer
by which it was issued in accordance with the Indenture; provided,
that no such cancellation shall become effective and no such
surrender shall take place until all Bonds subject to purchase
pursuant to Section 4.07(d) of the Indenture have been so
purchased or redeemed with the proceeds of such Credit Facility.
Section .1. Company's Option to Elect Rate Period. The
Company shall have, and is hereby granted, the option to elect to
convert on any Conversion Date the interest rate borne by the
Bonds to another Variable Rate to be effective for a Rate Period
pursuant to the provisions of Article II of the Indenture and
subject to the terms and conditions set forth therein. To
exercise such options, the Company shall give the written notice
required by the Indenture.
Section .2. Company's Obligation to Purchase Bonds. The
Company hereby agrees to pay or cause to be paid to the Trustee or
the Paying Agent, on or before each day on which Bonds may be or
are required to be tendered for purchase, amounts equal to the
amounts to be paid by the Trustee or the Paying Agent with respect
to the Bonds tendered for purchase on such dates pursuant to
Article IV of the Indenture; provided, however, that the
obligation of the Company to make any such payment under this
Section shall be reduced by the amount of (A) moneys paid by the
Remarketing Agent as proceeds of the remarketing of such Bonds by
the Remarketing Agent, (B) moneys drawn under any Credit Facility,
for the purpose of paying such purchase price and (C) other moneys
made available by the Company, as set forth in Section 4.08(b)(ii)
of the Indenture.
(End of Article IV)
ARTICLE I
ADDITIONAL AGREEMENTS AND COVENANTS
Section I.1. Right of Inspection. The Company agrees that,
subject to reasonable security and safety regulations and to
reasonable requirements as to notice, the Issuer and the Trustee
and their or any of their respective duly authorized agents shall
have the right at all reasonable times to enter upon the Project
Site to examine and inspect the Projects.
Section I.2. Maintenance. The Company shall use its best
efforts to keep and maintain the Project Facilities, including all
appurtenances thereto and any personal property therein or
thereon, in good repair and good operating condition so that the
Project Facilities will continue to constitute Pollution Control
Facilities, for the purposes of the operation thereof as required
by Section 5.4 hereof.
So long as such shall not be in violation of the Act or
impair the character of the Project Facilities as Pollution
Control Facilities, and provided there is continued compliance
with applicable laws and regulations of governmental entities
having jurisdiction thereof, the Company shall have the right to
remodel the Project Facilities or make additions, modifications
and improvements thereto, from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
the cost of which remodeling, additions, modifications and
improvements shall be paid by the Company and the same shall, when
made, become a part of the Project Facilities.
Section I.3. Removal of Portions of the Project Facilities.
The Company shall not be under any obligation to renew, repair or
replace any inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary portions of the Project Facilities,
except that, subject to Section 5.4 hereof, it will use its best
efforts to ensure the continued character of the Project
Facilities as Pollution Control Facilities. The Company shall
have the right from time to time to substitute personal property
or fixtures for any portions of the Project Facilities, provided
that the personal property or fixtures so substituted shall not
impair the character of the Project Facilities as Pollution
Control Facilities. Any such substituted property or fixtures
shall, when so substituted, become a part of the Project
Facilities. The Company shall also have the right to remove any
portion of the Project Facilities, without substitution therefor;
provided, that the Company shall deliver to the Trustee a
certificate signed by an Engineer describing said portion of the
Project Facilities and stating that the removal of such property
or fixtures will not impair the character of the Project
Facilities as Pollution Control Facilities.
Section I.4. Operation of Project Facilities. The Company
will, subject to its obligations and rights to maintain, repair or
remove portions of the Project Facilities, as provided in Sections
5.2 and 5.3 hereof, use its best efforts to continue operation of
the Project Facilities so long as and to the extent that operation
thereof is required to comply with laws or regulations of
governmental entities having jurisdiction thereof or unless the
Issuer shall have approved the discontinuance of such operation
(which approval shall not be unreasonably withheld). The Company
agrees that it will, within the design capacities thereof, use its
best efforts to operate and maintain the Project Facilities in
accordance with all applicable, valid and enforceable rules and
regulations of governmental entities having jurisdiction thereof;
provided, that the Company reserves the right to contest in good
faith any such laws or regulations.
Nothing in this Agreement shall prevent or restrict the
Company, in its sole discretion, at any time, from discontinuing
or suspending either permanently or temporarily its use of any
facility of the Company served by the Project Facilities and in
the event such discontinuance or suspension shall render
unnecessary the continued operation of the Project Facilities, the
Company shall have the right to discontinue the operation of the
Project Facilities during the period of any such discontinuance or
suspension.
Section I.5. Insurance. The Company shall cause the Project
Facilities to be kept insured against fire or other casualty to
the extent that property of similar character is usually so
insured by companies similarly situated and operating like
properties, to a reasonable amount by reputable insurance
companies or, in lieu of or supplementing such insurance in whole
or in part, adopt some other method or plan of protection against
loss by fire or other casualty at least equal in protection to the
method or plan of protection against loss by fire or other
casualty of companies similarly situated and operating properties
subject to similar or greater fire or other hazards or on which
properties an equal or higher primary fire or other casualty
insurance rate has been set by reputable insurance companies.
Section I.6. Workers' Compensation Coverage. Throughout the
term of this Agreement, the Company shall comply, or cause
compliance, with applicable workers' compensation laws of the
State.
Section I.7. Damage; Destruction and Eminent Domain. If,
during the term of this Agreement, the Project Facilities or any
portion thereof is destroyed or damaged in whole or in part by
fire or other casualty, or title to, or the temporary use of, the
Project Facilities or any portion thereof shall have been taken by
the exercise of the power of eminent domain, the Company (unless
it shall have exercised its option to prepay the Loan Payments
pursuant to Section 6.2 hereof) shall promptly repair, rebuild or
restore the portion of the Project Facilities so damaged,
destroyed or taken with such changes, alterations and
modifications (including the substitution and addition of other
property) as may be necessary or desirable for the administration
and operation of the Project Facilities as Pollution Control
Facilities and as shall not impair the character or significance
of the Project Facilities as furthering the purposes of the Act.
Section I.8. Company to Maintain its Corporate Existence;
Conditions Under Which Exceptions Permitted. The Company agrees
that, during the term of this Agreement, it will maintain its
corporate existence, will not dissolve or otherwise dispose of all
or substantially all of its assets and will not consolidate with
or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it; provided that
the Company may, without violating its agreement contained in this
Section, consolidate with or merge into another corporation, or
permit one or more other corporations to consolidate with or merge
into it, or sell or otherwise transfer to another corporation all
or substantially all of its assets as an entirety and thereafter
dissolve, provided the surviving, resulting or transferee
corporation, as the case may be (if other than the Company), is a
corporation organized and existing under the laws of one of the
states of the United States, and assumes in writing all of the
obligations of the Company herein, and, if not an Indiana
corporation, is qualified to do business in the State.
If consolidation, merger or sale or other transfer is made as
provided in this Section, the provisions of this Section shall
continue in full force and effect and no further consolidation,
merger or sale or other transfer shall be made except in
compliance with the provisions of this Section.
Section I.9. Indemnification. The Company releases the
Issuer from, agrees that the Issuer shall not be liable for, and
indemnifies the Issuer against, all liabilities, claims, costs and
expenses imposed upon or asserted against the Issuer on account
of: (a) any loss or damage to property or injury to or death of
or loss by any person that may be occasioned by any cause
whatsoever pertaining to the construction, maintenance, operation
and use of the Project Facilities; (b) any breach or default on
the part of the Company in the performance of any covenant or
agreement of the Company under this Agreement or any related
document, or arising from any act or failure to act by the
Company, or any of its agents, contractors, servants, employees or
licensees; (c) the authorization, issuance and sale of the Bonds,
and the provision of any information furnished in connection
therewith concerning the Project Facilities or the Company
(including, without limitation, any information furnished by the
Company for inclusion in any certifications made by the Issuer
under Section 3.4 hereof or for inclusion in, or as a basis for
preparation of, the Form 8038 information statement to be filed by
the Issuer); and (d) any claim or action or proceeding with
respect to the matters set forth in (a), (b) and (c) above brought
thereon.
The Company agrees to indemnify the Trustee, the Paying
Agent, the Remarketing Agent and the Registrar (each hereinafter
referred to in this section as an "indemnified party") for and to
hold each of them harmless against all liabilities, claims, costs
and expenses incurred without negligence or willful misconduct on
the part of the indemnified party, on account of any action taken
or omitted to be taken by the indemnified party in accordance with
the terms of this Agreement, the Bonds or the Indenture or any
action taken at the request of or with the consent of the Company,
including the costs and expenses of the indemnified party in
defending itself against any such claim, action or proceeding
brought in connection with the exercise or performance of any of
its powers or duties under this Agreement, the Bonds or the
Indenture.
In case any action or proceeding is brought against the
Issuer or an indemnified party in respect of which indemnity may
be sought hereunder, the party seeking indemnity promptly shall
give notice of that action or proceeding to the Company, and the
Company upon receipt of that notice shall have the obligation and
the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not
relieve the Company from any of its obligations under this Section
unless that failure prejudices the defense of the action or
proceeding by the Company. At its own expense, an indemnified
party may employ separate counsel and participate in the defense;
provided, however, where it is ethically inappropriate for one
firm to represent the interests of the Issuer and any other
indemnified party or parties, the Company shall pay the Issuer's
legal expenses in connection with the Issuer's retention of
separate counsel. The Company shall not be liable for any
settlement made without its consent.
The indemnification set forth above is intended to and shall
include the indemnification of all affected officials, directors,
officers and employees of the Issuer, the Trustee, the Paying
Agent, the Remarketing Agent and the Registrar, respectively.
That indemnification is intended to and shall be enforceable by
the Issuer, the Trustee, the Paying Agent, the Remarketing Agent
and the Registrar, respectively, to the full extent permitted by
law.
Section I.10. Company Not to Adversely Affect Exclusion of
Interest on Bonds From Gross Income For Federal Income Tax
Purposes. The Company hereby covenants and represents that it has
taken and caused to be taken and shall take and cause to be taken
all actions that may be required of it for the interest on the
Bonds to be and remain excluded from the gross income of the
Holders for federal income tax purposes, and that it has not taken
or permitted to be taken on its behalf, and covenants that it will
not take, or permit to be taken on its behalf, any action which,
if taken, would adversely affect that exclusion under the
provisions of the Code.
Section I.11. Use of Project Facilities. The Issuer agrees
that it will not take any action, or cause any action to be taken
on its behalf, to interfere with the Company's ownership interest
in the Project or to prevent the Company from having possession,
custody, use and enjoyment of the Project other than pursuant to
Article VII of this Agreement or Article VII of the Indenture.
Section I.12. Assignment by Company. This Agreement may be
assigned in whole or in part by the Company without the necessity
of obtaining the consent of either the Issuer or the Trustee,
subject, however, to each of the following conditions:
(a) No assignment (other than pursuant to Section 5.8
hereof) shall relieve the Company from primary liability for any
of its obligations hereunder, and in the event of any such
assignment the Company shall continue to remain primarily liable
for the payment of the Loan Payments and Additional Payments and
for performance and observance of the agreements on its part
herein provided to be performed and observed by it.
(b) Any assignment by the Company must retain for the
Company such rights and interests as will permit it to perform its
obligations under this Agreement, and any assignee from the
Company shall assume the obligations of the Company hereunder to
the extent of the interest assigned.
(c) The Company shall, within 30 days after execution
thereof, furnish or cause to be furnished to the Issuer and the
Trustee a true and complete copy of each such assignment together
with any instrument of assumption.
(d) Any assignment from the Company shall not materially
impair fulfillment of the Project Purposes to be accomplished by
operation of the Project as herein provided.
(End of Article V)
ARTICLE II
REDEMPTION
Section II.1. Optional Redemption. Provided no Event of
Default shall have occurred and be subsisting, at any time and
from time to time, the Company may deliver moneys to the Trustee
in addition to Loan Payments or Additional Payments required to be
made and direct the Trustee to use the moneys so delivered for the
purpose of calling Bonds for optional redemption in accordance
with the applicable provisions of the Indenture providing for
optional redemption at the redemption price stated in the
Indenture. Pending application for those purposes, any moneys so
delivered shall be held by the Trustee in a special account in the
Bond Fund and delivery of those moneys shall not, except as set
forth in Section 4.1 hereof, operate to abate or postpone Loan
Payments or Additional Payments otherwise becoming due or to alter
or suspend any other obligations of the Company under this
Agreement.
Section II.2. Extraordinary Optional Redemption. The
Company shall have, subject to the conditions hereinafter imposed,
the option during a Term Rate Period to direct the redemption of
the Bonds in whole in accordance with the applicable provisions of
the Indenture upon the occurrence of any of the following events:
(a) The Project or the Plant shall have been damaged or
destroyed to such an extent that (1) the Project or the Plant
cannot reasonably be expected to be restored, within a period of
six consecutive months, to the condition thereof immediately
preceding such damage or destruction or (2) the Company is
reasonably expected to be prevented from carrying on its normal
use and operation of the Project or the Plant for a period of six
consecutive months.
(b) Title to, or the temporary use of, all or a significant
part of the Project or the Plant shall have been taken under the
exercise of the power of eminent domain to such an extent (1) that
the Project or the Plant cannot reasonably be expected to be
restored within a period of six consecutive months to a condition
of usefulness comparable to that existing prior to the taking or
(2) the Company is reasonably expected to be prevented from
carrying on its normal use and operation of the Project or the
Plant for a period of six consecutive months.
(c) As a result of any changes in the Constitution of the
State, the Constitution of the United States of America or any
state or federal laws or as a result of legislative or
administrative action (whether state or federal) or by final
decree, judgment or order of any court or administrative body
(whether state or federal) entered after any contest thereof by
the Issuer or the Company in good faith, this Agreement shall have
become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed
in this Agreement.
(d) Unreasonable burdens or excessive liabilities shall
have been imposed upon the Issuer or the Company with respect to
the Project or the Plant or the operation thereof, including,
without limitation, the imposition of federal, state or other ad
valorem, property, income or other taxes other than ad valorem
taxes at the rates presently levied upon privately owned property
used for the same general purpose as the Project or the Plant.
(e) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies or facilities
(including, but not limited to, facilities in connection with the
disposal of industrial wastes) necessary for the operation of the
Project or the Plant for the Project Purposes occur or
technological or other changes occur which the Company cannot
reasonably overcome or control and which in the Company's
reasonable judgment render the Project or the Plant uneconomic or
obsolete for the Project Purposes.
(f) Any court or administrative body shall enter a
judgment, order or decree, or shall take administrative action,
requiring the Company to cease all or any substantial part of its
operations served by the Project or the Plant to such extent that
the Company is or will be prevented from carrying on its normal
operations at the Project or the Plant for a period of six
consecutive months.
(g) The termination by the Company of operations at the
Plant.
The amount payable by the Company in the event of its
exercise of the option granted in this Section shall be the sum of
the following:
(i) An amount of money which, when added to the
moneys and investments held to the credit of the Bond Fund,
will be sufficient pursuant to the provisions of the
Indenture to pay, at 100% of the principal amount thereof
plus accrued interest to the redemption date, and discharge,
all Outstanding Bonds on the earliest applicable redemption
date, that amount to be paid to the Trustee, plus
(ii) An amount of money equal to the Additional
Payments relating to those Bonds accrued and to accrue until
actual final payment and redemption of those Bonds, that
amount or applicable portions thereof to be paid to the
Trustee or to the Persons to whom those Additional Payments
are or will be due.
The requirement of (ii) above with respect to Additional Payments
to accrue may be met if provisions satisfactory to the Trustee and
the Issuer are made for paying those amounts as they accrue.
The rights and options granted to the Company in this Section
may be exercised whether or not the Company is in default
hereunder; provided, that such default will not relieve the
Company from performing those actions which are necessary to
exercise any such right or option granted hereunder.
Section II.3. Mandatory Redemption. The Company shall
deliver to the Trustee the moneys needed to redeem the Bonds in
accordance with any mandatory redemption provisions relating
thereto as may be set forth in Sections 4.01(b) of the Indenture.
Section II.4. Notice of Redemption. In order to exercise an
option granted in, or to consummate a redemption required by, this
Article VI, the Company shall, within 180 days following the event
authorizing the exercise of such option, or at any time during the
continuation of the condition referred to in paragraphs (c), (d)
or (e) of Section 6.2 hereof, or at any time that optional
redemption of the Bonds is permitted under the Indenture as
provided in Section 6.1 hereof, or promptly upon the occurrence of
a Determination of Taxability (as defined in the Indenture), give
written notice to the Issuer and the Trustee that it is exercising
its option to direct the redemption of Bonds, or that the
redemption thereof is required by Section 4.01(b) of the Indenture
due to the occurrence of a Determination of Taxability, as the
case may be, in accordance with the Agreement and the Indenture,
and shall specify therein the date on which such redemption is to
be made, which date shall not be more than 180 days from the date
such notice is mailed. The Company shall make arrangements
satisfactory to the Trustee for the giving of the required notice
of redemption to the Holders of the Bonds, in which arrangements
the Issuer shall cooperate.
Section II.5. Actions by Issuer. At the request of the
Company or the Trustee, the Issuer shall take all steps required
of it under the applicable provisions of the Indenture or the
Bonds to effect the redemption of all or a portion of the Bonds
pursuant to this Article VI.
(End of Article VI)
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
Section III.1. Events of Default. Each of the following
shall be an Event of Default:
(a) The occurrence of an event of default as defined in
Section 7.01 (a), (b), (c) or (d) of the Indenture;
(b) The Company shall fail to observe and perform any other
agreement, term or condition contained in this Agreement, other
than such failure as will have resulted in an event of default
described in (a) above and the continuation of that failure for a
period of 90 days after notice thereof shall have been given to
the Company by the Issuer or the Trustee, or for such longer
period as the Issuer and the Trustee may agree to in writing;
provided, that failure shall not constitute an Event of Default so
long as the Company institutes curative action within the
applicable period and diligently pursues that action to completion
within 150 days after the expiration of initial cure period as
determined above, or within such longer period as the Issuer and
the Trustee may agree to in writing; and
(c) By decree of a court of competent jurisdiction the
Company shall be adjudicated a bankrupt, or an order shall be made
approving a petition or answer filed seeking reorganization or
readjustment of the Company under the federal bankruptcy laws or
other law or statute of the United States of America or of the
state of incorporation of the Company or of any other state, or,
by order of such a court, a trustee in bankruptcy, a receiver or
receivers shall be appointed of all or substantially all of the
property of the Company, and any such decree or order shall have
continued unstayed on appeal or otherwise and in effect for a
period of sixty (60) days; and
(d) The Company shall file a petition in voluntary
bankruptcy or shall make an assignment for the benefit of
creditors or shall consent to the appointment of a receiver or
receivers of all or any part of its property, or shall file a
petition seeking reorganization or readjustment under the Federal
bankruptcy laws or other law or statute of the United States of
America or any state thereof, or shall file a petition to take
advantage of any debtors' act.
Notwithstanding the foregoing, if, by reason of Force
Majeure, the Company is unable to perform or observe any
agreement, term or condition hereof which would give rise to an
Event of Default under subsection (b) hereof, the Company shall
not be deemed in default during the continuance of such inability.
However, the Company shall promptly give notice to the Trustee
and the Issuer of the existence of an event of Force Majeure and
shall use its best efforts to remove the effects thereof; provided
that the settlement of strikes or other industrial disturbances
shall be entirely within its discretion.
The term Force Majeure shall mean the following:
(i) acts of God; strikes, lockouts or other
industrial disturbances; acts of public enemies; orders or
restraints of any kind of the government of the United States
of America or of the State or any of their departments,
agencies, political subdivisions or officials, or any civil
or military authority; insurrections; civil disturbances;
riots; epidemics; landslides; lightning; earthquakes; fires;
hurricanes; tornados; storms; droughts; floods; arrests;
restraint of government and people; explosions; breakage,
nuclear accidents or other malfunction or accident to
facilities, machinery, transmission pipes or canals; partial
or entire failure of a utility serving the Project; shortages
of labor, materials, supplies or transportation; or
(ii) any cause, circumstance or event not
reasonably within the control of the Company.
The exercise of remedies hereunder shall be subject to any
applicable limitations of federal bankruptcy law affecting or
precluding that declaration or exercise during the pendency of or
immediately following any bankruptcy, liquidation or
reorganization proceedings.
Section III.2. Remedies on Default. Whenever an Event of
Default shall have happened and be subsisting, either or both of
the following remedial steps may be taken:
(a) The Issuer or the Trustee may have access to, inspect,
examine and make copies of the books, records, accounts and
financial data of the Company, only, however, insofar as they
pertain to the Project; or
(b) The Issuer or the Trustee may pursue all remedies now
or hereafter existing at law or in equity to recover all amounts,
including all Loan Payments and Additional Payments and under
Section 4.8 hereof the purchase price of Bonds tendered for
purchase, then due and thereafter to become due under this
Agreement, or to enforce the performance and observance of any
other obligation or agreement of the Company under this Agreement.
Notwithstanding the foregoing, the Issuer shall not be obligated
to take any step which in its opinion will or might cause it to
expend time or money or otherwise incur liability unless and until
a satisfactory indemnity bond has been furnished to the Issuer at
no cost or expense to the Issuer. Any amounts collected as Loan
Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Bond Service Charges
collected pursuant to action taken under this Section shall be
paid into the Bond Fund and applied in accordance with the
provisions of the Indenture or, if the outstanding Bonds have been
paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in Section 5.07 of the
Indenture for transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further
limitation that the rescission and annulment by the Trustee of its
declaration that all of the Bonds are immediately due and payable
also shall constitute a rescission and annulment of any
corresponding declaration made pursuant to this Section and a
rescission and annulment of the consequences of that declaration
and of the Event of Default with respect to which that declaration
has been made, provided that no such rescission and annulment
shall extend to or affect any subsequent or other default or
impair any right consequent thereon.
Section III.3. No Remedy Exclusive. No remedy conferred
upon or reserved to the Issuer or the Trustee by this Agreement is
intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this
Agreement, or now or hereafter existing at law, in equity or by
statute. No delay or omission to exercise any right or power
accruing upon any default shall impair that right or power or
shall be construed to be a waiver thereof, but any such right or
power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Issuer or the Trustee
to exercise any remedy reserved to it in this Article, it shall
not be necessary to give any notice, other than any notice
required by law or for which express provision is made herein.
Section III.4. Agreement to Pay Attorneys' Fees and
Expenses. If an Event of Default should occur and the Issuer or
the Trustee should incur expenses, including attorneys' fees, in
connection with the enforcement of this Agreement or the
collection of sums due hereunder, the Company shall be required,
to the extent permitted by law, to reimburse the Issuer and the
Trustee, as applicable, for the expenses so incurred upon demand.
Section III.5. No Waiver. No failure by the Issuer or the
Trustee to insist upon the strict performance by the Company of
any provision hereof shall constitute a waiver of their right to
strict performance and no express waiver shall be deemed to apply
to any other existing or subsequent right to remedy the failure by
the Company to observe or comply with any provision hereof.
Section III.6. Notice of Default. The Company shall notify
the Trustee immediately if it becomes aware of the occurrence of
any Event of Default hereunder or of any fact, condition or event
which, with the giving of notice or passage of time or both, would
become an Event of Default.
(End of Article VII)
ARTICLE IV
MISCELLANEOUS
Section IV.1. Term of Agreement. This Agreement shall be
and remain in full force and effect from the date of delivery of
the Bonds to the Original Purchaser until such time as (i) all of
the Bonds shall have been fully paid (or provision made for such
payment) and the Indenture has been released pursuant to Section
9.01 thereof and (ii) all other sums payable by the Company under
this Agreement shall have been paid.
Section IV.2. Amounts Remaining in Funds. Any amounts in
the Bond Fund remaining unclaimed by the Holders of Bonds for four
years after the due date thereof (whether at stated maturity, by
redemption, upon acceleration or otherwise), at the option of the
Company, shall be deemed to belong to and shall be paid, subject
to Section 5.06 of the Indenture, at the written request of the
Company, to the Company by the Trustee. With respect to that
principal of and any premium and interest on the Bonds to be paid
from moneys paid to the Company pursuant to the preceding
sentence, the Holders of the Bonds entitled to those moneys shall
look solely to the Company for the payment of those moneys.
Further, any amounts remaining in the Bond Fund and any other
special funds or accounts created under this Agreement or the
Indenture, except the Rebate Fund, after all of the Bonds shall be
deemed to have been paid and discharged under the provisions of
the Indenture and all other amounts required to be paid under this
Agreement and the Indenture have been paid, shall be paid to the
Company to the extent that those moneys are in excess of the
amounts necessary to effect the payment and discharge of the
Outstanding Bonds.
Section IV.3. Notices. All notices, certificates, requests
or other communications hereunder shall be in writing, except as
provided in Section 3.4 hereof, and shall be deemed to be
sufficiently given when mailed by registered or certified mail,
postage prepaid, and addressed to the appropriate Notice Address.
A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Issuer, the Company, any
Credit Facility Issuer or the Trustee shall also be given to the
others. The Company, the Issuer, any Credit Facility Issuer and
the Trustee, by notice given hereunder, may designate any further
or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.
Section IV.4. Extent of Covenants of the Issuer; No Personal
Liability. All covenants, obligations and agreements of the
Issuer contained in this Agreement or the Indenture shall be
effective to the extent authorized and permitted by applicable
law. No such covenant, obligation or agreement shall be deemed to
be a covenant, obligation or agreement of any present or future
member, officer, agent or employee of the Issuer in other than his
official capacity, and neither the members of the Issuer nor any
official executing the Bonds shall be liable personally on the
Bonds or be subject to any personal liability or accountability by
reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this
Agreement or in the Indenture.
Section IV.5. Binding Effect. This Agreement shall inure to
the benefit of and shall be binding in accordance with its terms
upon the Issuer, the Company and their respective permitted
successors and assigns provided that this Agreement may not be
assigned by the Company (except as permitted under Sections 5.8 or
5.12 hereof) and may not be assigned by the Issuer except to (i)
the Trustee pursuant to the Indenture or as otherwise may be
necessary to enforce or secure payment of Bond Service Charges or
(ii) any successor public body to the Issuer.
Section IV.6. Amendments and Supplements. Except as
otherwise expressly provided in this Agreement or the Indenture,
subsequent to the issuance of the Bonds and prior to all
conditions provided for in the Indenture for release of the
Indenture having been met, this Agreement may not be effectively
amended, changed, modified, altered or terminated by the parties
hereto except with the consents required by, and in accordance
with, the provisions of Article XI of the Indenture, as
applicable.
Section IV.7. References to Credit Facility. During such
time or times as no Credit Facility is in effect, and during the
continuation of any event of default under the Indenture due to a
failure by the Credit Facility Issuer to honor a drawing by the
Trustee under the Credit Facility then in effect in accordance
with the terms thereof, references herein to the Credit Facility
Issuer shall be ineffective.
Section IV.8. Execution Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
regarded as an original and all of which shall constitute but one
and the same instrument.
Section IV.9. Severability. If any provision of this
Agreement, or any covenant, obligation or agreement contained
herein is determined by a judicial or administrative authority to
be invalid or unenforceable, that determination shall not affect
any other provision, covenant, obligation or agreement, each of
which shall be construed and enforced as if the invalid or
unenforceable portion were not contained herein. That invalidity
or unenforceability shall not affect any valid and enforceable
application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made,
entered into or taken in the manner and to the full extent
permitted by law.
Section IV.10. Governing Law. This Agreement shall be
deemed to be a contract made under the laws of the State and for
all purposes shall be governed by and construed in accordance with
the laws of the State.
(End of Article VIII)
IN WITNESS WHEREOF, the Issuer and the Company have caused
this Agreement to be duly executed in their respective names, all
as of the date hereinbefore written.
CITY OF PRINCETON,
INDIANA
By: /s/ George Taylor
Mayor
Attest:
/s/ Shirley Robb
Clerk-Treasurer
PSI ENERGY, INC.
By: /s/ William L. Sheafer
Treasurer
Exhibit A
DESCRIPTION OF POLLUTION CONTROL FACILITIES
AT
GIBSON GENERATING STATION
FINANCED IN PART BY SERIES 1982 BONDS
The Company's undivided 50.05% ownership interest in:
1. Flue Gas Desulfurization and Sludge Fixation
System for Unit 5 Generating Station, consists of a
system designed to remove sulfur dioxide from the flue
gases emitted from Unit 5. The primary components of
the facility include four booster fans and motors, four
scrubber modules and mist eliminators, four scrubber
pumps, a slurry recycle system, two sludge thickener
tanks and four underflow pumps, one thickener overflow
tank and two overflow pumps, inlet ductwork, four inlet
and four outlet isolation dampers, a reactant
preparation system consisting of facilities for
limestone unloading and transport, lime unloading and
transport, a ball mill, a reactant preparation
building, a slurry mix tank, three slurry transfer
pumps and a dolomitic lime day bin, support steel,
foundations, piping, wiring, instrumentation and
controls, but excluding certain bypass gas ductwork,
outlet ductwork, air reheater and certain electrical
components which are not entirely dedicated to support
the FGD system. The sludge treatment system consists
of a system to treat the FGD sludge from Unit 5 in a
stabilization process. The primary components of the
stabilization facility include fly ash and FGD sludge
transport systems to the stabilization area, a sludge
surge tank, a fly ash surge silo, a lime silo, a sludge
holding pond, an external loading hopper, a fixation
process building, four vacuum filters, one pug mill,
material handling conveyors, pumps, an external radial
stacking conveyor, foundations, structural steel,
wiring, instrumentation and controls.
2. Electrostatic Precipitator for Unit 5
Generating Station, consists of a system to remove fly
ash from the gases emitted from Unit 5. The primary
components of the facility include two electrostatic
precipitators and hoppers, certain inlet and outlet
ductwork thereto and therefrom, certain pneumatic fly
ash transport piping and hydroveyor.
3. Off-Road Solid Waste Transport and Disposal
Equipment and Solid Waste Disposal Site Improvement,
consists of a road dedicated exclusively to travel to
and from an 86 acre landfill site, four 50 ton rear
dump trucks, one tractor shovel, three low ground
pressure tractors, and one soil vibrator-compactor.
PSI ENERGY, INC.
AND
THE FIFTH THIRD BANK, Trustee
Indenture
Dated as of November 15, 1996
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a)(1) 609
(a)(2) 609
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 608
610
Section 311(a) 613
(b) 613
Section 312(a) 701
702
(b) 702
(c) 702
Section 313(a) 703
(b) 703
(c) 703
(d) 703
Section 314(a) 704
(a)(4) 101
1004
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
Section 315(a) 601
(b) 602
(c) 601
(d) 601
(e) 514
Section 316(a) 101
(a)(1)(A) 502
512
(a)(1)(B) 513
(a)(2) Not Applicable
(b) 508
(c) 104
Section 317(a)(1) 503
(a)(2) 504
(b) 1003
Section 318(a) 107
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture
PSI ENERGY, INC.
Indenture
Dated as of November 15, 1996
TABLE OF CONTENTS
Parties 8
Recitals of the Company 8
ARTICLE ONE
Definitions and Other Provisions of General Application
Section 101. Definitions:
Act 9
Affiliate; control 9
Authenticating Agent 9
Board of Directors 9
Board Resolution 9
Business Day 9
Commission 9
Company 9
Company Request; Company Order 10
Corporate Trust Office 10
corporation 10
Covenant Defeasance 10
Defaulted Interest 10
Defeasance 10
Depositary 10
Event of Default 10
Exchange Act 10
Expiration Date 10
Global Security 10
Holder 10
Indenture 10
interest 11
Interest Payment Date 11
Investment Company Act 11
Junior Subordinated Securities 11
Maturity 11
Notice of Default 11
Officers' Certificate 11
Opinion of Counsel 11
Original Issue Discount Security 11
Outstanding 11
Paying Agent 12
Person 13
Place of Payment 13
Predecessor Security 13
Redemption Date 13
Redemption Price 13
Regular Record Date 13
Responsible Officer 13
Securities 13
Securities Act 13
Security Register; Security Registrar 13
Senior Debt 14
Special Record Date 14
Stated Maturity 14
Subsidiary 14
Trust Indenture Act 14
Trustee 14
U.S. Government Obligation 14
Vice President 15
Section 102. Compliance Certificates and Opinions 15
Section 103. Form of Documents Delivered to Trustee 15
Section 104. Acts of Holders; Record Dates 16
Section 105. Notices, Etc., to Trustee and Company 18
Section 106. Notice to Holders; Waiver 19
Section 107. Conflict with Trust Indenture Act 19
Section 108. Effect of Headings and Table of Contents 19
Section 109. Successors and Assigns 19
Section 110. Separability Clause 20
Section 111. Benefits of Indenture 20
Section 112. Governing Law 20
Section 113. Legal Holidays 20
Section 114. Certain Matters Relating to Currencies 20
Section 115. Immunity of Incorporators, Stockholders, Officers
and Directors 21
Section 116. Counterparts 21
Section 117. Assignment to Subsidiary 21
ARTICLE TWO
0Security Forms
Section 201. Forms Generally 22
Section 202. Form of Face of Security 22
Section 203. Form of Reverse of Security 25
Section 204. Form of Legend for Global Securities 29
Section 205. Form of Trustee's Certificate of Authentication
29
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series 30
Section 302. Denominations 33
Section 303. Execution, Authentication, Delivery and Dating
33
Section 304. Temporary Securities 35
Section 305. Registration, Registration of Transfer and
Exchange 35
Section 306. Mutilated, Destroyed, Lost and Stolen Securities
37
Section 307. Payment of Interest; Interest Rights Preserved
38
Section 308. Persons Deemed Owners 39
Section 309. Cancellation 40
Section 310. Computation of Interest 40
Section 311. CUSIP Number 40
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture 41
Section 402. Application of Trust Money 42
ARTICLE FIVE
Remedies
Section 501. Events of Default 42
Section 502. Acceleration of Maturity; Rescission and
Annulment 43
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee 44
Section 504. Trustee May File Proofs of Claim 45
Section 505. Trustee May Enforce Claims Without Possession
of Securities 46
Section 506. Application of Money Collected 46
Section 507. Limitation on Suits 46
Section 508. Unconditional Right of Holders to Receive
Principal,
Premium and Interest 47
Section 509. Restoration of Rights and Remedies 47
Section 510. Rights and Remedies Cumulative 48
Section 511. Delay or Omission Not Waiver 48
Section 512. Control by Holders 48
Section 513. Waiver of Past Defaults 48
Section 514. Undertaking for Costs 49
Section 515. Waiver of Usury, Stay or Extension Laws 49
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities 50
Section 602. Notice of Defaults 50
Section 603. Certain Rights of Trustee 50
Section 604. Not Responsible for Recitals or Issuance of
Securities 51
Section 605. May Hold Securities 52
Section 606. Money Held in Trust 52
Section 607. Compensation and Reimbursement 52
Section 608. Conflicting Interests 53
Section 609. Corporate Trustee Required; Eligibility 53
Section 610. Resignation and Removal; Appointment of Successor
53
Section 611. Acceptance of Appointment by Successor 55
Section 612. Merger, Conversion, Consolidation or Succession
to Business. 56
Section 613. Preferential Collection of Claims Against Company
57
Section 614. Appointment of Authenticating Agent 57
Section 615. Indemnification 59
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses
of Holders 59
Section 702. Preservation of Information; Communications
to Holders 60
Section 703. Reports by Trustee 60
Section 704. Reports by Company 61
ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidation and Mergers Permitted. 61
Section 802. Rights and Duties of Successor Company 61
Section 803. Opinion of Counsel 62
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of
Holders 62
Section 902. Supplemental Indentures With Consent of Holders
64
Section 903. Execution of Supplemental Indentures 65
Section 904. Effect of Supplemental Indentures 66
Section 905. Conformity with Trust Indenture Act 66
Section 906. Reference in Securities to Supplemental
Indentures 66
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest 66
Section 1002. Maintenance of Office or Agency 66
Section 1003. Money for Securities Payments to Be Held in Trust
67
Section 1004. Statement by Officers as to Default 68
Section 1005. Maintenance of Properties 68
Section 1006. Payment of Taxes and Other Claims 69
Section 1007. Waiver of Certain Covenants 69
Section 1008. Calculation of Original Issue Discount 69
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article 70
Section 1102. Election to Redeem; Notice to Trustee 70
Section 1103. Selection by Trustee of Securities to Be Redeemed
70
Section 1104. Notice of Redemption 71
Section 1105. Deposit of Redemption Price 72
Section 1106. Securities Payable on Redemption Date 72
Section 1107. Securities Redeemed in Part 72
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article 73
Section 1202. Satisfaction of Sinking Fund Payments with
Securities 73
Section 1203. Redemption of Securities for Sinking Fund 74
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance 74
Section 1302. Defeasance and Discharge 74
Section 1303. Covenant Defeasance 75
Section 1304. Conditions to Defeasance or Covenant Defeasance
75
Section 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions
78
Section 1306. Reinstatement 79
ARTICLE FOURTEEN
Junior Subordinated Securities
Section 1401. Certain Securities Subordinate to Senior Debt
79
Section 1402. Payment Over of Proceeds Upon Default 80
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc
80
Section 1404. Subrogation to Rights of Holders of Senior Debt
81
Section 1405. Trustee to Effectuate Subordination 83
Section 1406. Notice to Trustee 83
Section 1407. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights 84
Section 1408. No Waiver of Subordination Provisions 84
Testimonium 85
Signatures 85
INDENTURE, dated as of November 15, 1996, between PSI
Energy, Inc., a corporation duly organized and existing under the
laws of the State of Indiana (herein called the "Company"),
having its principal office at 1000 East Main Street, Plainfield,
Indiana 46168, and The Fifth Third Bank, an Ohio banking
corporation, as Trustee (herein called the "Trustee").
Recitals of the Company
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of
its unsecured debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in
one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, subject
to Article Fourteen, if applicable, for the equal and
proportionate benefit of the Holders of the Securities of each
series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles;
(4) unless the context otherwise requires, any reference to fan
"Article" or a "Section" refers to an Article or a Section, as
the case may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For
the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to
authenticate Securities of one or more series.
"Board of Directors" means the board of directors of the Company,
or any duly authorized committee of that board, or any Person
duly authorized to act on behalf of that board.
"Board Resolution" means a copy of a resolution or resolutions
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment,
means each Monday, Tuesday, Wednesday, Thursday and Friday which
is not a day on which banking institutions in that Place of
Payment are authorized or obligated by law or executive order to
close.
"Commission" means the Securities and Exchange Commission, from
time to time constituted, created under the Exchange Act, or, if
at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have
become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor
Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company either by (i) its
Chairman of the Board, its Vice Chairman, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the
Trustee, or (ii) any two Persons designated in a Board
Resolution, or in a Company Order previously delivered to the
Trustee signed by any two of the foregoing, and delivered to the
Trustee.
"Corporate Trust Office" means the office of the Trustee for
Securities of any series at which at any particular time its
corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is
located at 38 Fountain Square Plaza, Cincinnati, Ohio.
"corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Defaulted Interest" has the meaning specified in Section
307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series
issuable in whole or in part in the form of one or more Global
Securities, a clearing agency registered under the Exchange Act
that is designated to act as Depositary for such Securities as
contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and
any statute successor thereto, in each case as amended from time
to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or
part of the Securities of any series and bears the legend set
forth in Section 204 (or such legend as may be specified as
contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this
instrument and any such supplemental indenture, the provisions of
the Trust Indenture Act that are deemed to be a part of and
govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms
of particular series of Securities established as contemplated by
Section 301.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after
Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an installment of interest
on such Security.
"Investment Company Act" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended
from time to time.
"Junior Subordinated Securities" shall have the meaning
specified in Section 1401.
"Maturity", when used with respect to any Security, means
the date on which the principal of such Security or an
installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration
of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind
specified in Section 501(4).
"Officers' Certificate" means a certificate signed in the
same manner and by Persons as provided for in a Company Requestor
a Company Order, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel,
who may be an employee of or counsel for the Company.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(3) Securities as to which Defeasance has been
effected pursuant to Section 1302; and
(4) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations
of the Company; provided, however, that in determining whether
the Holders of the requisite principal amount of the Outstanding
Securities have given, made or taken any request, demand,
authorization, direction, notice, consent, waiver or other action
hereunder as of any date, (A) the principal amount of an Original
Issue Discount Security which shall be deemed to be Outstanding
shall be the amount of the principal thereof which would be due
and payable as of such date upon acceleration of the Maturity
thereof to such date pursuant to Section 502, (B) if, as of such
date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such
Security which shall be deemed to be Outstanding shall be the
amount as specified or determined as contemplated by Section 301,
(C) the principal amount of a Security denominated in one or more
foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of
such date in the manner provided as contemplated by Section 301,
of the principal amount of such Security (or, in the case of a
Security described in Clause (A) or (B) above, of the amount
determined as provided in such Clause), and (D) Securities owned
by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice,
consent, waiver or other action, only Securities which the
Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor.
"Paying Agent" means, if not the Company, then any Person
authorized by the Company to pay the principal of or any premium
or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership,
joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities
of any series, means the place or places where the principal of
and any premium and interest on the Securities of that series are
payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means the
date specified for that purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the
Trustee, means any vice president, any assistant vice-president,
any trust officer or assistant trust officer of the Trustee
assigned to the Trustee's corporate trust department and
customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to
time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Debt" of the Company means the principal of,
premium, if any, interest on and any other payment due pursuant
to any of the following, whether outstanding at the date of
execution of this Indenture or thereafter incurred, created or
assumed: (a) all indebtedness of the Company evidenced by notes,
debentures, bonds or other securities sold by the Company for
money, excluding Junior Subordinated Securities, but including
all first mortgage bonds of the Company outstanding from time to
time; (b) all indebtedness of others of the kinds described in
the preceding clause (a) assumed by or guaranteed in any manner
by the Company, including through an agreement to purchase,
contingent or otherwise; and (c) all renewals, extensions or
refundings of indebtedness of the kinds described in any of the
preceding clauses (a) and (b); unless, in the case of any
particular indebtedness, renewal, extension or refunding, the
instrument creating or evidencing the same or the assumption or
guarantee of the same expressly provides that such indebtedness,
renewal, extension or refunding is not superior in right of
payment to or is pari passu with the Junior Subordinated
Securities.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
307.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means
the date specified in such Security as the fixed date on which
the principal of such Security or such installment of principal
or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed,
except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee
with respect to Securities of that series.
"U.S. Government Obligation" has the meaning specified in
Section 1304.
"Vice President", when used with respect to the Company or
the Trustee, means any vice president, whether or not designated
by a number or a word or words added before or after the title
"vice president".
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act. Each
such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and
any other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall
include,
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
(2) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(3) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied
with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to the matters upon which his certificate or opinion is
based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect
to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Section 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this
Indenture to be given, made or taken by Holders may be embodied
in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such
action is made upon such Security.
The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any
series entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given, made or
taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this
paragraph shall not apply with respect to, the giving or making
of any notice, declaration, request or direction referred to in
the next paragraph. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities of the relevant
series on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to
the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on such
record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of
no effect), and nothing in this paragraph shall be construed to
render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities of the relevant series
on the date such action is taken. Promptly after any record date
is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given
to the Trustee in writing and to each Holder of Securities of the
relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any
series entitled to join in the giving or making of (i) any Notice
of Default, (ii) any declaration of acceleration referred to in
Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section
512, in each case with respect to Securities of such series. If
any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of such series on such record date, and no
other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to
the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on such
record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and
of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Securities of the
relevant series on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date,
the proposed action by Holders and the applicable Expiration Date
to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in
Section 106.
With respect to any record date set pursuant to this
Section, the party hereto which sets such record date may
designate any day as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day;
provided that no such change shall be effective unless notice of
the proposed new Expiration Date is given to the other party
hereto in writing, and to each Holder of Securities of the
relevant series in the manner set forth in Section 106, on or
prior to the existing Expiration Date. If an Expiration Date is
not designated with respect to any record date set pursuant to
this Section, the party hereto which set such record date shall
be deemed to have initially designated the 180th day after such
record date as the Expiration Date with respect thereto, subject
to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record
date.
Without limiting the foregoing, a Holder entitled hereunder
to take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the
principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal
amount.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust
Administration, or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class
postage prepaid, to the Company addressed to it at the address of
its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in
writing to the Trustee by the Company.
Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if in writing and mailed, to each
Holder affected by such event, at his address as it appears in
the Security Register, not later than the latest date (if any),
and not earlier than the earliest date (if any), prescribed for
the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other
Holders. Any notice when mailed to a Holder in the aforesaid
manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall
be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with
the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
a provision of the Trust Indenture Act which is required under
such Act to be a part of and govern this Indenture, the latter
provision shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the
construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder, the Holders, and the holders of any
Senior Debt, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York,
without regard to conflicts of laws principles thereof.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Security shall not be a Business Day at
any Place of Payment, then (notwithstanding any other provision
of this Indenture or of the Securities (other than a provision of
any Security which specifically states that such provision shall
apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment
on such date, but may be made on the next succeeding Business Day
at such Place of Payment with the same force and effect as if
made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity, and no interest shall accrue with respect to
such payment for the period from and after such Interest Payment
Date, Redemption Date or Stated Maturity, as the case may be, to
such next succeeding Business Day.
Section 114. Certain Matters Relating to Currencies.
Whenever any action or Act is to be taken hereunder by the
Holders of Securities denominated in different currencies or
currency units, then for purposes of determining the principal
amount of Securities held by such Holders, the aggregate
principal amount of the Securities denominated in a foreign
currency or currency unit shall be deemed to be that amount of
Dollars that could be obtained for such principal amount on the
basis of a spot exchange rate specified to the Trustee for such
series in an Officers' Certificate for exchanging such foreign
currency or currency unit into Dollars as of the date of the
taking of such action or Act by the Holders of the requisite
percentage in principal amount of the Securities.
The Trustee shall segregate moneys, funds and accounts held
by the Trustee in one currency or currency unit from any moneys,
funds or accounts held in any other currencies or currency units,
notwithstanding any provision herein that would otherwise permit
the Trustee to commingle such amounts.
Section 115. Immunity of Incorporators, Stockholders, Officers
and Directors.
No recourse shall be had for the payment of the principal of
(and premium, if any), or the interest, if any, on any Securities
of any series, or for any claim based thereon, or upon any
obligation, covenant or agreement of this Indenture, against any
incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any successor
corporation, either directly or indirectly through the Company or
any successor corporation, whether by virtue of any constitution,
statute or rule of law or by the enforcement of any assessment of
penalty or otherwise; it being expressly agreed and understood
that this Indenture and all the Securities of each series are
solely corporate obligations, and that no personal liability
whatever shall attach to, or is incurred by, any incorporator,
stockholder, officer or director, past, present or future, of the
Company or of any successor corporation, either directly or
indirectly through the Company or any successor corporation,
because of the incurring of the indebtedness hereby authorized or
under or by reason of any of the obligations, covenants or
agreements contained in this Indenture or in any of the
Securities of any series, or to be implied herefrom or therefrom;
and that all such personal liability is hereby expressly released
and waived as a condition of, and as part of the consideration
for, the execution of this Indenture and the issuance of the
Securities of each series.
Section 116. Counterparts.
This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same
instrument.
Section 117. Assignment to Affiliate.
The Company will have the right at all times to assign by
indenture supplemental hereto any of its rights or obligations
under the Indenture to a direct, indirect, or wholly owned
Affiliate of the Company; provided that, in the event of any such
assignment, the Company will remain liable for all such
obligations.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
The Securities of each series shall be in substantially the
form set forth in this Article, or in such other form as shall be
established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or
Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as
evidenced by their execution thereof. If the form of Securities
of any series is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action shall
be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery
of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Section 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and
the regulations thereunder.]
PSI ENERGY, INC.
.................................................................
....
No. .........
$ .............
CUSIP NO. _______
PSI Energy, Inc., a corporation duly organized and existing
under the laws of the state of Indiana (herein called the
"Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to
.............................................., or registered
assigns, the principal sum of
...................................... Dollars on
........................................................ [if the
Security is to bear interest prior to Maturity, insert: , and
to pay interest thereon from ............. or from the most
recent Interest Payment Date to which interest has been paid or
duly provided for, ................... on ............ and
............ in each year, commencing ........., at the rate of
....% per annum, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date
for such interest, which shall be the ....... or ....... (whether
or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity,
insert: The principal of this Security shall not bear interest
except in the case of a default in payment of principal upon
acceleration, upon redemption or at Stated Maturity and in such
case the overdue principal and any overdue premium shall bear
interest at the rate of ....% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the
dates such amounts are due until they are paid or made available
for payment. Interest on any overdue principal or premium shall
be payable on demand. Any such interest on overdue principal or
premium which is not paid on demand shall bear interest at the
rate of ......% per annum (to the extent that the payment of such
interest on interest shall be legally enforceable), from the date
of such demand until the amount so demanded is paid or made
available for payment. Interest on any overdue interest shall be
payable on demand.]
Payment of the principal of (and premium, if any) and [if
applicable, insert: any such] interest on this Security will be
made at the office or agency of the Company maintained for that
purpose in ............, in such coin or currency of the United
States of America as at the time of payment is legal tender for
payment of public and private debts [if applicable, insert:
;provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security
Register].
Any payment on this Security due on any day which is not a
Business Day in the City of New York need not be made on such
day, but may be made on the next succeeding Business Day with the
same force and effect as if made on the due date and no interest
shall accrue for the period from and after such date.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, [if subordinated,
insert: including, without limitation, provisions subordinating
the payment of the principal hereof and any premium and interest
hereon to the payment in full of all Senior Debt as defined in
the Indenture] which such further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
In Witness Whereof, the Company has caused this instrument
to be duly executed.
PSI ENERGY, INC.
By...............................................
Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"),
issued and to be issued in one or more series under an Indenture,
dated as of , 1996 (herein called the
"Indenture", which term shall have the meaning assigned to it in
such instrument), between the Company and The Fifth Third Bank,
as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), and reference is hereby
made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the
Company, the Trustee and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated
and delivered. This Security is one of the series designated on
the face hereof [if applicable, insert: , limited in aggregate
principal amount to $...........].
[If applicable, insert: The Securities of this series are
subject to redemption upon not less than 30 days' notice by mail,
[if applicable, insert: (1) on ........... in any year
commencing with the year ...... and ending with the year ......
through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)]
at any time [if applicable, insert: on or after ..........,
19..], as a whole or in part, at the election of the Company, at
the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [if applicable, insert: on or
before ..............., ...%, and if redeemed] during the
12-month period beginning ............. of the years indicated,
Redemption Redemption
Year Price Year Price
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such redemption [if
applicable, insert: (whether through operation of the sinking
fund or otherwise)] with accrued interest to the Redemption Date,
but interest installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture.]
[If applicable, insert: The Securities of this series are
subject to redemption upon not less than 30 days' notice by mail,
(1) on ............ in any year commencing with the year .... and
ending with the year .... through operation of the sinking fund
for this series at the Redemption Prices for redemption through
operation of the sinking fund (expressed as percentages of the
principal amount) set forth in the table below, and (2) at any
time [if applicable, insert: on or after ............], as a
whole or in part, at the election of the Company, at the
Redemption Prices for redemption otherwise than through operation
of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the
12-month period beginning ............ of the years indicated,
Redemption Price For Redemption
Price For
Redemption Through Redemption
Otherwise Than
Operation of the Through
Operation of the
Year Sinking Fund
Sinking Fund
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such redemption
(whether through operation of the sinking fund or otherwise) with
accrued interest to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture.]
[If applicable, insert: Notwithstanding the foregoing, the
Company may not, prior to ............., redeem any Securities of
this series as contemplated by [if applicable, insert: Clause
(2) of] the preceding paragraph as a part of, or in anticipation
of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the
Company (calculated in accordance with generally accepted
financial practice) of less than .....% per annum.]
[If applicable, insert: The sinking fund for this series
provides for the redemption on ............ in each year
beginning with the year ....... and ending with the year ......
of [if applicable, insert: not less than $..........
("mandatory sinking fund") and not more than] $.........
aggregate principal amount of Securities of this series.
Securities of this series acquired or redeemed by the Company
otherwise than through [if applicable, insert: mandatory]
sinking fund payments may be credited against subsequent [if
applicable, insert: mandatory] sinking fund payments otherwise
required to be made [if applicable, insert: , in the inverse
order in which they become due].]
[If the Security is subject to redemption of any kind, insert:
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the
unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.]
[If subordinated, insert: The indebtedness evidenced by the
Securities of this series is, to the extent and in the manner
provided in the Indenture, expressly subordinate and subject in
right of payment to the prior payment in full of all Senior Debt
of the Company (as defined in the Indenture) whether outstanding
at the date of the Indenture or thereafter incurred, and this
Security is issued subject to the provisions of the Indenture
with respect to such subordination. Each holder and owner of
this Security, by accepting the same, agrees to and shall be
bound by such provisions and authorizes the Trustee in his behalf
to take such action as may be necessary or appropriate to
effectuate the subordination so provided and appoints the Trustee
his attorney-in-fact for such purpose.]
[If applicable, insert: The Indenture contains provisions
for defeasance at any time of [the entire indebtedness of this
Security] [or] [certain restrictive covenants and Events of
Default with respect to this Security] [, in each case] upon
compliance with certain conditions set forth in the Indenture.]
[If the Security is not an Original Issue Discount Security,
insert: If an Event of Default with respect to Securities of
this series shall occur and be continuing, the principal of the
Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security,
insert: If an Event of Default with respect to Securities of
this series shall occur and be continuing, an amount of principal
of the Securities of this series may be declared due and payable
in the manner and with the effect provided in the Indenture. Such
amount shall be equal to insert: formula for determining the
amount. Upon payment (i) of the amount of principal so declared
due and payable and (ii) of interest on any overdue principal,
premium and interest (in each case to the extent that the payment
of such interest shall be legally enforceable), all of the
Company's obligations in respect of the payment of the principal
of and premium and interest, if any, on the Securities of this
series shall terminate.]
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Securities of each series to be affected under the
Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected.
The Indenture also contains provisions permitting the Holders of
a majority in principal amount of the Securities of each series
at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made
upon this Security.
As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have the right
to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy
thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with
respect to the Securities of this series, the Holders of not less
than 35% in principal amount of the Securities of this series at
the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee indemnity reasonably
satisfactory to the Trustee, and the Trustee shall not have
received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction
inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or any premium
or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and any premium and interest on this
Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company in any place where the principal of and any premium
and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only in
registered form without coupons in denominations of $....... and
any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of
this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the
Indenture.
Section 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301
for the Securities evidenced thereby, every Global Security
authenticated and delivered hereunder shall bear a legend in
substantially the following form (or such other form as a
securities exchange or Depositary may request or require):
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name
of a Depositary or a nominee thereof. This Security may not be
exchanged in whole or in part for a Security registered, and no
transfer of this Security in whole or in part may be registered,
in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the
Indenture.
Section 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
As Trustee
By.........................................
Authorized Signatory
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be established in or pursuant to a Board Resolution and,
subject to Section 303, set forth, or determined in the manner
provided, in an Officers' Certificate, or established in one or
more indentures supplemental hereto, prior to the issuance of
Securities of any series,
(1) the title of the Securities of the series (which
shall distinguish the Securities of the series from Securities
of any other series);
(2) any limit upon the aggregate principal amount of
the Securities of the series which may be authenticated and
delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series
pursuant to Section 304, 305, 306, 906 or 1107 and except for any
Securities which, pursuant to Section 303, are deemed never to
have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of
the series shall be payable, if other than the Person in whose
name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date
for such interest;
(4) the date or dates on which the principal of any
Securities of the series is payable;
(5) the rate or rates at which any Securities of the
series shall bear interest, if any, the date or dates from which
any such interest shall accrue, the Interest Payment Dates on
which any such interest shall be payable, the manner of
determination of such Interest Payment Dates and the Regular
Record Date for any such interest payable on any Interest Payment
Date;
(6) the right, if any, to extend the interest payment
periods and the duration of such extension;
(7) the place or places where the principal of and any
premium and interest on any Securities of the series shall be
payable;
(8) the period or periods within which, the price or
prices at which and the terms and conditions upon which any
Securities of the series may be redeemed, in whole or in part, at
the option of the Company and, if other than by a Board
Resolution, the manner in which any election by the Company to
redeem the Securities shall be evidenced;
(9) the obligation, if any, of the Company to redeem
or purchase any Securities of the series pursuant to any sinking
fund or analogous provisions or at the option of the Holder
thereof and the period or periods within which, the price or
prices at which and the terms and conditions upon which any
Securities of the series shall be redeemed or purchased, in whole
or in part, pursuant to such obligation;
(10) the denominations in which any Securities of the
series shall be issuable;
(11) if the amount of principal of or any premium or
interest on any Securities of the series may be determined with
reference to an index or pursuant to a formula, the manner in
which such amounts shall be determined;
(12) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the
series shall be payable and the manner of determining the
equivalent thereof in the currency of the United States of
America for any purpose, including for purposes of the definition
of "Outstanding" in Section 101;
(13) if the principal of or any premium or interest on
any Securities of the series is to be payable, at the election of
the Company or the Holder thereof, in one or more currencies or
currency units other than that or those in which such Securities
are stated to be payable, the currency, currencies or currency
units in which the principal of or any premium or interest on
such Securities as to which such election is made shall be
payable, the periods within which and the terms and conditions
upon which such election is to be made and the amount so payable
(or the manner in which such amount shall be determined);
(14) if other than the entire principal amount thereof,
the portion of the principal amount of any Securities of the
series which shall be payable upon declaration of acceleration of
the Maturity thereof pursuant to Section 502;
(15) if the principal amount payable at the Stated
Maturity of any Securities of the series will not be determinable
as of any one or more dates prior to the Stated Maturity, the
amount which shall be deemed to be the principal amount of such
Securities as of any such date for any purpose thereunder or
hereunder, including the principal amount thereof which shall be
due and payable upon any Maturity other than the Stated Maturity
or which shall be deemed to be Outstanding as of any date prior
to the Stated Maturity (or, in any such case, the manner in which
such amount deemed to be the principal amount shall be
determined);
(16) if applicable, that the Securities of the series,
in whole or any specified part, shall be defeasible pursuant to
Section 1302 or Section 1303 or both such Sections;
(17) if applicable, that any Securities of the series
shall be issuable in whole or in part in the form of one or more
Global Securities and, in such case, the respective Depositaries
for such Global Securities, the form of any legend or legends
which shall be borne by any such Global Security in addition to
or in lieu of that set forth in Section 204 and any
circumstances in addition to or in lieu of those set forth in
Clause (2) of the last paragraph of Section 305 in which any
such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security
in whole or in part may be registered, in the name or names of
Persons other than the Depositary for such Global Security or a
nominee thereof;
(18) any addition to or change in the Events of Default
which applies to any Securities of the series and any change in
the right of the Trustee or the requisite Holders of such
Securities to declare the principal amount thereof due and
payable pursuant to Section 502;
(19) any addition to or change in the covenants set
forth in Article Ten which applies to Securities of the series;
(20) the applicability of, or any addition to or change
in, Article Fourteen with respect to the Securities of a series;
(21) any other terms of the series (which terms shall
not be inconsistent with the provisions of this Indenture.
All Securities of any one series shall be substantially
identical except as to date and principal amount and except as
may otherwise be provided in or pursuant to the Board Resolution
referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action
taken pursuant to a Board Resolution, a copy of an appropriate
record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate setting
forth the terms of the series.
Section 302. Denominations.
The Securities of each series shall be issuable only in
registered form without coupons and only in such denominations as
shall be specified as contemplated by Section 301. In the absence
of any such specified denomination with respect to the Securities
of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman, its President, one
of its Vice Presidents, or its Treasurer. The signature of any of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of
any series executed by the Company to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee
in accordance with the Company Order shall authenticate and
deliver such Securities. If the form or terms of the Securities
of the series have been established by or pursuant to a Board
Resolution as permitted by Sections 201 and 301, in
authenticating such Securities, and accepting the additional
responsibilities under this Indenture in
relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been
established by or pursuant to Board Resolution as permitted
by Section 201, that such form has been established in
conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been
established by or pursuant to Board Resolution as permitted
by Section 301, that such terms have been established in
conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and
delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally
binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditors' rights to general equity principles and to such
other matters as such counsel shall set forth therein.
If such form or terms have been so established, the Trustee shall
not be required to authenticate such Securities if the issue of
such Securities pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Securities
and this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the
preceding paragraph, if all Securities of a series are not to be
originally issued at one time, it shall not be necessary to
deliver the Officers' Certificate otherwise required pursuant to
Section 301 or the Company Order and Opinion of Counsel otherwise
required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents
(with appropriate variations to reflect such future issuance) are
delivered at or prior to the authentication upon original
issuance of the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section
309, for all purposes of this Indenture such Security shall be
deemed never to have been authenticated and delivered hereunder
and shall never be entitled to the benefits of this Indenture.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any
series, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially
of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities of any series are issued, the
Company will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of
such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of
Payment for that series, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary
Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one
or more definitive Securities of the same series, of any
authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and
tenor.
Section 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in
such office and in any other office or agency of the Company in a
Place of Payment being herein sometimes collectively referred to
as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of Securities and of transfers of Securities.
The Trustee is hereby appointed "Security Registrar" for the
purpose of registering Securities and transfers of Securities as
herein provided.
Upon surrender for registration of transfer of any Security
of a series at the office or agency of the Company in a Place of
Payment for that series, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be
exchanged for other Securities of the same series, of any
authorized denominations and of like tenor and aggregate
principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are
so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Securities which the
Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or
the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any
transfer.
If the Securities of any series (or of any series and
specified tenor) are to be redeemed in part, the Company shall
not be required (A) to issue, register the transfer of or
exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of any such Securities selected for
redemption under Section 1103 and ending at the close of business
on the day of such mailing, or (B) to register the transfer of or
exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being
redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall
apply only to Global Securities:
(1) Each Global Security authenticated under this
Indenture shall be registered in the name of the Depositary
designated for such Global Security or a nominee thereof and
delivered to such Depositary or nominee thereof or custodian
therefor, and each such Global Security shall constitute a
single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this
Indenture, no Global Security may be exchanged in whole or
in part for Securities registered, and no transfer of a
Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such
Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling
or unable to continue as Depositary for such Global Security
or (ii) has ceased to be a clearing agency registered under
the Exchange Act, (B) there shall have occurred and be
continuing an Event of Default with respect to such Global
Security or (C) there shall exist such circumstances, if
any, in addition to or in lieu of the foregoing as have
been specified for this purpose as contemplated by
Section 301.
(3) Subject to Clause (2) above, any exchange of
a Global Security for other Securities may be made in whole
or in part, and all Securities issued in exchange for a
Global Security or any portion thereof shall be registered
in such names as the Depositary for such Global Security
shall direct.
(4) Every Security authenticated and delivered
upon registration of transfer of, or in exchange for or in
lieu of, a Global Security or any portion thereof, whether
pursuant to this Section, Section 304, 306, 906 or 1107 or
otherwise, shall be authenticated and delivered in the form
of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary
for such Global Security or a nominee thereof.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same series
and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or
theft of any Security and (ii) such security or indemnity as may
be required by them to save each of them and any agent of either
of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of the same series and of like
tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section,
the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301
with respect to any series of Securities, interest on any
Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular
Record Date for such interest.
Any interest on any Security of any series which is payable,
but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Security
of such series and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given to each Holder of
Securities of such series in the manner set forth in Section
106, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest on the Securities of any series in any other lawful
manner not inconsistent with the requirements of any
securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security
is registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and (subject to
Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent (if not
the Company) or the Security Registrar shall have any
responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests.
Section 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee
(or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder
which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities
held by the Trustee shall be disposed of as directed by a Company
Order; provided, however, that the Trustee shall not be required
to destroy such cancelled Securities.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301
for Securities of any series,
interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
Section 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee may
use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of
such numbers.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to any surviving rights of registration
of transfer or exchange of Securities herein expressly provided
for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either (A) all Securities theretofore
authenticated and delivered (other than (i) Securities
which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306 and (ii)
Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or (B) all
such Securities not theretofore delivered to the Trustee for
cancellation (i) have become due and payable, or (ii)
will become due and payable at their Stated Maturity within
one year, or (iii) are to be called for redemption
within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above,
has deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose, money in an amount
sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest
to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 607, the obligations of the Company to any Authenticating
Agent under Section 614 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003 and to Article Fourteen, if applicable, all money deposited
with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and any premium and interest
for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to
Securities of any series, means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon
any Security of that series when it becomes due and payable,
and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of or
any premium on any Security of that series at its Maturity;
or
(3) default in the deposit of any sinking fund
payment, when and as due by the terms of a Security of that
series; or
(4) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in whose performance
or whose breach is elsewhere in this Section specifically
dealt with or which has expressly been included in this
Indenture solely for the benefit of a series of Securities
other than that series), and continuance of such default or
breach for a period of 90 days after there has been given,
by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders
of at least 35% in principal amount of the Outstanding
Securities of that series a written notice specifying such
default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default"
hereunder; or
(5) the entry by a court having jurisdiction in
the premises of (A) a decree or order for relief in respect
of the Company in an involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or state law, or
appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a
period of 90 consecutive days; or
(6) the commencement by the Company of a
voluntary case or proceeding under any applicable Federal
or state bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable
Federal or state law, or the consent by it to the filing of
such petition or to the appointment of, or taking possession
of the Company or of any substantial part of its property
by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official or the making by the
Company of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action; or
(7) any other Event of Default established
pursuant to Section 301 with respect to Securities of that
series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(5) or 501(6)) with respect to Securities
of any series at the time Outstanding occurs and is continuing,
then in every such case the Trustee or the Holders of not less
than 35% in principal amount of the Outstanding Securities of
that series may declare the principal amount of all the
Securities of that series (or, if any Securities of that series
are Original Issue Discount Securities, such portion of the
principal amount of such Securities as may be specified by the
terms thereof) to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. If an Event of
Default specified in Section 501(5) or 501(6) with respect to
Securities of any series at the time Outstanding occurs, the
principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be
specified by the terms thereof) shall automatically, and without
any declaration or other action on the part of the Trustee or any
Holder, become immediately due and payable.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a
judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount of the Outstanding
Securities of that series, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if,
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay (A) all overdue interest
on all Securities of that series, (B) the principal of (and
premium, if any, on) any Securities of that series which
have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities, (C) all sums paid
or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to
Securities of that series, other than the non-payment of the
principal of Securities of that series which have become due
solely by such declaration of acceleration, have been cured
or waived as provided in Section 513.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on
any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal
of (or premium, if any, on) any Security at the Maturity
thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal and any premium
and interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the
rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the
Holders, vote for the election of a trustee in bankruptcy or
similar official and be a member of a creditors' or other similar
committee.
Section 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without
the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article,
subject to Article Fourteen, if applicable, shall be applied in
the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of
principal or any premium or interest, upon presentation of the
Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under
Section 607; and
Second: To the payment of the amounts then due and unpaid
for principal of and any premium and interest on the Securities
in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities
for principal and any premium and interest, respectively
Third: The balance, if any, to the Company.
Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right
to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of Default with
respect to the Securities of that series;
(2) the Holders of not less than 35% in principal
amount of the Outstanding Securities of that series shall
have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the
Trustee indemnity reasonably satisfactory to the Trustee
against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60-day
period by the Holders of a majority in principal amount of
the Outstanding Securities of that series; it being
understood and intended that no one or more of such Holders
shall have any right in any manner whatever by virtue of, or
by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of
such Holders.
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of and any
premium and (subject to Section 307) interest on such Security on
the respective Stated Maturities expressed in such Security (or,
in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or
has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be
restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had
been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in
the last paragraph of Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities of any series shall have the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Securities
of such series, provided that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture, and
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount
of the Outstanding Securities of any series may on behalf of the
Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its
consequences, except a default
(1) in the payment of the principal of or any
premium or interest on any Security of such series, or
(2) in respect of a covenant or provision hereof
which under Article Nine cannot be modified or amended
without the consent of the Holder of each Outstanding
Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair
any right consequent thereon.
Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party
litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that this Section shall not apply to any
suit instituted by the Trustee or to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than
10% in principal amount of Outstanding Securities (of any
series), or to any suit instituted by a Holder for the
enforcement of the payment of the principal of or any premium or
interest on any Security on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date).
Section 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any
usury, stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.
Section 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of
any series, the Trustee shall give the Holders of Securities of
such series notice of such default as and to the extent provided
by the Trust Indenture Act, unless such default shall have been
cured or waived; provided, however, that in the case of any
default of the character specified in Section 501(4) with respect
to Securities of such series, no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become,
an Event of Default with respect to Securities of such series.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected
in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order, and any resolution of the
Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel of its
selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity reasonably
satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit.
(7) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder.
Section 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as
the statements of the Company, and neither the Trustee nor any
Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of
Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing
with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such
compensation as shall be agreed to in writing between the
Company and the Trustee for all services rendered by it
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided
herein, to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred
or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its
powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to
all property and funds held by it hereunder for any amount owing
it or any predecessor Trustee pursuant to this Section 607,
except with respect to funds held in trust for the benefit of the
Holders of particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(5)
or Section 501(6), the expenses (including the reasonable charges
and expenses of its counsel) and the compensation for the
services are intended to constitute expenses of administration
under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
Section 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture. To the extent permitted
by such Act, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a trustee under this
Indenture with respect to Securities of more than one series.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee
hereunder with respect to the Securities of each series, which
may be Trustee hereunder for Securities of one or more other
series. Each Trustee shall be a Person that is eligible pursuant
to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law
or to the requirements of its supervising or examining authority,
then for the purposes of this Section and to the extent permitted
by the Trust Indenture Act, the combined capital and surplus of
such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee with respect to the
Securities of any series shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this
Article.
Section 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of
Sectionr 611.
The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof
to the Company. If the instrument of acceptance by a successor
Trustee required by Section 611 shall not have been delivered to
the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series,
delivered to the Trustee and to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section
608 after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver
of the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may
remove the Trustee with respect to all Securities, or (B) subject
to Section 514, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or
Trustees.
If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee
for any cause, with respect to the Securities of one or more
series, the Company, by a Board Resolution, shall promptly
appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any
time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable
requirements of Section 611, become the successor Trustee with
respect to the Securities of such series and to that extent
supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any
series and each appointment of a successor Trustee with respect
to the Securities of any series to all Holders of Securities of
such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to
the Securities of such series and the address of its Corporate
Trust Office.
Section 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company
and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of
the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such
retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all)
series, the Company, the retiring Trustee and each successor
Trustee with respect to the Securities of one or more series
shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and
which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect
to all Securities, shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in
such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates.
Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts referred to in the first or second
preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be
qualified and eligible under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any
such other obligor). For purposes of Section 311(b) (4) and (6)
of the Trust Indenture Act, the following terms shall mean:
(a) "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days
after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable
upon demand; and
(b) "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of
financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is
secured by documents evidencing title to, possession of, or a
lien upon, the goods, wares or merchandise or the receivables or
proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
Section 614. Appointment of Authenticating Agent.
From time to time the Trustee may appoint one or more
Authenticating Agents with respect to one or more series of
Securities, which may include the Company or any of its
Affiliates, with power to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption
thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall
at all times be a corporation organized and doing business under
the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed
to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent
shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating
Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this
Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in
the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE FIFTH THIRD BANK
As Trustee
By......................................,
As Authenticating Agent
By.......................................
Authorized Officer
Section 615. Indemnification.
The Company agrees to indemnify the Trustee for, and hold it
harmless against, any loss, liability or expense incurred by it,
arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder or the
performance of its duties hereunder or under any related
document, including the reasonable costs and expenses of
defending itself against or investigating any claim or liability
with respect to the Securities, except to the extent that any
such loss, liability or expense was due to its own negligence or
bad faith. The Company need not pay for any settlement made
without its consent. The obligations of the Company to the
Trustee under this Section shall survive the satisfaction and
discharge of this Indenture and payment in full and/or retirement
of the Securities.
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the
Trustee:
(1) on each Regular Record Date, a list, in such
form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities of each series as of
such Regular Record Date, and
(2) at such other times as the Trustee may
request in writing, within 30 days after the receipt by the
Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the
time such list is furnished; provided, however, that if and
so long as the Trustee shall be the Security Registrar, no
such list need be furnished.
Section 702. Preservation of Information; Communications to
Holders.
The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders
contained in the most recent list as provided in Section 701 and
the names and addresses of Holders received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list
furnished to it as provided in Section 701 upon receipt of a new
list so furnished.
The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the
Securities, and the corresponding rights and privileges of the
Trustee, shall be as provided by the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any agent of either of them shall be
held accountable by reason of any disclosure of information as to
names and addresses of Holders made pursuant to the Trust
Indenture Act.
Section 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto. If required by
Section 313(a) of the Trust Indenture Act, the Trustee shall,
within sixty days after each May 15 following the date of this
Indenture deliver to Holders a brief report, dated as of such May
15, which complies with the provisions of such Section 313(a).
A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock
exchange upon which any Securities are listed, with the
Commission and with the Company.
Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant
to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 15 days after the same is
so required to be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidations and Mergers Permitted.
Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of the
Company with or into any other corporation or corporations
(whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor
or successors shall be a party or parties, or shall prevent any
sale, conveyance, transfer or other disposition of the property
of the Company or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether
or not affiliated with the Company or its successor or
successors) authorized to acquire and operate the same; provided,
however, the Company hereby covenants and agrees that, upon any
such consolidation, merger, sale, conveyance, transfer or other
disposition, the due and punctual payment of the principal of
(premium, if any) and interest on all of the Securities of all
series in accordance with the terms of each series, according to
their tenor, and the due and punctual performance and observance
of all the covenants and conditions of this Indenture with
respect to each series or established with respect to such series
to be kept or performed by the Company, shall be expressly
assumed, by supplemental indenture (which shall conform to the
provisions of the Trust Indenture Act as then in effect)
satisfactory in form to the Trustee executed and delivered to the
Trustee by the entity formed by such consolidation, or into which
the Company shall have been merged, or by the entity which shall
have acquired such property.
Section 802. Rights and Duties of Successor Company.
In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment of the principal of, premium, if
any, and interest on all of the Securities of all series
outstanding and the due and punctual performance of all of the
covenants and conditions of this Indenture or established with
respect to each series of the Securities to be performed by the
Company with respect to each series, such successor corporation
shall succeed to and be substituted for the Company, with the
same effect as if it had been named herein as the party of the
first part, and thereupon the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture
and the Securities. Such successor corporation thereupon may
cause to be signed, and may issue either in its own name or in
the name of the Company or any other predecessor obligor on the
Securities, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor
company, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver any Securities which
previously shall have been signed and delivered by the officers
of the predecessor Company to the Trustee for authentication, and
any Securities which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose.
All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued
at the date of the execution hereof.
Nothing contained in this Indenture or in any of the
Securities shall prevent the Company from merging into itself or
acquiring by purchase or otherwise all or any part of the
property of any other corporation (whether or not affiliated
with the Company).
Section 803. Opinion of Counsel.
The Trustee may receive an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply
with the provisions of this Article.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to evidence the succession of another Person
to the Company to the assumption by any such successor of
the covenants of the Company herein and in the Securities
pursuant to Article Eight or Section 117; or
(2) to add to the covenants of the Company for
the benefit of the Holders of all or any series of
Securities (and if such covenants are to be for the benefit
of less than all series of Securities, stating that such
covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power
herein conferred upon the Company; provided, however, that
in respect of any such additional covenant, such
supplemental indenture may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or
may provide for an immediate enforcement upon such default
or may limit the remedies available to the Trustee upon such
default or may limit the right of the Holders of a majority
in aggregate principal amount of the Securities of such
series to waive such default;
(3) to add any additional Events of Default for
the benefit of the Holders of all or any series of
Securities (and if such additional Events of Default are to
be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly
being included solely for the benefit of such series); or
(4) to add to or change any of the provisions of
this Indenture to such extent as shall be necessary to
permit or facilitate the issuance of Securities in bearer
form, registrable or not registrable as to principal, and
with or without interest coupons, or to permit or facilitate
the issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the
provisions of this Indenture in respect of one or more
series of Securities, provided that any such addition,
change or elimination (A) shall neither (i) apply to any
Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of
such provision nor (ii) modify the rights of the Holder of
any such Security with respect to such provision or (B)
shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities
of any series as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities of one or more series and to add to or change
any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of
the trusts hereunder by one or more successor Trustees,
pursuant to the requirements of Section 611; or
(9) to cure any ambiguity, to correct or
supplement any provision herein which may be defective or
inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions
arising under this Indenture, provided that such action
pursuant to this Clause (9) shall not adversely affect the
interests of the Holders of Securities of any series in any
material respect.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, and to make any
further appropriate agreements and stipulations which may be
therein contained.
Any supplemental indenture authorized by the provisions of
this Section may be executed by the Company and the Trustee
without the consent of the holders of any of the Securities at
the time outstanding, notwithstanding any of the provisions of
Section 902.
Section 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority
in principal amount of the Outstanding Securities of each series
affected by such supplemental indenture, by Act of said Holders
delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder
of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal
of, or any installment of principal of or interest on, any
Security, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section
502, or change any Place of Payment where, or the coin or
currency in which, any Security or any premium or interest
thereon is payable, affect the applicability of Article
Fourteen to any Security, or impair the right to institute
suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption,
on or after the Redemption Date), or
(2) reduce the percentage in principal amount of
the Outstanding Securities of any series, the consent of
whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section,
Section 513 or Section 1007, except to increase any such
percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to
changes in the references to "the Trustee" and concomitant
changes in this Section and Section 1007, or the deletion of
this proviso, in accordance with the requirements of
Sections 611 and 901(8).
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular
series of Securities, or which modifies the rights of the Holders
of Securities of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series;
provided that no such supplemental indenture shall modify any
provision of this Indenture so as to adversely affect the rights
of any holder of outstanding Senior Debt to the benefits of
Article Fourteen.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the
modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may,
but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after
the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each
series of Securities that it will duly and punctually pay the
principal of and any premium and interest on the Securities of
that series in accordance with the terms of the Securities and
this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of that
series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the
Company in respect of the Securities of that series and this
Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities of one or more
series may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of Payment for Securities of
any series for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other
office or agency.
Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before
each due date of the principal of or any premium or interest on
any of the Securities of that series, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents
for any series of Securities, it will, on or before each due date
of the principal of or any premium or interest on any Securities
of that series, deposit with a Paying Agent a sum sufficient to
pay such amount, such sum to be held as provided by the Trust
Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of this Section, that such
Paying Agent will (1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (2) during
the continuance of any default by the Company (or any other
obligor upon the Securities of that series) in the making of any
payment in respect of the Securities of that series, upon the
written request of the Trustee, forthwith pay to the Trustee all
sums held in trust by such Paying Agent for payment in respect of
the Securities of that series.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such
Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the
principal of or any premium or interest on any Security of any
series and remaining unclaimed for 18 months after such
principal, premium or interest has become due and payable shall
be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder
of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any
such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language,
customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York,
New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30
days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
Section 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after the
date hereof, an Officers' Certificate, stating whether or not to
the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder)
and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have
knowledge.
Section 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its
business or the business of any Subsidiary.
Section 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful
claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by
appropriate proceedings.
Section 1007. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301
for Securities of such series, the Company may, with respect to
the Securities of any series, omit in any particular instance to
comply with any term, provision or condition set forth in any
covenant provided pursuant to Section 301(18), 901(2) or 901(7)
for the benefit of the Holders of such series if before the time
for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities of such series
shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in
full force and effect.
Section 1008. Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end
of each calendar year a written notice specifying the amount of
original issue discount
(including daily rates and accrual periods) accrued on
Outstanding Securities as of the end of such year.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their
Stated Maturity shall be redeemable in accordance with their
terms and (except as otherwise specified as contemplated by
Section 301 for such Securities) in accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall
be evidenced by a Board Resolution or in another manner specified
as contemplated by Section 301 for such Securities. In case of
any redemption at the election of the Company the Company shall,
at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of the
principal amount of Securities of such series to be redeemed. In
the case of any redemption of Securities prior to the expiration
of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be
redeemed (unless all the Securities of such series and of a
specified tenor are to be redeemed or unless such redemption
affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities
of such series not previously called for redemption, by such
method as the Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of a portion of the
principal amount of any Security of such series, provided that
the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less
than the minimum authorized denomination) for such Security. If
less than all the Securities of such series are to be redeemed
(unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series not previously called
for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case
of any Securities selected for partial redemption as aforesaid,
the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not
apply with respect to any redemption affecting only a single
Security, whether such Security is to be redeemed in whole or in
part. In the case of any such redemption in part, the unredeemed
portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
Section 1104. Notice of the Redemption.
Notice of redemption shall be given by mail not less than 30
nor more than 60 days prior to the Redemption Date, to each
Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to
be redeemed and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities
of any series consisting of more than a single Security are
to be redeemed, the identification (and, in the case of
partial redemption of any such Securities, the principal
amounts) of the particular Securities to be redeemed and, if
less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the
principal amount of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption
Price will become due and payable upon each such Security to
be redeemed and, if applicable, that interest thereon will
cease to accrue on and after said date,
(5) the place or places where each such Security
is to be surrendered for payment of the Redemption Price,
and
(6) that the redemption is for a sinking fund, if
such is the case.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense
of the Company and shall be irrevocable.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the
Holder receives such notice. In any case, failure to give such
notice by mail or any defect in the notice to the Holder of any
Security designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of
any other Security.
Section 1105. Deposit of Redemption Price.
On or before any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall
be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided,
however, that, unless otherwise specified as contemplated by
Section 301, installments of interest whose Stated Maturity is on
or prior to the Redemption Date will be payable to the Holders of
such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant
Record Dates according to their terms and the provisions of
Section 307.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company
or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of
the same series and of like tenor, of any authorized denomination
as requested by such Holder, in aggregate principal amount equal
to and in exchange for the unredeemed portion of the principal of
the Security so surrendered; provided, however, that a Depositary
need not surrender a Global Security for a partial redemption and
may be authorized to make a notation on such Global Security of
such partial redemption. In the case of a partial redemption of
a Global Security, the Depositary, and in turn, the participants
in the Depositary, shall have the responsibility to select any
Securities to be redeemed by random lot.
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of any series
except as otherwise specified as contemplated by Section 301 for
such Securities.
The minimum amount of any sinking fund payment provided for
by the terms of any Securities is herein referred to as a
"mandatory sinking fund payment", and any payment in excess of
such minimum amount provided for by the terms of such Securities
is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of
any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to
the redemption of Securities as provided for by the terms of such
Securities.
Section 1202. Satisfaction of Sinking Fund Payments with
Securities.
The Company (1) may deliver Outstanding Securities of a
series (other than any previously called for redemption) and (2)
may apply as a credit Securities of a series which have been
redeemed either at the election of the Company pursuant to the
terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of
any sinking fund payment with respect to any Securities of such
series required to be made pursuant to the terms of such
Securities as and to the extent provided for by the terms of such
Securities; provided that the Securities to be so credited have
not been previously so credited. The Securities to be so credited
shall be received and credited for such purpose by the Trustee at
the Redemption Price, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund
and the amount of such sinking fund payment shall be reduced
accordingly.
Section 1203. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment
date for any Securities, the Company will deliver to the Trustee
an Officers' Certificate specifying the amount of the next
ensuing sinking fund payment for such Securities pursuant to the
terms of such Securities, the portion thereof, if any, which is
to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting
Securities pursuant to Section 1202 and will also deliver to the
Trustee any Securities to be so delivered. Not less than 30 days
prior to each such sinking fund payment date, the Trustee shall
select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and
at the expense of the Company in the manner provided in Section
1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated
in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may elect, at its option at any time, to have
Section 1302 or Section 1303 applied to any Securities or any
series of Securities, as the case may be, designated pursuant to
Section 301 as being defeasible pursuant to such Section 1302 or
1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions
set forth below in this Article. Any such election shall be
evidenced by a Board Resolution or in another manner specified as
contemplated by Section 301 for such Securities.
Section 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have
this Section applied to any Securities or any series of
Securities, as the case may be, the Company shall be deemed to
have been discharged from its obligations with respect to such
Securities as provided in this Section on and after the date the
conditions set forth in Section 1304 are satisfied (hereinafter
called "Defeasance"). For this purpose, such Defeasance means
that the Company shall be deemed to have paid and discharged the
entire indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and
this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), subject to the following
which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1304 and
as more fully set forth in such Section, payments in respect of
the principal of and any premium and interest on such Securities
when payments are due, (2) the Company's obligations with respect
to such Securities under Sections 304, 305, 306, 1002 and 1003,
(3) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (4) this Article. Subject to compliance
with this Article, the Company may exercise its option (if any)
to have this Section applied to any Securities notwithstanding
the prior exercise of its option (if any) to have Section 1303
applied to such Securities.
Section 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have
this Section applied to any Securities or any series of
Securities, as the case may be, (1) the Company shall be released
from its obligations under Section 801(3), Sections 1005 through
1006, inclusive, and any covenants provided pursuant to Section
301(19), 901(2) or 901(7) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in
Sections 501(4) (with respect to any of Section 801(3), Sections
1005 through 1006, inclusive, and any such covenants provided
pursuant to Section 301(19), 901(2) or 901(7)), and 501(7) shall
be deemed not to be or result in an Event of Default in each case
with respect to such Securities as provided in this Section on
and after the date the conditions set forth in Section 1304 are
satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to
such Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation
set forth in any such specified Section (to the extent so
specified in the case of Section 501(4)) or Article Fourteen,
whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of
any reference in any such Section or Article to any other
provision herein or in any other document, but the remainder of
this Indenture and such Securities shall be unaffected thereby.
Section 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
Section 1302 or Section 1303 to any Securities or any series of
Securities, as the case may be:
(1) The Company shall irrevocably have deposited
or caused to be deposited with the Trustee (or another
trustee which satisfies the requirements contemplated by
Section 609 and agrees to comply with the provisions of this
Article applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money
in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a firm of independent public
accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of
and any premium and interest on such Securities on the
respective Stated Maturities, in accordance with the terms
of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i)
a direct obligation of the United States of America for the
payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a
Person controlled or supervised by and acting as an
agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States
of America, which, in either case (i) or (ii), is not
callable or redeemable at the option of the issuer thereof,
and (y) any depositary receipt issued by a bank (as defined
in Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation which is specified
in Clause (x) above and held by such bank for the account of
the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any
U.S. Government Obligation which is so specified and held,
provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any
amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal
or interest evidenced by such depositary receipt.
(2) In the event of an election to have Section
1302 apply to any Securities or any series of Securities, as
the case may be, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (A) the Company
has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of
this instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the
effect that, and based thereon such opinion shall confirm
that, the Holders of such Securities will not recognize gain
or loss for Federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with
respect to such Securities and will be subject to
Federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit,
Defeasance and discharge were not to occur.
(3) In the event of an election to have Section
1303 apply to any Securities or any series of Securities, as
the case may be, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders
of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit and
Covenant Defeasance to be effected with respect to such
Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as
would be the case if such deposit and Covenant Defeasance
were not to occur.
(4) The Company shall have delivered to the
Trustee an Officers' Certificate to the effect that neither
such Securities nor any other Securities of the same series,
if then listed on any securities exchange, will be delisted
as a result of such deposit.
(5) No event which is, or after notice or lapse
of time or both would become, an Event of Default with
respect to such Securities or any other Securities shall
have occurred and be continuing at the time of such deposit
or, with regard to any such event specified in Sections
501(5) and (6), at any time on or prior to the 90th day
after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until after
such 90th day).
(6) Such Defeasance or Covenant Defeasance shall
not cause the Trustee to have a conflicting interest within
the meaning of the Trust Indenture Act (assuming all
Securities are in default within the meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which
the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall
not result in the trust arising from such deposit
constituting an investment company within the meaning of the
Investment Company Act unless such trust shall be registered
under such Act or exempt from registration thereunder.
(9) At the time of such deposit, (A) no default
in the payment of any principal of or premium or interest on
any Senior Debt shall have occurred and be continuing, (B)
no event of default with respect to any Senior Debt shall
have resulted in such Senior Debt becoming, and continuing
to be, due and payable prior to the date on which it would
otherwise have become due and payable (unless payment of
such Senior Debt has been made or duly provided for), and
(C) no other event of default with respect to any Senior
Debt shall have occurred and be continuing permitting (after
notice or lapse of time or both) the holders of such Senior
Debt (or a trustee on behalf of such holders) to declare
such Senior Debt due and payable prior to the date on which
it would otherwise have become due and payable.
(10) The Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent with respect to
such Defeasance or Covenant Defeasance have been complied
with.
Section 1305. Deposited Money and U.S. Government Obligations to
Be Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or other qualifying
trustee (solely for purposes of this Section and Section 1306,
the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in
respect of any Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through
any such Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in
respect of principal and any premium and interest, but money so
held in trust need not be segregated from other funds except to
the extent required by law.
Money and U.S. Government Obligations so held in trust shall
not be subject to the provisions of Article Fourteen.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 1304 or the
principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of
the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time
upon Company Request any money or U.S. Government Obligations
held by it as provided in Section 1304 with respect to any
Securities which, in the opinion of a firm of independent public
accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof
which would then be required to be deposited to effect the
Defeasance or Covenant Defeasance, as the case may be, with
respect to such Securities.
Section 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been
discharged or released pursuant to Section 1302 or 1303 shall be
revived and reinstated as though no deposit had occurred pursuant
to this Article with respect to such Securities, until such time
as the Trustee or Paying Agent is permitted to apply all money
held in trust pursuant to Section 1305 with respect to such
Securities in accordance with this Article; provided, however,
that if the Company makes any payment of principal of or any
premium or interest on any such Security following such
reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to
receive such payment from the money so held in trust.
ARTICLE FOURTEEN
Junior Subordinated Securities
Section 1401. Certain Securities Subordinate to Senior Debt.
As provided pursuant to Section 301 or in a supplemental
indenture, the Company may issue one or more series of Securities
subject to the provisions of this Article Fourteen, and each
Holder of a Security of a series so issued ("Junior Subordinated
Securities"), whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and
interest on all Junior Subordinated Securities issued with
respect to which this Article Fourteen applies shall, to the
extent and in the manner hereinafter set forth, be subordinate
and subject in right of payment to the prior payment in full of
all Senior Debt, whether outstanding at the date of this
Indenture or thereafter incurred.
No provision of this Article Fourteen shall prevent the
occurrence of any default or Event of Default hereunder.
Section 1402. Payment Over of Proceeds Upon Default.
In the event and during the continuation of any default in
the payment of principal, premium, interest or any other payment
due on any Senior Debt continuing beyond the period of grace, if
any, specified in the instrument evidencing such Senior Debt,
unless and until such default shall have been cured or waived or
shall have ceased to exist, or in the event that the maturity of
any Senior Debt has been accelerated because of a default, then
no payment shall be made by the Company with respect to the
principal (including redemption and sinking fund payments) of, or
premium, if any, or interest on the Junior Subordinated
Securities.
In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any holder when such
payment is prohibited by the preceding paragraph of this Section
1402, such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt or
their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may
have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Debt (or their
representative or representatives or a trustee) notify the
Trustee within 90 days of such payment of the amounts then due
and owing on the Senior Debt and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Senior
Debt.
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc.
Upon any payment by the Company, or distribution of assets
of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become
due upon all Senior Debt shall first be paid in full, or payment
thereof provided for in money in accordance with its terms,
before any payment is made on account of the principal (and
premium, if any) or interest on the Junior Subordinated
Securities; and upon any such dissolution or winding-up or
liquidation or reorganization any payment by the Company, or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of
the Junior Subordinated Securities or the Trustee would be
entitled, except for the provisions of this Article Fourteen,
shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making
such payment or distribution, or by the Holders of the Junior
Subordinated Securities or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Debt
(pro rata to such holders on the basis of the respective amounts
of Senior Debt held by such holders, as calculated by the
Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Debt may have been issued, as
their respective interests may appear, to the extent necessary to
pay all Senior Debt in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt, before any payment or distribution is
made to the holders of Junior Subordinated Securities or to the
Trustee.
In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee or the holders of
the Junior Subordinated Securities before all Senior Debt is paid
in full, or provision is made for such payment in money in
accordance with its terms, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or
delivered to the holders of Senior Debt or their representative
or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior
Debt may have been issued, as their respective interests may
appear, as calculated by the Company, for application to the
payment of all Senior Debt remaining unpaid to the extent
necessary to pay all Senior Debt in full in money in accordance
with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Debt.
For purposes of this Article Fourteen, the words, "cash,
property or securities" shall not be deemed to include shares of
stock of the Company as reorganized or readjusted, or securities
of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article
Fourteen with respect to the Junior Subordinated Securities to
the payment of all Senior Debt which may at the time be
outstanding; provided that (i) the Senior Debt is assumed by the
new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of the Senior
Debt are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the
Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation
upon the terms and conditions provided for in Article Eight
hereof shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the proposes of this Section 1403 if such
other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in
Article Eight hereof. Nothing in Section 1402 or in this Section
1403 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 607.
Section 1404. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the
rights of the holders of the Junior Subordinated Securities shall
be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Debt; and, for the
purposes of such subrogation, no payment or distributions to the
holders of the Senior Debt of any cash, property or securities to
which the holders of the Junior Subordinated Securities or the
Trustee would be entitled except for the provisions of this
Article Fourteen, and no payment over pursuant to the provisions
of this Article Fourteen, to or for the benefit of the holders of
Senior Debt by holders of the Junior Subordinated Securities or
the Trustee, shall, as between the Company, its creditors other
than holders of Senior Debt, and the Holders of the Junior
Subordinated Securities, be deemed to be a payment by the Company
to or on account of the Senior Debt. It is understood that the
provisions of this Article Fourteen are and are intended solely
for the purposes of defining the relative rights of the holders
of the Junior Subordinated Securities, on the one hand, and the
holders of the Senior Debt on the other hand.
Nothing contained in this Article Fourteen or elsewhere in
this Indenture or in the Junior Subordinated Securities is
intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt, and the holders
of the Junior Subordinated Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the
holders of the Junior Subordinated Securities the principal of
(and premium, if any) and interest on the Junior Subordinated
Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect
the relative rights of the holders of the Junior Subordinated
Securities and creditors of the Company other than the holders of
the Senior Debt, nor shall anything herein or therein prevent the
Trustee or the holder of any Junior Subordinated Security from
exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any,
under this Article Fourteen of the holders of Senior Debt in
respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Fourteen, the Trustee, subject to the
provision of Article Six, and the Holders of the Junior
Subordinated Securities shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization,
liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation
trustee, agent or other person making such payment or
distribution, delivered to the Trustee or to the Holders of the
Junior Subordinated Securities, for the purposes of ascertaining
the persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Company,
the amount hereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or
to this Article Fourteen.
Section 1405. Trustee to Effectuate Subordination.
Each Holder of a Junior Subordinated Security by his acceptance
thereof authorizes and directs the Trustee in his behalf to take
such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Fourteen and appoints the
Trustee his attorney-in-fact for any and all such purposes.
Section 1406. Notice to Trustee.
The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the
Company which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Junior Subordinated
Securities pursuant to the provisions of this Article Fourteen.
Notwithstanding the provisions of this Article Fourteen or any
other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would
prohibit the making of any payment of monies to or by the Trustee
in respect of the Junior Subordinated Securities pursuant to the
provisions of this Article Fourteen, unless and until a
Responsible Officer of the Trustee shall have received written
notice thereof at the Principal Office of the Trustee from the
Company or a holder or holders of Senior Debt or from any trustee
therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Article Six, shall be
entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received
the notice provided for in this Section 1406 at least two
Business Days prior to the date upon which by the terms hereof
any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any)
or interest on any Junior Subordinated Security), then, anything
herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to
apply the same to the purposes for which they were received, and
shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Article Six, shall
be entitled to rely on the delivery to it of a written notice by
a person representing himself to be a holder of Senior Debt (or a
trustee on behalf of such holder) to establish that such notice
has been given by a holder of Senior Debt or a trustee on behalf
of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required with
respect to the right of any person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Debt held by such Person, the extent to which
such person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such
person under this Article Fourteen, and if such evidence is not
furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to
receive such payment.
Section 1407. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Fourteen in respect of
any Senior Debt at any time held by it, to the same extent as any
other holder of Senior Debt, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article Fourteen shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 607.
Section 1408. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt
to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may
have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from
time to time, without the consent of or notice to the Trustee or
the holders of the Junior Subordinated Securities, without
incurring responsibility to the holders of the Junior
Subordinated Securities and without impairing or releasing the
subordination provided in this Article or the obligations
hereunder of the holders of the Junior Subordinated Securities to
the holders of Senior Debt, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior
Debt; (iii) release any person liable in any manner for the
collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other person.
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
In Witness Whereof, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above
written.
PSI ENERGY, INC.
By /s/ William L. Sheafer
William L. Sheafer
Treasurer
THE FIFTH THIRD BANK
as Trustee
By /s/ Kerry R. Burne
Kerry R. Byrne
Vice President
=================================================================
==
PSI ENERGY, INC.
AND
THE FIFTH THIRD BANK,
Trustee
________________
First Supplemental Indenture
Dated as of November 15, 1996
To
Indenture
Dated as of November 15, 1996
________________
6.35% Debentures Due 2006
=================================================================
==
FIRST SUPPLEMENTAL INDENTURE, dated as of November
15, 1996, between PSI Energy, Inc., a corporation duly
organized and existing under the laws of the State of
Indiana (herein called the "Company"), having its
principal office at 1000 East Main Street, Plainfield,
Indiana 46168, and The Fifth Third Bank, an Ohio
banking corporation, as Trustee (herein called the
"Trustee") under the Indenture dated as of November 15,
1996 between the Company and the Trustee (the
"Indenture").
Recitals of the Company
The Company has executed and delivered the
Indenture to the Trustee to provide for the issuance
from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), to
be issued in one or more series as in the Indenture
provided.
Pursuant to the terms of the Indenture, the
Company desires to provide for the establishment of a
new series of its Securities to be known as its 6.35%
Debentures Due 2006 (herein called the "Debentures"),
in this First Supplemental Indenture.
All things necessary to make this First
Supplemental Indenture a valid agreement of the Company
have been done.
Now, Therefore, This First Supplemental Indenture
Witnesseth:
For and in consideration of the premises and the
purchase of the Debentures by the Holders thereof, it
is mutually agreed, for the equal and proportionate
benefit of all Holders of the Debentures, as follows:
ARTICLE ONE
Terms of the Debentures
Section 101. There is hereby authorized a series
of Securities designated the "6.35% Debentures Due
2006", limited in aggregate principal amount to
$100,000,000 (except as provided in Section 301(2) of
the Indenture). The Debentures shall mature and the
principal shall be due and payable together with all
accrued and unpaid interest thereon on November 15,
2006 and shall be issued in the form of a registered
Global Security without coupons, registered in the name
of Cede & Co.
Section 102. The provisions of Section 305 of the
Indenture applicable to Global Securities shall apply
to the Debentures.
Section 103. Interest on each of the Debentures
shall be payable semiannually on May 15 and November 15
in each year (each an "Interest Payment Date"),
commencing on May 15, 1997, at the rate per annum
specified in the designation of the Debentures from
November 15, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly
provided for. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date
will be paid to the Person in whose name such Debenture
(or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for
such interest, which shall be the May 1 or November 1
(whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. The amount
of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
Section 104. Subject to agreements with or the
rules of The Depository Trust Company or any successor
book-entry security system or similar system with
respect to Global Securities, payments of interest will
be made by check mailed to the Holder of each Debenture
at the address shown in the Security Register, and
payments of the principal amount of each Debenture will
be made at maturity by check against presentation of
the Debenture at the office or agency of the Trustee.
Section 105. The Debentures shall be issued in
denominations of $1,000 or any integral multiple of
$1,000.
Section 106. Principal and interest on the
Debentures shall be payable in the coin or currency of
the United States of America, which, at the time of
payment, is legal tender for public and private debts.
Section 107. The Debentures shall be subject to
defeasance, at the Company's option, as provided for in
Sections 1302 and 1303 of the Indenture.
Section 108. The Debentures will not be
redeemable at the option of the Company prior to
maturity and will not be subject to any sinking fund.
Section 109. Each Holder shall have the right,
at such Holder's option, exercisable on September 15,
2000 and thereafter until October 15, 2000, to require
the Company to redeem, and upon the exercise of such
right in the manner set forth hereinafter the Company
shall redeem, all or any part of such Holder's
Debentures that is $1,000 or any integral multiple
thereof, on November 15, 2000 (the "Redemption Date")
at a redemption price in cash equal to 100% of the
principal amount of such Debenture (the "Redemption
Price"), together with accrued and unpaid interest to
the Redemption Date.
To exercise a redemption right, a Holder of the
Debentures shall deliver (i) to the Company and to the
Trustee irrevocable written notice of the Holder's
election to exercise such right (the "Holder's Notice")
which shall set forth the name of the Holder, the
amount of Debentures to be redeemed and a statement
that an election to exercise the redemption right is
being made thereby, and (ii) to the Trustee the
Debentures with respect to which the redemption right
is being exercised, duly endorsed for transfer to the
Company if required by the Trustee or the Company. The
Debentures held by a securities depositary may be
delivered in such other manner as may be agreed to by
such securities depositary and the Company and the
Trustee. Such written notice shall be irrevocable.
The Debentures as to which the redemption right has
been so exercised shall, on the Redemption Date, become
due and payable at the Redemption Price, together with
accrued and unpaid interest to the Redemption Date.
On or before the Redemption Date, the Company
shall deposit with the Trustee an amount of money
sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment
Date) accrued interest on, all the Debentures which are
to be redeemed on that date.
If any Debentures surrendered for redemption
shall not be so paid on the Redemption Date, such
Debenture shall, until paid, continue to bear interest
from the Redemption Date at the same rate as the rate
borne by such Debenture. The Company shall pay to the
Holder of such Debenture the additional amounts of
interest arising from this paragraph at the same time
that it pays the Redemption Price.
If any Debenture which is to be redeemed only in
part shall be surrendered at any office or agency of
the Company (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), the Company shall
execute, and the Trustee shall authenticate and deliver
to the Holder of such Security without service charge,
a new Debenture, of any authorized denomination as
requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unredeemed
portion of the Debenture so surrendered.
ARTICLE TWO
Form of the Debentures
Section 201. The Debentures are to be
substantially in the following form and shall include
substantially the legend shown so long as the
Debentures are Global Securities:
(FORM OF FACE OF DEBENTURE)
No. R-1 $100,000,000
CUSIP No. 693627AB7
PSI ENERGY, INC.
6.35% DEBENTURE DUE 2006
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC") to issuer or its agent for
registration of transfer, exchange, or payment and any
certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an
interest herein.
PSI ENERGY, INC., a corporation duly organized and
existing under the laws of the State of Indiana (herein
called the "Company", which term includes any successor
Person under the Indenture hereafter referred to), for
value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of One Hundred
Million and No/100 Dollars ($100,000,000) on November
15, 2006, and to pay interest thereon from November 15,
1996 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for,
semi-annually on May 15 and November 15 in each year,
commencing May 15, 1997, at the rate of 6.35% per
annum, until the principal hereof is paid or made
available for payment. The amount of interest payable
on any Interest Payment Date shall be computed on the
basis of a 360-day year of twelve 30-day months. The
interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall
be the May 1 or November 1 (whether or not a Business
Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on
which the Securities of this series may be listed, and
upon such notice as may be required by such exchange,
all as more fully provided in the Indenture.
Payment of the principal of (and premium, if any)
and interest on this Security will be made at the
office or agency of the Company maintained for that
purpose in the City of Cincinnati, in such coin or
currency of the United States of America as at the time
of payment is legal tender for payment of public and
private debts; provided, however, that at the option of
the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register.
Any payment on this Security due on any day which
is not a Business Day in the City of New York need not
be made on such day, but may be made on the next
succeeding Business Day with the same force and effect
as if made on the due date and no interest shall accrue
for the period from and after such date.
Reference is hereby made to the further provisions
of this Security set forth on the reverse hereof, which
further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall
not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
In Witness Whereof, the Company has caused this
instrument to be duly executed.
PSI ENERGY, INC.
By..............................
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the
series designated therein
referred to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
as Trustee
By.............................
Authorized Signatory
(FORM OF REVERSE OF
DEBENTURE)
This Security is one of a duly authorized issue of
securities of the Company (herein called the
"Securities"), issued and to be issued in one or more
series under an Indenture, dated as of November 15,
1996 (herein called the "Indenture", which term shall
have the meaning assigned to it in such instrument),
between the Company and The Fifth Third Bank, as
Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture),
and reference is hereby made to the Indenture for a
statement of the respective rights, limitations of
rights, duties and immunities thereunder of the
Company, the Trustee and the Holders of the Securities
and of the terms upon which the Securities are, and are
to be, authenticated and delivered. This Security is
one of the series designated on the face hereof,
limited in aggregate principal amount to $100,000,000.
The Securities will not be redeemable at the option of
the Company prior to maturity and will not be subject
to any sinking fund.
The Holder of this Security shall have the right, at
such Holder's option, exercisable on September 15, 2000
and thereafter until October 15, 2000, to require the
Company to redeem, and upon the exercise of such right
in the manner set forth hereinafter the Company shall
redeem, all or any part of this Security that is $1,000
or any integral multiple thereof, on November 15, 2000
(the "Redemption Date") at a redemption price in cash
equal to 100% of the principal amount of this Security
(the "Redemption Price"), together with accrued and
unpaid interest to the Redemption Date. To exercise
this redemption right, the Holder hereof shall deliver
(i) to the Company and to the Trustee irrevocable
written notice of the Holder's election to exercise
such right (the "Holder's Notice") which shall set
forth the name of the Holder, the amount hereof to be
redeemed and a statement that an election to exercise
the redemption right is being made thereby and (ii) to
the Trustee this Security duly endorsed for transfer to
the Company if required by the Trustee or the Company.
Securities held by a securities depositary may be
delivered in such other manner as may be agreed to by
such securities depositary and the Company and the
Trustee. Such written notice shall be irrevocable. If
this Security is so surrendered for redemption it
shall, on the Redemption Date, become due and payable
at the Redemption Price, together with accrued and
unpaid interest to the Redemption Date.
If this Security is to be so redeemed only in part, the
Company shall execute, and the Trustee shall
authenticate and deliver to the Holder hereof without
service charge, a new Security of any authorized
denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for
the unredeemed portion hereof so surrendered.
The Indenture contains provisions for defeasance at any
time of the entire indebtedness of this Security or
certain restrictive covenants and Events of Default
with respect to this Security upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of
this series shall occur and be continuing, the
principal of the Securities of this series may be
declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the
modification of the rights and obligations of the
Company and the rights of the Holders of the Securities
of each series to be affected under the Indenture at
any time by the Company and the Trustee with the
consent of the Holders of a majority in principal
amount of the Securities at the time Outstanding of
each series to be affected. The Indenture also
contains provisions permitting the Holders of a
majority in principal amount of the Securities of each
series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of
the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security
issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have
the right to institute any proceeding with respect to
the Indenture or for the appointment of a receiver or
trustee or for any other remedy thereunder, unless such
Holder shall have previously given the Trustee written
notice of a continuing Event of Default with respect to
the Securities of this series, the Holders of not less
than 35% in principal amount of the Securities of this
series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered
the Trustee reasonably satisfactory indemnity, and the
Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this
series at the time Outstanding a direction inconsistent
with such request, and shall have failed to institute
any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of
principal hereof or any premium or interest hereon on
or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or
impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any
premium and interest on this Security at the times,
place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this
Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer
at the office or agency of the Company in any place
where the principal of and any premium and interest on
this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more
new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate
principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only in
registered form without coupons in denominations of
$1,000 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations
therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of
Securities of this series and of like tenor of a
different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security which are defined in
the Indenture shall have the meanings assigned to them
in the Indenture.
ARTICLE THREE
Original Issue of Debentures
Section 301. Debentures in the aggregate principal
amount of $100,000,000, may, upon execution of this
First Supplemental Indenture, or from time to time
thereafter, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Debentures upon
a Company Order without any further action by the
Company.
ARTICLE FOUR
Paying Agent and Security Registrar
Section 401. The Fifth Third Bank will be the
Paying Agent and Security Registrar for the Debentures.
ARTICLE FIVE
Sundry Provisions
Section 501. Except as otherwise expressly
provided in this First Supplemental Indenture or in the
form of Debenture or otherwise clearly required by the
context hereof or thereof, all terms used herein or in
said form of Debenture that are defined in the
Indenture shall have the several meanings respectively
assigned to them thereby.
Section 502. The Indenture, as supplemented by
this First Supplemental Indenture, is in all respects
ratified and confirmed, and this First Supplemental
Indenture shall be deemed part of the Indenture in the
manner and to the extent herein and therein provided.
__________________
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed
to be an original, but all such counterparts shall
together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused
this First Supplemental Indenture to be duly executed,
and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first
above written.
PSI ENERGY, INC.
By /s/ William L.
Sheafer
William L. Sheafer
Treasurer
THE FIFTH THIRD BANK, as Trustee
By /s/ Kerry R. Byrne
Kerry R. Byrne
Vice President
PSI ENERGY, INC.
AND
THE FIFTH THIRD BANK,
Trustee
Second Supplemental Indenture
Dated as of December 15, 1996
To
Indenture
Dated as of November 15, 1996
6.25% Notes Due 2005
SECOND SUPPLEMENTAL INDENTURE, dated as of December 15, 1996,
between PSI Energy, Inc., a corporation duly organized and
existing under the laws of the State of Indiana (herein called the
"Company"), having its principal office at 1000 East Main Street,
Plainfield, Indiana 46168, and The Fifth Third Bank, an Ohio
banking corporation, as Trustee (herein called the "Trustee")
under the Indenture dated as of November 15, 1996 between the
Company and the Trustee (the "Indenture").
Recitals of the Company
The Company has executed and delivered the Indenture to the
Trustee to provide for the issuance from time to time of its
unsecured debentures, notes or other evidences of indebtedness
(the "Securities"), to be issued in one or more series as in the
Indenture provided.
Pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Securities
to be known as its 6.25% Notes Due 2005 (herein called the
"Notes"), in this Second Supplemental Indenture.
All things necessary to make this Second Supplemental
Indenture a valid agreement of the Company have been done.
Now, Therefore, This Second Supplemental Indenture
Witnesseth:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually agreed, for the
equal and proportionate benefit of all Holders of the Notes, as
follows:
ARTICLE ONE
Terms of the Notes
Section 101. There is hereby authorized a series of
Securities designated the "6.25% Notes Due 2005", limited in
aggregate principal amount to $50,000,000 (except as provided in
Section 301(2) of the Indenture). Subject to the provisions in
Section 110 hereof, the Notes shall mature and the principal shall
be due and payable together with all accrued and unpaid interest
thereon on December 15, 2005 and initially shall be issued in
certificated form registered to the holder thereof.
Section 102. Upon the request of holders of not less than
66-2/3% in aggregate principal amount of the Notes, the Notes will
be represented by one or more Global Securities deposited with, or
on behalf of, The Depository Trust Company ("DTC"). The
provisions of Section 305 of the Indenture applicable to Global
Securities shall then apply to the Notes.
Section 103. Interest on each of the Notes shall be payable
semi-annually on December 15 and June 15 in each year (each an
"Interest Payment Date"), commencing on June 15, 1997, at the rate
per annum specified in the designation of the Notes from
December 15, 1996, or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, until
December 15, 1998. The interest rate on the Notes will be reset
as provided in Section 106 hereof effective from December 15, 1998
until the principal amount of each Note is paid or made available
for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will be paid to the
Person in whose name such Note (or one or more Predecessor
Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the day (whether or
not a Business Day), as the case may be, immediately preceding
such Interest Payment Date. The amount of interest payable for
any period will be computed on the basis of a 360-day year of
twelve 30-day months.
Section 104. Subject to agreements with or the rules of DTC
or any successor book-entry security system or similar system with
respect to Global Securities, payments of interest will be made by
wire transfer or by check mailed to the Holder of each Note at the
address shown in the Security Register, and payments of the
principal amount of each Note will be made at maturity by wire
transfer or by check against presentation of the Note at the
office or agency of the Trustee.
Section 105. The Notes shall be issued in denominations of
$100,000 or any integral multiple of $100,000.
Section 106. The interest rate on the Notes shall be reset,
effective from December 15, 1998, as provided in the Calculation
Agency Agreement, dated as of December 20, 1996, among the
Company, UBS Securities LLC, a limited liability company organized
under the laws of the State of New York and Union Bank of
Switzerland, London branch, which is incorporated herein by this
reference.
Section 107. Principal and interest on the Notes shall be
payable in the coin or currency of the United States of America,
which, at the time of payment, is legal tender for public and
private debts.
Section 108. The Notes shall be subject to defeasance, at
the Company's option, as provided for in Section 1302 of the
Indenture.
Section 109. The Notes will not be redeemable at the option
of the Company prior to maturity and will not be subject to any
sinking fund, (it being understood, however, that the Company, in
connection with the issuance of the Notes, has purchased from
Union Bank of Switzerland, London branch, a call option, dated
December 20, 1996, pursuant to which the Company, under terms as
stated therein, can repurchase the Notes).
Section 110. Each Holder shall have the right, at such
Holder's option, exercisable on December 15, 1998, to require the
Company to redeem, and upon the exercise of such right in the
manner set forth hereinafter, the Company shall redeem in whole,
but not in part, all of such Holder's Notes on December 15, 1998
(the "Redemption Date") at a redemption price in cash equal to
100% of the principal amount of such Note (the "Redemption
Price"), together with accrued and unpaid interest to the
Redemption Date.
To exercise a redemption right, a Holder of the Notes shall
deliver at least one day but not more than 15 days prior to the
Redemption Date (i) to the Company and to the Trustee irrevocable
written notice of the Holder's election to exercise such right
(the "Holder's Notice") which shall set forth the name of the
Holder and a statement that an election to exercise the redemption
right is being made thereby, and (ii) to the Trustee the Notes
with respect to which the redemption right is being exercised,
duly endorsed for transfer to the Company if required by the
Trustee or the Company. The Notes held by a securities depositary
may be delivered in such other manner as may be agreed to by such
securities depositary, the Company and the Trustee. Such written
notice shall be irrevocable. The Notes as to which the redemption
right has been so exercised shall, on the Redemption Date, become
due and payable at the Redemption Price, together with accrued and
unpaid interest to the Redemption Date.
On or before the Redemption Date, the Company shall deposit
with the Trustee an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be
an Interest Payment Date) accrued interest on, all the Notes which
are to be redeemed on that date.
If any Notes surrendered for redemption shall not be so paid
on the Redemption Date, such Note shall, until paid, continue to
bear interest from the Redemption Date at the same rate as the
rate borne by such Note. The Company shall pay to the Holder of
such Note the additional amounts of interest arising from this
paragraph at the same time that it pays the Redemption Price.
ARTICLE TWO
Form of the Notes
Section 201. The Notes are to be substantially in the
following form and all certificates evidencing Notes initially
issued hereunder shall bear legends as specified in this Section
201 to be applied to such Notes, and any such required legend, or
part thereof, shall not be removed unless the Company shall have
delivered to the Trustee written notice that the certificates
evidencing the Notes may be issued without such legend, or part
thereof, as the case may be If a legend has been removed from a
certificate evidencing a Note as provided above, no other
certificates evidencing any Note issued in exchange for all or any
part of such Note shall bear such legend, unless the Company has
reasonable cause to believe that such legend, or any part thereof,
is required by law to be applied to such other Note and instructs
the Trustee in writing to cause such legend, or part thereof, as
the case may be, to appear thereon.
(FORM OF FACE OF NOTE)
No. R-l $50,000,000
CUSIP No. 693627AC5
PSI ENERGY, INC.
6.25% NOTE DUE 2005
[Upon the issuance of any global security pursuant to Section 102
hereof, insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC") TO ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES
LAWS, NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT UPON THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO THE TRUSTEE AND THE COMPANY, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE TRUSTEE
AND THE COMPANY, SUBJECT IN EACH OF THE FOREGOING CASES, TO A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS NOTE BEING COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THIS NOTE IS SUBJECT TO DEPARTMENT OF TREASURY REGULATIONS
SECTION 1.1275-4(b) (THE "CONTINGENT PAYMENT REGULATIONS") AND IS
THEREFORE ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUE PRICE OF
THE NOTE IS $50,701,500, AND THE ISSUE DATE OF THE NOTE IS
DECEMBER 20, 1996. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$27,668,500. THE YIELD TO MATURITY OF THE NOTE AND THE COMPARABLE
YIELD PURSUANT TO THE CONTINGENT PAYMENT REGULATIONS ARE 6.096%.
THE PROJECTED PAYMENT SCHEDULE PROVIDES FOR A NON-CONTINGENT
PAYMENT OF $1,562,500 PER INTEREST ACCRUAL PERIOD PRIOR TO THE
INTEREST RESET DATE AND A NON-CONTINGENT PAYMENT OF $1,580,000 AND
A CONTINGENT PAYMENT OF $0 PER INTEREST ACCRUAL PERIOD THEREAFTER.
PSI ENERGY, INC., a corporation duly organized and existing
under the laws of the State of Indiana (herein called the
"Company", which term includes any successor Person under the
Indenture hereafter referred to), for value received, hereby
promises to pay to ___________________________________, or
registered assigns, the principal sum of Fifty Million and No/100
Dollars ($50,000,000) on December 15, 2005, and to pay interest
thereon from December 15, 1996 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for,
semi-annually on December 15 and June 15 in each year, commencing
June 15, 1997, at the rate of 6.25% per annum, until December 15,
1998. The interest rate on the Notes will be reset as provided in
the Indenture, effective from December 15, 1998 until the
principal hereof is paid or made available for payment. The
amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the day
(whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be
listed, and upon such notice as may be required by such exchange,
all as more fully provided in the Indenture.
Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Cincinnati,
in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company
payment of interest may be made by wire transfer or by check
mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Any payment on this Security due on any day which is not a
Business Day in the City of New York need not be made on such day,
but may be made on the next succeeding Business Day with the same
force and effect as if made on the due date and no interest shall
accrue for the period from and after such date.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
In Witness Whereof, the Company has caused this instrument to
be duly executed.
PSI ENERGY INC.
By
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
as Trustee
By
Authorized Signatory
(FORM OF REVERSE OF NOTE)
This Security is one of a duly authorized issue of securities of
the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of
November 15, 1996 as supplemented by the second supplement to the
Indenture dated December 15, 1996 (herein called the "Indenture",
which term shall have the meaning assigned to it in such
instrument, as supplemented), between the Company and The Fifth
Third Bank, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), and reference
is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal
amount to $50,000,000.
The Securities will not be redeemable at the option of the Company
prior to maturity and will not be subject to any sinking fund, (it
being understood, however, that the Company, in connection with
the issuance of the Notes, has purchased from Union Bank of
Switzerland, London branch, a call option, dated December 20,
1996, pursuant to which the Company, under terms as stated
therein, can repurchase the Notes).
The Holder of this Security shall have the right, at such Holder's
option, exercisable on December 15, 1998, to require the Company
to redeem, and upon the exercise of such right in the manner set
forth hereinafter, the Company shall redeem in whole, but not in
part, the principal amount of this Security on December 15, 1998
(the "Redemption Date") at a redemption price in cash equal to
100% of the principal amount of this Security (the "Redemption
Price"), together with accrued and unpaid interest to the
Redemption Date. To exercise this redemption right, the Holder
hereof shall deliver at least one day but not more than 15 days
prior to the Redemption Date (i) to the Company and to the Trustee
irrevocable written notice of the Holder's election to exercise
such right (the "Holder's Notice") which shall set forth the name
of the Holder and a statement that an election to exercise the
redemption right is being made thereby and (ii) to the Trustee
this Security duly endorsed for transfer to the Company if
required by the Trustee or the Company. Securities held by a
securities depositary may be delivered in such other manner as may
be agreed to by such securities depositary, the Company and the
Trustee. Such written notice shall be irrevocable. If this
Security is so surrendered for redemption it shall, on the
Redemption Date, become due and payable at the Redemption Price,
together with accrued and unpaid interest to the Redemption Date.
The Indenture contains provisions for defeasance at any time of
the entire indebtedness of this Security upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of
this series may be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders of
the Securities of each series to be affected under the Indenture
at any time by the Company and the Trustee with the consent of the
Holders of a majority in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such
series, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security
issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of
a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice
of a continuing Event of Default with respect to the Securities of
this series, the Holders of not less than 35% in principal amount
of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute proceedings
in respect of such Event of Default as Trustee and offered the
Trustee reasonably satisfactory indemnity, and the Trustee shall
not have received from the Holders of a majority in principal
amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or any premium
or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Security at the
times, place and rate and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in
any place where the principal of and any premium and interest on
this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company
and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more
new Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $100,000 and any integral
multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series
are exchangeable for a like aggregate principal amount of
Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable
in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee nor
any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE THREE
Original Issue of Notes
Section 301. Notes in the aggregate principal amount of
$50,000,000, may, upon execution of this Second Supplemental
Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and deliver said Notes upon a
Company Order without any further action by the Company.
ARTICLE FOUR
Paying Agent and Security Registrar
Section 401. The Fifth Third Bank will be the Paying Agent
and Security Registrar for the Notes.
ARTICLE FIVE
Sundry Provisions
Section 501. Except as otherwise expressly provided in this
Second Supplemental Indenture or in the form of Note or otherwise
clearly required by the context hereof or thereof, all terms used
herein or in said form of Note that are defined in the Indenture
shall have the several meanings respectively assigned to them
thereby.
Section 502. The Indenture, as supplemented by this Second
Supplemental Indenture, is in all respects ratified and confirmed,
and this Second Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein
provided.
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
In Witness Whereof, the parties hereto have caused this
Second Supplemental Indenture to be duly executed, all as of the
day and year first above written.
PSI ENERGY, INC.
By /s/ William L. Sheafer
William L. Sheafer
Treasurer
THE FIFTH THIRD BANK, as
Trustee
By /s/ Kerry R. Byrne
Kerry R. Byrne
Vice President
SUPPIN4.PSI
THE CINCINNATI GAS & ELECTRIC COMPANY
and
THE BANK OF NEW YORK,
Trustee
_________
Thirty-seventh Supplemental Indenture
Dated as of October 14, 1996
__________________________________________
THIRTY-SEVENTH SUPPLEMENTAL INDENTURE, dated as of October 14,
1996, between The Cincinnati Gas & Electric Company, a
corporation of the State of Ohio (the Company), and The Bank of
New York, a corporation of the State of New York, as Trustee (the
Trustee).
WHEREAS, the Company has executed and delivered to the
Trustee a certain Indenture, dated as of August 1, 1936 (the
First Mortgage), to secure the payment of the principal of and
interest on an issue of bonds of the Company, unlimited in
aggregate principal amount (the Bonds);
WHEREAS, the Company and the Trustee have amended and
supplemented the First Mortgage by means of thirty-six
supplemental indentures (the First Mortgage as amended);
WHEREAS, Article Eighteen of the First Mortgage as amended
provides that the Company and the Trustee may from time to time
enter into one or more indentures supplemental to the First
Mortgage for the purpose of curing any ambiguity or of curing or
correcting any defective provisions contained in the First
Mortgage or in any supplemental indenture;
WHEREAS, the Company has requested the Trustee, pursuant to
Section 1 of Article Eighteen of the First Mortgage as amended,
to enter into this Thirty-seventh Supplemental Indenture for the
purpose of curing an ambiguity or of curing or correcting a
defective provision in Section 3 of Article Eleven of the First
Mortgage as amended.
ARTICLE ONE
RESTATEMENT OF A PART OF SECTION 3 OF ARTICLE ELEVEN
SECTION 1. That part of the first paragraph of Section 3 of
Article Eleven of the First Mortgage as amended which precedes
subdivision (1) of said Section is hereby restated so as to read
as follows:
"So long as the Company is not in default under any of
the provisions of this Indenture, the Company may obtain the
release of any of the mortgaged and pledged property,
including, without limiting the generality of the foregoing,
the Company's gas property substantially as an entirety
(provided, however, that the electric property of the
Company shall not in any event be released substantially as
an entirety and, further, that prior lien bonds deposited
with the Trustee shall not be released except as provided in
Article Nine hereof), and the Trustee shall release the same
from the lien hereof upon the application of the Company and
receipt by the Trustee of"
ARTICLE TWO
MISCELLANEOUS
SECTION 1. The provisions of this Thirty-seventh
Supplemental Indenture shall become effective immediately upon
the execution and delivery hereof. From and after such time this
Thirty-seventh Supplemental Indenture shall form a part of the
First Mortgage as amended and all the terms and conditions hereof
shall be deemed to be part of the terms of the First Mortgage as
amended, as fully and with the same effect as if they had been
set forth in the First Mortgage as originally executed. Except
as modified or amended by this Thirty-seventh Supplemental
Indenture, the First Mortgage as amended shall remain and
continue in full force and effect in accordance with the terms
and provisions thereof, and all the covenants, conditions, terms
and provisions of the First Mortgage as amended with respect to
the Trustee shall remain in full force and effect and be
applicable to the Trustee under this Thirty-seventh Supplemental
Indenture in the same manner as though set out herein at length.
All representations and recitals contained in this Thirty-
seventh Supplemental Indenture are made by and on behalf of the
Company, and the Trustee is in no way responsible therefor or for
any statement therein contained.
SECTION 2. The terms defined in Article One of the First
Mortgage as amended, when used in this Thirty-seventh
Supplemental Indenture shall, respectively, have the meanings set
forth in such Article.
SECTION 3. This Thirty-seventh Supplemental Indenture may be
executed in several counterparts and each counterpart shall be an
original instrument.
IN WITNESS WHEREOF, THE CINCINNATI GAS & ELECTRIC COMPANY has caused
this instrument to be signed on its behalf by its Treasurer and
its corporate seal to be hereunto affixed and attested by an
Assistant Secretary, and THE BANK OF NEW YORK has caused this
instrument to be signed on its behalf by a Vice President and its
corporate seal to be hereunto affixed and attested by an
Assistant Treasurer, as of the day and year first above written.
THE CINCINNATI GAS & ELECTRIC COMPANY,
By ___________________________________
Treasurer
(Seal)
Attest: _______________________
Assistant Secretary
Signed and acknowledged in our presence on behalf of
THE CINCINNATI GAS & ELECTRIC COMPANY
______________________________________
______________________________________
THE BANK OF NEW YORK,
By______________________________
Vice President
(Seal)
Attest: _______________________
Assistant Vice President
Signed and acknowledged in our presence on behalf of
THE BANK OF NEW YORK
______________________________________
______________________________________
STATE OF OHIO )
) ss.:
COUNTY OF HAMILTON )
On this 14th day of October, 1996, WILLIAM L. SHEAFER and
JEROME A. VENNEMANN came before me and acknowledged that they signed
and sealed this instrument as Treasurer and Assistant Secretary,
respectively, of THE CINCINNATI GAS & ELECTRIC COMPANY and that the
same were free acts; and such Treasurer, being duly sworn, said
that he resides in Hamilton County, Ohio, that he is the
Treasurer of the corporation and that the seal affixed hereto is
its corporate seal.
IN WITNESS WHEREOF I have signed my name and affixed my
official seal.
(Seal)
________________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of ____________, 1996, MARY JANE
MORRISSEY and LUCILLE FIRRINCIELI came before me and acknowledged that
they signed and sealed this instrument as Vice President and
Assistant Vice President, respectively, of THE BANK OF NEW YORK and
that the same were free acts; and such Vice President, being duly
sworn, said that she resides in Point Pleasant, New Jersey, that
she is a Vice President of THE BANK OF NEW YORK and that the seal
affixed hereto is its corporate seal.
IN WITNESS WHEREOF I have signed my name and affixed my
official seal.
(Seal)
__________________________________________
This instrument was prepared by
_________________________________________
Jerome A. Vennemann, Esq.
P. O. Box 960
Cincinnati, OH 45201
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
June, 1996, by and among Cinergy Corp., a Delaware Corporation
("Cinergy"), Cinergy Services, Inc., a Delaware Corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an
Ohio Corporation ("CG&E"), PSI Energy, Inc., an Indiana
Corporation ("PSI"), and Elizabeth K. Lanier (the "Executive").
Cinergy, Cinergy Services, CG&E, and PSI will sometimes be
referred to in this Employment Agreement collectively as the
"Corporation".
WHEREAS, the Corporation desires that the Executive become an
employee in accordance with this Employment Agreement;
WHEREAS, the Executive is willing to commit herself to the employ
of the Corporation and any successor thereto, on the terms and
conditions set forth in this Employment Agreement and thus to
forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Employment
Agreement as of the date first set forth above setting forth the
terms and conditions for the employment relationship of the
Executive;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises,
covenants and agreements set forth below, it is hereby agreed as
follows:
1. Employment and Term.
a. The Corporation agrees to employ the Executive, and
the Executive agrees to be employed, in accordance with
the terms and provisions of this Employment Agreement
for the period set forth below (the "Employment
Period").
b. The Employment Period of the Executive as provided
in Section 1(a) will commence on June 1, 1996 (the
"Effective Date") and shall continue until May 31,
2001, which term may be renewed for an additional
period upon the mutual written agreement of the
parties.
2. Duties and Powers of Executive.
a. Position. The Executive shall serve the Corporation
in such responsible executive capacity or capacities as
the Board of Directors of Cinergy or Cinergy Services
(the Board of Directors of Cinergy or Cinergy Services,
as the case may be, may be referred to sometimes as the
"Board") or the Chief Executive Officer of Cinergy may
from time to time determine and shall have such
capacities, responsibilities, duties and authority as
may be assigned to her from time to time during the
Employment Period by the Board or the Chief Executive
Officer of Cinergy or the Chief Operating Officer of
Cinergy that are consistent with such capacities,
responsibilities, duties and authority. Upon the
Effective Date of this Employment Agreement, the
Executive shall initially serve as Vice President and
Chief of Staff for the Corporation, but consistent with
the foregoing provisions of this Section 2(a), may be
assigned to any other position or positions by either
the Board or the Chief Executive Officer of Cinergy
during the Employment Period.
b. Place of Performance. In connection with the
Executive's employment, the Executive shall be based at
the principal executive offices of the Corporation, 221
East Fourth Street, Cincinnati, Ohio, and, except for
required business travel to an extent substantially
consistent with the present business travel obligations
of executives of the Corporation who have positions of
authority comparable to that of the Executive, the
Executive shall not be required to relocate to a new
principal place of business which is more that thirty
(30) miles from the current principal place of business
of the Corporation.
3. Compensation. The Executive shall receive the following
compensation for her services under this Employment
Agreement.
a. Salary. The Executive's annual base salary (the
"Annual Base Salary"), payable not less often than
semi-monthly, shall be at the annual rate of not less
than $220,000. The Board may, from time to time,
direct such upward adjustments in the Annual Base
Salary as the Board deems to be necessary or desirable,
including without limitation adjustments in order to
reflect increases in the cost of living. Any increase
in the Annual Base Salary shall not serve to limit or
reduce any other obligation of the Corporation under
this Employment Agreement. The Annual Base Salary
shall not be reduced after any increase thereof except
for across-the-board salary reductions similarly
affecting all executive management personnel of
Cinergy, Cinergy Services, PSI and CG&E.
b. Retirement, Incentive, Welfare Benefit Plans and
Other Benefits. During the Employment Period and so
long as the Executive is employed by the Corporation,
the Executive shall be eligible, and the Corporation
shall take such actions as may be necessary or required
to cause the Executive to become eligible, to
participate in all short-term and long-term incentive,
stock option, restricted stock, performance unit,
savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees
and/or other senior executives of the Corporation,
including but not limited to Cinergy's Annual Incentive
Plan, Cinergy's Performance Shares Plan, Cinergy's 1996
Long-Term Incentive Compensation Plan, Cinergy's
Executive Supplemental Life Insurance Program,
Cinergy's Stock Option Plan, PSI's Employees' 401(k)
Savings Plan, PSI's Pension Plan, PSI's Supplemental
Retirement Plan and PSI's Excess Benefit Plan, or any
successors thereto, except with respect to any plan,
practice, policy or program to which the Executive has
waived her rights in writing.
c. Fringe Benefits and Perquisites. During the
Employment Period and so long as the Executive is
employed by the Corporation, the Executive shall be
entitled to the following additional fringe benefits:
(i) The Corporation shall furnish to the Executive
an automobile and shall pay all of the related
expenses for gasoline, insurance, maintenance and
repairs,
(ii) The Corporation shall reimburse the
initiation fee and shall pay the annual dues,
assessments and other membership charges of the
Executive for membership charges of the Executive
for membership in a country club selected by the
Executive,
(iii) The Corporation shall provide paid vacation
for four (4) weeks per year (or longer if
permitted by the Corporation's policy), and
(iv) The Corporation shall furnish to the
Executive annual financial planning and tax
preparation services. In addition, the Executive
shall be entitled to receive such other fringe
benefits in accordance with the plans, practices,
programs and policies of the Corporation from time
to time in effect, commensurate with her position
and at least comparable to those received by other
senior executives of the Corporation.
d. Expenses. The Corporation agrees to reimburse the
Executive for all expenses, including those for travel
and entertainment, properly incurred by her in the
performance of her duties under this Employment
Agreement in accordance with the policies established
from time to time by the Board.
4. Termination of Employment.
a. Death. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period.
b. By the Corporation for Cause. The Corporation may
terminate the Executive's employment during the
Employment Period for Cause. For purposes of this
Employment Agreement, "Cause" shall mean:
(i) The willful and continued failure by the
Executive to substantially perform the Executive's
duties with the Corporation (other than any such
failure resulting from Executive's incapacity due
to physical or mental illness or any such actual
or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the
Executive pursuant to Section 4(c)) after a
written demand for substantial performance is
delivered to the Executive by the Board, which
demand specifically identifies the manner in which
the Board believes that the Executive has not
substantially performed the Executive's duties,
and the Executive fails to substantially perform
the Executive's duties to the satisfaction of the
Board within sixty (60) days of receipt of the
Board's written demand for substantial
performance; or
(ii) The breach by the Executive of the
confidentiality provisions set forth in Section 8
of this Employment Agreement, or
(iii) The conviction of the Executive for the
commission of a felony, including the entry of a
guilty or nolo contendere plea, or any willful or
grossly negligent action or inaction by the
Executive that has a materially adverse effect on
the Corporation.
For purposes of this definition of "Cause", no act, or
failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was
in the best interest of the Corporation.
Notwithstanding the above definition of "Cause", the
Corporation may terminate the Executive's employment
during the Employment Period for a reason other than
Cause, but the obligations placed upon the Corporation
in Section 5 shall apply.
c. By the Executive for Good Reason. The Executive may
terminate her employment during the Employment Period
for Good Reason. For purposes of this Employment
Agreement, "Good Reason" shall mean:
(i) The reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this
Employment Agreement, or any other benefit or
payment described in Section 3 of this Employment
Agreement, except for across-the-board salary
reductions similarly affecting all management
personnel of Cinergy, Cinergy Services, CG&E, and
PSI, and changes to the employee benefits programs
affecting all management personnel of those
Corporations, provided that such changes (either
individually or in the aggregate) will not result
in a material adverse change with respect to the
benefits which the Executive was entitled to
receive as of the Effective Date;
(ii) The material reduction without her consent of
the Executive's title, authority, duties or
responsibilities from those in effect immediately
prior to the reduction;
(iii) Any breach by the Corporation of any other
material provision (including but not limited to
the place of performance as specified in Section
2(b);
(iv) The Executive's disability due to physical or
mental illness or injury which precludes the
Executive from performing any job for which she is
qualified and able to perform based upon her
education, training or experience; or
(v) Any event which constitutes a "Change in
Control" as defined in Section 4(f) of this
Employment Agreement.
d. Notice of Termination. Any termination by the
Corporation for cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party to this Employment Agreement given
in accordance with Section 10(b) of this Employment
Agreement. For purposes of this Employment Agreement,
a "Notice of Termination" means a written notice which:
(i) Indicates the specific termination provision
in this Employment Agreement relied upon,
(ii) To the extent applicable, sets forth in
reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Executive's employment under the provision so
indicated, and
(iii) If the Date of Termination (as defined in
Section 4(e)) is other than the date of receipt of
such notice, specifies the termination date (which
date shall be not more than thirty (30) days after
the giving of such notice). The failure by the
Executive or the Corporation to set forth in the
Notice of Termination any fact or circumstances
which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive
or the Corporation under this Employment Agreement
or preclude the Executive or the Corporation from
asserting such fact or circumstances in enforcing
the Executive's or the Corporation's rights under
this Employment Agreement.
e. Date of Termination. "Date of Termination" means:
(i) If the Executive's employment is terminated by
the Corporation for Cause, or by the Executive for
Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein,
as the case may be,
(ii) If the Executive's employment is terminated
by the Corporation other than for Cause, the date
on which the Corporation notifies the Executive of
such termination, and
(iii) If the Executive's employment is terminated
by reason of death, the date of death.
f. Change in Control. A "Change in Control" shall be
deemed to have occurred if any of the following events
occur after the Effective Date:
(i) Any corporation, person, other entity or group
becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934)
of more than fifty percent (50%) of the then
outstanding voting stock of Cinergy otherwise than
through a transaction arranged by, or consummated
with, the prior approval of the Board;
(ii) The shareholders of Cinergy approve a
definite agreement to merge or consolidate with or
into another corporation in a transaction in which
neither Cinergy nor any of its subsidiaries or
affiliates will be the surviving corporation, or
to sell or otherwise dispose of all or
substantially all of Cinergy's assets to any
person or group other than Cinergy or any of its
subsidiaries or affiliates, other than a merger or
a sale which will result in the voting securities
of Cinergy outstanding prior to the merger or sale
continuing to represent at least fifty percent
(50%) of the combined voting power of the voting
securities of the corporation surviving the merger
or purchasing the assets;
(iii) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors of Cinergy (and
any new director whose election by the Board of
Directors of Cinergy or whose nomination for
election by Cinergy's stockholders was approved by
a vote of at least two thirds (2/3) of the
directors then still in office who either were
directors at the beginning of such period or whose
election or nomination for election was previously
so approved) cease for any reason to constitute a
majority of Cinergy's Board of Directors; or
(iv) James E. Rogers ceases to be Cinergy's Chief
Executive Officer.
g. Person. "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934,
as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include:
(i) The Corporation or any of its subsidiaries,
(ii) A trustee or other fiduciary holding
securities under an employee benefit plan of
Cinergy or any of its subsidiaries,
(iii) An underwriter temporarily holding
securities pursuant to an offering of such
securities, or
(iv) A corporation owned, directly or indirectly,
by the stockholders of Cinergy in substantially
the same proportions as their ownership of stock
of the Corporation.
5. Obligations of the Corporation Upon Termination.
a. Certain Terminations. During the Employment Period,
if the Corporation shall terminate the Executive's
employment (other than in the case of a termination for
Cause), the Executive shall terminate her employment
for Good Reason or the Executive's employment shall
terminate by reason of death (termination in any such
case referred to as "Termination"):
(i) The Corporation shall pay to the Executive a
lump sum amount, in cash, equal to the sum of:
(1) the Executive's Annual Base Salary
through the Date of Termination to the extent
not previously paid,
(2) an amount equal to the Cinergy Annual
Incentive Plan target percentage benefit for
the fiscal year that includes the Date of
Termination multiplied by a fraction the
numerator of which shall be the number of
days from the beginning of such fiscal year
to and including the Date of Termination and
the denominator of which shall be three
hundred and sixty-five (365),
(3) an amount equal to her vested accrued
benefit under the Cinergy Performance Shares
Plan, and
(4) any compensation previously deferred by
the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
previously paid.
(The amounts specified in clauses (1), (2),
(3) and (4) shall be referred to in this
Employment Agreement as the "Accrued
Obligations".) The amounts specified in this
Section 5(a)(i) shall be paid within thirty
(30) days after the Date of Termination. The
Accrued Obligations described in this Section
are payable to the Executive regardless of
whether a Change in Control has occurred.
(ii) Prior to the occurrence of a Change in
Control, and in the event of Termination other
than by reason of the Executive's death, then:
(1) the Corporation shall pay to the
Executive a lump sum amount, in cash, equal
to the present value discounted using an
interest rate equal to the prime rate
promulgated by CitiBank, N.A. and in effect
as of the Date of Termination (the "Prime
Rate") of the Annual Base Salary, and the
Cinergy Annual Incentive Plan target
percentage payable through the end of the
Employment Period, each at the rate, and
using the same goals and factors, in effect
at the time Notice of Termination is given,
and paid within thirty (30) days of the Date
of Termination;
(2) the Corporation shall pay to the
Executive the present value (discounted at
the Prime Rate) of all amounts to which the
Executive would have been entitled had she
remained in employment with the Corporation
until the end of the Employment Period, each,
where applicable, at the rate of the Annual
Base Salary, and using the same goals and
factors, in effect at the time Notice of
Termination is given, under the Cinergy
Performance Shares Plan and the Cinergy
Executive Supplemental Life Insurance Program
minus the present value (discounted at the
Prime Rate) of the benefits to which she is
actually entitled under the above mentioned
plans and programs;
(3) the Corporation shall pay the value of
all deferred compensation amounts and all
executive life insurance benefits whether or
not then vested or payable; and
(4) the Corporation shall continue, until the
end of the Employment Period, medical and
welfare benefits to the Executive and/or the
Executive's family at least equal to those
which would have been provided if the
Executive's employment had not been
terminated (excluding benefits to which the
Executive has waived her rights in writing),
such benefits to be in accordance with the
most favorable medical and welfare benefit
plans, practices, programs or policies (the
"M&W Plans") of the Corporation as in effect
and applicable generally to other senior
executives of the Corporation and their
families during the ninety (90) day period
immediately preceding the Date of
Termination; provided, however, that if the
Executive becomes employed with another
employer and is eligible to receive medical
or other welfare benefits under another
employer-provided plan, the benefits under
the M&W Plans shall be secondary to those
provided under such other plan during such
applicable period of eligibility.
(iii) From and after the occurrence of a Change in
Control and in the event of Termination other than
by reason of the Executive's death, then in lieu
of any further salary payments to the Executive
for periods subsequent to the Date of Termination
and in lieu of any other benefits payable pursuant
to Section 5(a)(ii) of this Employment Agreement:
(1) The Corporation shall pay to the
Executive a lump sum severance payment, in
cash, equal to the greater of:
(A) the present value of all amounts and
benefits that would have been due under
Sections 5(a)(ii) of this Employment
Agreement, excluding Section
5(a)(ii)(4), and
(B) three (3) times the sum of (x) the
higher of the Executive's Annual Base
Salary in effect immediately prior to
the occurrence of the event or
circumstance upon which the Notice of
Termination is based or in effect
immediately prior to the Change in
Control, and (y) the higher of the
amount paid to the Executive pursuant to
all incentive compensation or bonus
plans or programs maintained by the
Corporation, in the year preceding that
in which the Date of Termination occurs
or in the year preceding that in which
the Change in Control occurs; and
(2) For a thirty-six (36) month period after
the Date of Termination, the Corporation
shall arrange to provide the Executive with
life, disability, accident and health
insurance benefits substantially similar to
those which the Executive is receiving
immediately prior to the Notice of
Termination (without giving effect to any
reduction in such benefits subsequent to a
Change in Control which reduction constitutes
Good Reason), except for any benefits that
were waived by the Executive in writing.
Benefits otherwise receivable by the
Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent
comparable benefits are actually received by
or made available to the Executive without
cost during the thirty-six (36) month period
following the Executive's termination of
employment (and any such benefits actually
received by the Executive shall be reported
to the Corporation by the Executive).
The Executive's employment shall be deemed to
have been terminated following a Change in
Control of Cinergy without Cause or by the
Executive for Good Reason if, in addition to
all other applicable Terminations, the
Executive's employment is terminated prior to
a Change in Control without Cause at the
direction of a Person who has entered into an
agreement with Cinergy or any of its
subsidiaries or affiliates, the consummation
of which will constitute a Change in Control
or if the Executive terminates her employment
for Good Reason prior to a Change in Control
if the circumstances or event which
constitutes Good Reason occurs at the
direction of such Person.
b. Termination by the Corporation for Cause or by the
Executive Other Than for Good Reason. Subject to the
provisions of Section 7 of this Employment Agreement,
if the Executive's employment shall be terminated for
Cause during the Employment Period, or if the Executive
terminates employment during the Employment Period
other than a termination for Good Reason, the
Corporation shall have no further obligations to the
Executive under this Employment Agreement other than
the obligation to pay to the Executive the Accrued
Obligations and the amounts determined under Section
5(c), plus any other earned but unpaid compensation, in
each case to the extent not previously paid.
c. Retirement Benefits on Termination. In addition to
retirement benefits under PSI's Pension Plan, PSI's
Supplemental Retirement Plan, and PSI's Excess Benefit
Plan, or any successor thereto, the Executive shall be
eligible to participate in any supplemental executive
retirement plan (commonly referred to as a "SERP")
sponsored by the Corporation.
d. Survival of Section 5(c). The provisions of Section
5(c) shall survive the expiration or termination of
this Employment Agreement for any reason.
e. Certain Tax Consequences. In the event that the
Executive becomes entitled to the payments and benefits
described in this Section 5 (the "Severance Benefits"),
if any of the Severance Benefits will be subject to any
excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Corporation shall pay to the
Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive,
after deduction of an Excise Tax on the Severance
Benefits and any federal, state and local income and
employment tax and Excise Tax upon the payment provided
for by this Section 5, shall be equal to the Severance
Benefits. For purposes of determining whether any of
the Severance Benefits will be subject to the Excise
Tax and the amount of such Excise Tax,
(i) any other payments or benefits received or to
be received by the Executive in connection with a
Change in Control or the Executive's termination
of employment (whether pursuant to the terms of
this Employment Agreement or any other plan,
arrangement or agreement with the Corporation, any
Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or
such Person) shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected
by the Corporation's independent auditors and
reasonably acceptable to the Executive such other
payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason
of Section 280G(b)(4)(A) of the Code, or such
excess parachute payments (in whole or in part)
represent reasonable compensation for services
actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the Base
Amount as defined in Section 280G(b)(3) of the
Code allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax,
(ii) the amount of the Severance Benefits that
shall be treated as subject to the Excise Tax
shall be equal to the lesser of
(1) the total amount of the Severance
Benefits, or
(2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) of
the Code (after applying clause (i), above),
and
(iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by
the Corporation's independent auditors in
accordance with the principles of Section
280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of
federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal
rate of taxation in the state and locality of the
Executive's residence on the Date of Termination,
net of the maximum reduction in federal income
taxes which would be obtained from deduction of
such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at
the time of termination of the Executive's
employment, the Executive shall repay to the
Corporation, at the time that the amount of such
reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and
federal, state and local income and employment tax
imposed on the Gross-Up Payment being repaid by
the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax
deduction) plus interest on the amount of such
repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the
termination of the Executive's employment
(including by reason of any payment the existence
or amount of which cannot be determined at the
time of the Gross-Up Payment), the Corporation
shall make an additional Gross-Up Payment in
respect of such excess (plus any interest,
penalties or additions payable by the Executive
with respect to such excess) at the time that the
amount of such excess is finally determined. The
Executive and the Corporation shall each
reasonably cooperate with the other in connection
with any administrative or judicial proceedings
concerning the existence or amount of liability
for Excise Tax with respect to the Severance
Benefits.
f. Other Fees and Expenses. The Corporation also shall
pay to the Executive all legal fees and expenses
incurred by the Executive as a result of a termination
which entitles the Executive to the Severance Benefits
(including all such fees and expenses, if any, incurred
in disputing any such termination or in seeking in good
faith to obtain or enforce any benefit or right
provided by this Employment Agreement). Such payments
shall be made within five (5) business days after
delivery of the Executive's written requests for
payment accompanied with such evidence of fees and
expenses incurred as the Corporation reasonably may
require.
6. Non-exclusivity of Rights. Nothing in this Employment
Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, plan, program,
policy or practice provided by the Corporation and for which
the Executive may qualify (except with respect to any
benefit to which the Executive has waived her rights in
writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other
contract or agreement entered into after the date hereof
with the Corporation. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under
any benefit, plan, program, policy or practice of, or any
contract or agreement entered into after the date hereof
with, the Corporation at or subsequent to the Date of
Termination, shall be payable in accordance with such
benefit, plan, program, policy or practice, or contract or
agreement, except as explicitly modified by this Employment
Agreement.
7. Full Settlement: Mitigation. Except as provided in
Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this Employment
Agreement, the Corporation's obligation to make the payments
provided for in this Employment Agreement and otherwise to
perform its obligations under this Employment Agreement
shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which
the Corporation may have against the Executive or others.
In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of
the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this
Employment Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment. If
the Executive finally prevails with respect to any dispute
between the Corporation, the Executive or others as to the
interpretation, terms, validity or enforceability of
(including any dispute about the amount of any payment
pursuant to) this Employment Agreement, the Corporation
agrees to pay all legal fees and expenses which the
Executive may reasonably incur as a result of any such
dispute.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of Cinergy, all of its
subsidiary companies and affiliates, as well as all
successors and assigns thereof (the "Cinergy Companies"),
all secret, confidential information, knowledge or data
relating to the Cinergy Companies, and their respective
businesses, that shall have been obtained by the Executive
during the Executive's employment by the Corporation and
that shall not have been or now or subsequently have become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this
Employment Agreement). During the Employment Period and
thereafter, the Executive shall not, without the prior
written consent of the Corporation or as may otherwise by
required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the
Corporation and those designated by it. The Executive
understands that during the Employment Period, the Cinergy
Companies may be required from time to time to make public
disclosure of the terms or existence of the Executive's
employment relationship in order to comply with various laws
and legal requirements. In addition to all other remedies
available to the Corporation in law and equity, this
Employment Agreement is subject to termination by the
Corporation for Cause under Section 4(b) in the event the
Executive violates any provision of this Section 8.
9. Successors.
a. This Employment Agreement is personal to the
Executive and, without the prior written consent of the
Corporation, shall not be assignable by the Executive
otherwise than by will or the laws of descent and
distribution. This Employment Agreement shall insure
to the benefits of and be enforceable by the
Executive's legal representatives.
b. This Employment Agreement shall inure to the benefit
of and be binding upon the Corporation, and its
successors and assigns.
c. The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the
business and/or assets of the Corporation to assume
expressly and agree to perform this Employment
Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if
no such succession had taken place.
10. Miscellaneous.
a. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of
Ohio, without reference to principles of conflict of
laws. The captions of this Employment Agreement are
not part of the provisions hereof and shall have no
force or effect. This Employment Agreement may not be
amended, modified, repealed, waived, extended or
discharged except by an agreement in writing signed by
the party against whom enforcement of such amendment,
modification, repeal, waiver, extension or discharge is
sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have
authority on behalf of the Corporation to agree to
amend, modify, repeal, waive, extend or discharge any
provision of this Employment Agreement or anything in
reference thereto.
b. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to
the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Elizabeth K. Lanier
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
If to the Corporation:
Cinergy Corp.
221 East Fourth Street
P. O. Box 960
Cincinnati, Ohio 45201-0960
Attn: Chief Executive Officer
or to such other address as either party shall have
furnished to the other in writing in accordance with
this Employment Agreement. All notices and
communications shall be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision
of this Employment Agreement shall not affect the
validity or enforceability of any other provision of
this Employment Agreement.
d. The Corporation may withhold from any amounts
payable under this Employment Agreement such federal,
state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
e. The Executive's or the Corporation's failure to
insist upon strict compliance with any provision of
this Employment Agreement or the failure to assert any
right the Executive or the Corporation may have under
this Employment Agreement, including without limitation
the right of the Executive to terminate employment for
Good Reason pursuant to Section 4(c) of this Employment
Agreement, or the right of the Corporation to terminate
the Executive's employment for Cause pursuant to
Section 4(b) of this Employment Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Employment Agreement.
f. This instrument contains the entire agreement of the
Executive and the Corporation with respect to the
subject matter hereof; and all promises,
representations, understandings, arrangements and prior
agreements are merged into this Employment Agreement
and accordingly superseded.
g. This Employment Agreement may be executed in
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one
and the same instrument.
h. The Corporation and the Executive agree that Cinergy
shall be authorized to act for the Corporation with
respect to all aspects pertaining to the administration
and interpretation of this Employment Agreement.
IN WITNESS WHEREOF, the Executive and the Corporation have caused
this Employment Agreement to be executed as of the day and year
first above written.
CINERGY CORP., CINERGY SERVICES, INC.,
THE CINCINNATI GAS & ELECTRIC COMPANY,
AND PSI ENERGY, INC.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman and Chief Executive Officer
EXECUTIVE
ELIZABETH K. LANIER
Elizabeth K. Lanier
Adopted by the PSI Energy, Inc.
Board of Directors on December 17, 1996
AMENDMENT TO THE PSI ENERGY, INC.
UNION EMPLOYEES' 401(k) SAVINGS PLAN
The PSI Energy, Inc. Union Employees' 401(k) Savings Plan, as
amended and restated effective January 1, 1992, and as amended
effective January 1, 1992, is hereby further amended pursuant to
Article 16 thereof. Amendments with respect to the modification
of Sections 3.1, 5.5, 7.6(a)(4), and 7.6(b)(4) are effective
January 1, 1996. Amendments with respect to the modification of
Sections 14.1, 14.2(b), and 14.2(h) are effective April 1, 1996.
Amendments with respect to the modification of Sections 1.13,
1.79, 5.1(a), and 5.1(c) are effective July 1, 1996.
(1) Explanation of Amendments
Section 3.1 is amended, effective January 1, 1996, by deleting
the requirement that an employee must be an employee for at least
nine months before he or she is eligible to participate in the
Plan. Thus, with the amendment each new employee is eligible to
enroll immediately in the Plan.
Section 5.5 is amended, effective January 1, 1996, to provide
that there are no limitations as to the number of times during a
calendar year that a participant may reduce or increase his or
her before-tax or after-tax contributions.
Sections 7.6(a)(4) and 7.6(b)(4) are amended, effective January
1, 1996, to lower to age 50 the age at which participants in the
Plan may reallocate balances held in the Stock Fund whenever the
Plan is on a monthly or daily accounting basis, respectively.
Sections 14.1, 14.2(b), and 14.2(h) are amended, effective April
1, 1996. Each of these sections pertains to loans from a
participant's accounts. Section 14.1 is amended to allow loan
applications to be made in any manner prescribed by PSI's
Comptroller. This amendment will allow loan applications to be
made in writing or orally by telephone. Section 14.2(b) removes
the former $1,000 minimum loan requirement and allows the
participant's rollover account to be considered in determining
the maximum available loan. Section 14.2(h) provides that
proceeds equal to the amount of a loan shall be transferred pro
rata from a participant's account and repaid proportionately into
the participant's accounts in accordance with the investment
directive in effect when the loan was made.
Section 1.12 is amended, effective July 1, 1996, to include
overtime pay as compensation subject to deferral into the Plan.
However, overtime pay will not be considered when calculating the
company matching contributions.
Section 1.78, the definition of "overtime pay" is added,
effective July 1, 1996.
Sections 5.1(a) and 5.1(c) are amended, effective July 1, 1996,
to provide that the maximum before-tax and/or after-tax
contribution that can be made annually by a participant is 15% of
the participant's eligible compensation.
(2) Amendments Effective January 1, 1996
(a) Section 3.1 as Amended
Section 3.1, as hereby amended, reads as follows:
"3.1 Eligibility Requirements for Participation.
Each Union Employee on January 1, 1996, who was
participating in the Plan as of December 31, 1995,
shall continue as a Participant in the Plan as of
January 1, 1996.
Each other Employee may become a Participant on
the first Entry Date following the date on which
he meets all of the following requirements:
(a) The Employee has attained age 21;
(b) The Employee is a Union Employee; and
(c) The Employee has elected to enroll in the
Plan pursuant to Section 3.2 (Entry Dates for
Participation).
No Employee shall become a Participant prior to
the Plan's effective date. An Employee who meets
the requirement of Items (a), and (b), but who
does not elect to enroll in the Plan pursuant to
Section 3.2 (Entry Dates for Participation), shall
be considered an `Eligible Employee.'"
(b) Section 5.5 as Amended
Section 5.5, as hereby amended, reads as follows:
"5.5 Modification of Deferred Compensation
Contribution and After-Tax Contribution.
(a) A Participant who desires to reduce or increase
the amount of his Deferred Compensation
Contribution may elect to do so, in writing, on a
form prescribed by PSI's Comptroller. There shall
be no limitation on the total number of
reductions, increases, or combination of
reductions and increases, including any
discontinuances or resumptions of Deferred
Compensation Contributions, effected by a
Participant during any Plan Year. If a Participant
elects to discontinue his Deferred Compensation
Contributions, then he shall not be able to resume
having any contributions made until the first full
Payroll Period of any calendar quarter which
quarter begins at least 90 days after the last day
of the last Payroll Period with respect to which
Deferred Compensation Contributions were
previously elected. Any election to resume
Deferred Compensation Contributions shall be made
by the Participant in the manner described in this
Subsection with respect to reducing or increasing
contributions.
(b) A Participant who desires to reduce or increase
the amount of his After-Tax Contribution may elect
to do so, in writing, on a form prescribed by
PSI's Comptroller. There will be no limitation on
the total number of reductions, increases, or
combination of reductions and increases, including
any discontinuances or resumptions of After-Tax
Contributions, effected by a Participant during
any Plan Year. If a Participant elects to
discontinue his After-Tax Contributions, then he
shall not be able to resume having contributions
made until the first full Payroll Period of any
calendar quarter which quarter begins at least 90
days after the last day of the last Payroll Period
with respect to which After-Tax Contributions were
previously elected. Any election to resume After-
Tax Contributions shall be made by the Participant
in the manner described in this Subsection with
respect to reducing or increasing the
contributions. A Participant's election to reduce
or increase either his Deferred Compensation
Contribution or his After-Tax Contribution shall
become effective as of the first day of the
Participant's first Payroll Period following by 15
days (or any shorter period of time as may be
designated by PSI's Comptroller) the date on which
PSI's Manager, Payroll-Benefits receives the
Participant's written modification election."
(c) Section 7.6(a)(4) as Amended
Section 7.6(a)(4), as hereby amended, reads as follows:
"(4) A Participant may not reallocate the Fund balances
of his Employer Matching Account or his Incentive
Matching Account with regard to Employer Matching
Contributions or Incentive Matching Contributions made
on or after January 1, 1992. Instead, these amounts
must remain invested in the Stock Fund until the
Participant attains age 55 (age 50 effective January 1,
1996) at which time the Fund balances may be
reallocated, at least once during any calendar quarter,
in multiples of five percent, among the Fund options
upon the receipt by PSI's Manager, Payroll-Benefits of
a written reallocation on a form prescribed by PSI's
Comptroller. A reallocation shall become effective as
of the first day of the first calendar quarter of a
Plan Year (or as of any other day or days of a Plan
Year as designated by PSI's Comptroller) that follows
by 15 days (or any shorter period of time as designated
by PSI's Comptroller) receipt of the proper form by
PSI's Manager, Payroll-Benefits."
(d) Section 7.6(b)(4) as Amended
Article 7.6(b)(4), as hereby amended, reads as follows:
"(4) A Participant may not reallocate the Fund
balances of his Employer Matching Account or his
Incentive Matching Amount with regard to Employer
Matching Contributions made on or after January 1,
1992. Instead, these amounts must remain invested
in the Stock Fund until the Participant attains
age 55 (age 50 effective January 1, 1996) at which
time the Fund balances may be reallocated, at
least once during any calendar quarter, in
multiples of five percent, among the Fund options
upon the receipt by PSI's Manager, Payroll-
Benefits of a written reallocation on a form
prescribed by PSI's Comptroller. A reallocation
shall become effective as of the first day of the
first calendar quarter of a Plan Year (or as of
any other day or days of a Plan Year as designated
by PSI's Comptroller) that follows by 15 days (or
any shorter period of time as designated by PSI's
Comptroller) receipt of the proper form by PSI's
Manager, Payroll-Benefits."
(3) Amendments Effective April 1, 1996
(a) Section 14.1 as Amended
Section 14.1, as hereby amended, reads as follows:
"14.1 Effective Date
Upon proper application by a Participant, in a manner
prescribed by PSI's Comptroller and delivered to PSI's
Manager, Payroll-Benefits, who shall administer the
Plan's loan program, PSI may direct the Trustee to make
a loan to a Participant subject to the requirements of
this Article and any other rules as PSI may prescribe.
In deciding whether to approve or deny any written
request for a loan, PSI's Manager, Payroll-Benefits
shall take into consideration the factors applied by
commercial banks in making loan decisions, including
the Participant's creditworthiness and the available
security for the loan. PSI shall apply the eligibility
requirements and rules for a loan uniformly to all
Participants. For purposes of this Article, the term
`Participant' includes Employees and former Employees
and Beneficiaries who are `parties in interest,' as
defined in ERISA Section 3(14)."
(b) Section 14.2(b) as Amended
Section 14.2(b), as hereby amended, reads as follows:
"(b) There is no minimum principal amount
requirement for a loan. The principal amount of
any loan to be made plus the principal amount of
all loans to a Participant outstanding at the time
the loan is to be made shall not exceed the lesser
of (1) 50% of the balance of the Participant's
Deferred Compensation Account, ESOP Transfer
Account, and Rollover Account, and (2) $50,000
reduced by the excess of the highest outstanding
balance of loans to the Participant from the Plan
during the period beginning one year and one day
before the day the loan is to be made over the
outstanding balance of loans from the Plan on the
date on which the loan is to be made. A
Participant may have no more than two loans
outstanding at any time. A loan shall be made
within 30 days after the loan is approved by PSI
or as soon thereafter as administratively
feasible. All charges, including all expenses and
fees incurred in connection with the processing,
record keeping, or refinancing of any loan are, to
the extent administratively feasible, charged to
the Participant who received the loan, except to
the extent paid by the Employers."
(c) Section 14.2(h) as Amended
Section 14.2(h), as hereby amended, reads as follows:
"(h) Amounts equal to any loans shall be
transferred pro rata from the Participant's
subaccounts under his Deferred Compensation
Account, ESOP Transfer Account, and Rollover
Account in proportion to the principal amount of
the loan. PSI's Comptroller shall establish,
operate, and maintain a loan subaccount or
otherwise account for the receipt of amounts
transferred from the Participant's Fund
subaccounts. Appropriate accounting entries
reflecting transfers shall be concurrent with the
disbursement to the Participant of amounts
borrowed. Interest received by the Trustee in
respect of amounts borrowed by a Participant shall
be credited to the Participant's loan subaccount
or otherwise properly credited at the end of each
month. Interest so allocated to a Participant
shall then be allocated proportionately among the
Participant's Fund subaccounts in accordance with
the Participant's investment directions in effect
when the loan was made. A repayment of principal
by a Participant shall be invested among the Funds
and credited proportionately to the Participant's
appropriate Fund subaccounts in accordance with
the Participant's investment directions in effect
when the loan was made. If contributions on
behalf of the Participant have been suspended or
discontinued for any other reason at the time of
any interest payment or principal repayment, the
payments or repayments shall be invested in
accordance with the investment direction in effect
when the loan was made."
(4) Amendments Effective July 1, 1996
(a) Section 1.12 as Amended
Section 1.12, as hereby amended, reads as follows:
"1.12 `Compensation' means, effective July 1,
1996, with respect to an Employee for any period
of reference, the sum of the Employee's (1) Base
Wage, (2) Ratification Pay, (3) Overtime Pay, and
(4) Pre-Paid Sick-Time, plus (5) Deferred
Compensation Contributions made on behalf of the
Employee for the Plan Year and other elective
contributions made by the Employer on behalf of
the Employee during the Plan Year that are not
includible in gross income under Code Section
125, Paragraph 402(a)(8), Subsection 402(h), or
Subsection 403(b), provided, however, that annual
Compensation taken into account under the Plan
for any Plan Year beginning on or after January
1, 1989, shall not exceed the limitation
specified in Code Paragraph 401(a)(17) (as
adjusted for increases in the limitation pursuant
to Code Subparagraph 401(a)(17)(B)). For Plan
Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation
specified in Code Paragraph 401(a)(17) shall mean
the OBRA '93 Annual Compensation Limit. In
determining an Employee's Compensation, the rules
of Code Paragraph 414(q)(6) shall apply, except
that in applying those rules, the term `family'
shall include only the Employee's spouse and
lineal descendants who have not attained age 19
before the close of the Plan Year.
Notwithstanding anything in this Subsection to
the contrary, with respect to any Employee, the
term `Compensation' shall not include Overtime
Pay for purposes of Article 6 (Employer
Contributions)."
(b) Section 1.78 as Added
Section 1.78, as hereby added, reads as follows:
"1.78 `Overtime Pay' means, with respect to an
Employee, the pay received at one-half times the
Employee's regular rate of pay as remuneration for
hours worked in a work day or a work week in excess of
8 hours or 40 hours, respectively, for the relevant
period."
(c) Section 5.1(a) as Amended
Section 5.1(a), as hereby amended, reads as follows:
"(a) Deferred Compensation Contributions. Subject
to the limitations set forth in Section 5.6
(Deferred Compensation Contribution Limitation),
each Employer shall contribute to the Trust Fund,
on behalf of each Participant employed by the
Employer as a Deferred Compensation Contribution
an amount elected by the Participant equal to not
less than one percent nor more than 15 percent
(expressed as a whole percentage) of the
Participant's Compensation for the first full
Payroll Period of the month for which the
Participant's election to defer Compensation is to
become effective and shall continue for each
subsequent Payroll Period that the election is in
effect. However, if a Participant receives a
hardship withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1
(Hardship Withdrawals) of the PSI Energy, Inc.
Employees' 401(k) Savings Plan, the Participant's
Deferred Compensation Contributions shall be
suspended for a period of 12 months after the
receipt of the hardship withdrawal. An election
shall be made by the Participant filing with PSI's
Manager, Payroll-Benefits the written form
prescribed by PSI's Comptroller at least 15 days
(or such shorter period of time as may be
designated by PSI's Comptroller) before the first
day of the month during which the election is to
be effective. The total sum of Deferred
Compensation Contributions made under this Plan
when combined with the amount of elective
deferrals made under any other Employer plan
established and maintained by any Employer or
Affiliate under Code Subsection 401(k) for a
Participant's taxable year, shall not exceed the
excess deferral limitation set forth in Code
Paragraph 402(g)(1), as adjusted pursuant to Code
Paragraph 402(g)(5). However, if a Participant
receives a hardship withdrawal under Section 12.1
(Hardship Withdrawals) of the Plan or under
Section 12.1 (Hardship Withdrawals) of the PSI
Energy, Inc. Employees' 401(k) Savings Plan, the
Participant may not make Deferred Compensation
Contributions for the Participant's taxable year
immediately following the taxable year of the
hardship withdrawal in excess of the applicable
limit under Code Subsection 402(g) for the next
taxable year less the amount of the Participant's
Deferred Compensation Contributions for the
taxable year of the hardship withdrawal. The
Deferred Compensation Contribution attributed to
each Participant shall be allocated to the
Participant's Deferred Compensation Account."
(d) Section 5.1(c) as Amended
Section 5.1(c), as hereby amended, reads as follows:
"(c) After-Tax Contributions. A Participant may
also elect to make an After-Tax Contribution of
his Compensation to the Trust Fund on his behalf
in an amount (expressed as a whole percentage)
which together with his Deferred Compensation
Contributions, shall not exceed 15 percent of his
Compensation (1) for the first full Payroll Period
of the month for which the Participant's election
(as described in this Paragraph) to make After-Tax
Contributions is to become effective and shall
continue for each subsequent Payroll Period that
the election is in effect (payroll deduction). In
the alternative, a Participant may elect to make
once per Plan Year an After-Tax Contribution in
lump sum payment by a check or money order by the
Participant payable to the Trustee and submitted
to PSI's Manager, Payroll-Benefits. However, the
amount of a Participant's After-Tax Contributions
for a Plan Year shall not cause the Participant's
Annual Addition to exceed his Maximum Permissible
Amount. If a Participant receives a hardship
withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1
(Hardship Withdrawals) of the PSI Energy, Inc.
Employees' 401(k) Savings Plan, the Participant's
After-Tax Contributions shall be suspended for a
period of 12 months after the receipt of the
hardship withdrawal. If a Participant receives a
withdrawal under Section 12.2 (Withdrawals from
After-Tax Contribution Account) of the Plan, the
Participant's After-Tax Contributions shall be
suspended for a period of 12 months after the
receipt of the withdrawal. The After-Tax
Contribution attributed to each Participant shall
be allocated to the Participant's After-Tax
Contribution Account. Any election described in
this Subsection shall be made by the Participant
in the same manner described in Subsection 5.1(a)
with respect to Deferred Compensation
Contributions."
This Amendment is executed and approved by the duly authorized
officers of PSI Energy, Inc., effective as of the dates set forth
herein.
PSI ENERGY, INC.
By: JAMES E.
ROGERS
James E.
Rogers
Vice
Chairman and
Chief Executive
Officer
Dated: December
30, 1996
APPROVED:
By: CHERYL M. FOLEY
Cheryl M. Foley
Vice President, General Counsel
and Corporate Secretary
Dated: December 30, 1996
Adopted by the PSI Energy, Inc.
Board of Directors on December 17, 1996
AMENDMENT TO THE PSI ENERGY, INC.
EMPLOYEES' 401(k) SAVINGS PLAN
The PSI Energy, Inc. Employees' 401(k) Savings Plan, as amended
and restated effective January 1, 1992, and as amended effective
January 1, 1992, is hereby further amended pursuant to Article 16
thereof. Amendments with respect to the modification of Sections
3.1, 5.5, 7.6(a)(4), and 7.6(b)(4) are effective January 1, 1996.
Amendments with respect to the modification of Sections 14.1,
14.2(b), and 14.2(h) are effective April 1, 1996. Amendments
with respect to the modification of Sections 1.13, 1.79, 5.1(a),
and 5.1(c) are effective July 1, 1996.
(1) Explanation of Amendments
Section 3.1 is amended, effective January 1, 1996, by deleting
the requirement that an employee must be an employee for at least
nine months before he or she is eligible to participate in the
Plan. Thus, with the amendment each new employee is eligible to
enroll immediately in the Plan.
Section 5.5 is amended, effective January 1, 1996, to provide
that there are no limitations as to the number of times during a
calendar year that a participant may reduce or increase his or
her before-tax or after-tax contributions.
Sections 7.6(a)(4) and 7.6(b)(4) are amended, effective January
1, 1996, to lower to age 50 the age at which participants in the
Plan may reallocate balances held in the Stock Fund whenever the
Plan is on a monthly or daily accounting basis, respectively.
Sections 14.1, 14.2(b), and 14.2(h) are amended, effective April
1, 1996. Each of these sections pertains to loans from a
participant's accounts. Section 14.1 is amended to allow loan
applications to be made in any manner prescribed by PSI's
Comptroller. This amendment will allow loan applications to be
made in writing or orally by telephone. Section 14.2(b) removes
the former $1,000 minimum loan requirement and allows the
participant's rollover account to be considered in determining
the maximum available loan. Section 14.2(h) provides that
proceeds equal to the amount of a loan shall be transferred pro
rata from a participant's account and repaid proportionately into
the participant's accounts in accordance with the investment
directive in effect when the loan was made.
Section 1.13 is amended, effective July 1, 1996, to include
overtime pay as compensation subject to deferral into the Plan.
However, overtime pay will not be considered when calculating the
company matching contributions.
Section 1.79, the definition of "overtime pay" is added,
effective July 1, 1996.
Sections 5.1(a) and 5.1(c) are amended, effective July 1, 1996,
to provide that the maximum before-tax and/or after-tax
contribution that can be made annually by a participant is 15% of
the participant's eligible compensation.
(2) Amendments Effective January 1, 1996
(a) Section 3.1 as Amended
Section 3.1, as hereby amended, reads as follows:
"3.1 Eligibility Requirements for Participation.
Each Exempt Employee and Non-Exempt Employee on
January 1, 1996, who was participating in the Plan
as of December 31, 1995, shall continue as a
Participant in the Plan as of January 1, 1996.
Each other Employee may become a Participant on
the first Entry Date following the date on which
he meets all of the following requirements:
(a) The Employee has attained age 21;
(b) The Employee is an Exempt Employee or a Non-
Exempt Employee; and
(c) The Employee has elected to enroll in the
Plan pursuant to Section 3.2 (Entry Dates for
Participation).
No Employee shall become a Participant prior to
the Plan's effective date. An Employee who meets
the requirement of Items (a), and (b), but who
does not elect to enroll in the Plan pursuant to
Section 3.2 (Entry Dates for Participation), shall
be considered an `Eligible Employee.'"
(b) Section 5.5 as Amended
Section 5.5, as hereby amended, reads as follows:
"5.5 Modification of Deferred Compensation
Contribution and After-Tax Contribution.
(a) A Participant who desires to reduce or increase
the amount of his Deferred Compensation
Contribution may elect to do so, in writing, on a
form prescribed by PSI's Comptroller. There shall
be no limitation on the total number of
reductions, increases, or combination of
reductions and increases, including any
discontinuances or resumptions of Deferred
Compensation Contributions, effected by a
Participant during any Plan Year. If a Participant
elects to discontinue his Deferred Compensation
Contributions, then he shall not be able to resume
having any contributions made until the first full
Payroll Period of any calendar quarter which
quarter begins at least 90 days after the last day
of the last Payroll Period with respect to which
Deferred Compensation Contributions were
previously elected. Any election to resume
Deferred Compensation Contributions shall be made
by the Participant in the manner described in this
Subsection with respect to reducing or increasing
contributions.
(b) A Participant who desires to reduce or increase
the amount of his After-Tax Contribution may elect
to do so, in writing, on a form prescribed by
PSI's Comptroller. There will be no limitation on
the total number of reductions, increases, or
combination of reductions and increases, including
any discontinuances or resumptions of After-Tax
Contributions, effected by a Participant during
any Plan Year. If a Participant elects to
discontinue his After-Tax Contributions, then he
shall not be able to resume having contributions
made until the first full Payroll Period of any
calendar quarter which quarter begins at least 90
days after the last day of the last Payroll Period
with respect to which After-Tax Contributions were
previously elected. Any election to resume After-
Tax Contributions shall be made by the Participant
in the manner described in this Subsection with
respect to reducing or increasing the
contributions. A Participant's election to reduce
or increase either his Deferred Compensation
Contribution or his After-Tax Contribution shall
become effective as of the first day of the
Participant's first Payroll Period following by 15
days (or any shorter period of time as may be
designated by PSI's Comptroller) the date on which
PSI's Manager, Payroll-Benefits receives the
Participant's written modification election."
(c) Section 7.6(a)(4) as Amended
Section 7.6(a)(4), as hereby amended, reads as follows:
"(4) A Participant may not reallocate the Fund balances
of his Employer Matching Account or his Incentive
Matching Account with regard to Employer Matching
Contributions or Incentive Matching Contributions made
on or after January 1, 1992. Instead, these amounts
must remain invested in the Stock Fund until the
Participant attains age 55 (age 50 effective January 1,
1996) at which time the Fund balances may be
reallocated, at least once during any calendar quarter,
in multiples of five percent, among the Fund options
upon the receipt by PSI's Manager, Payroll-Benefits of
a written reallocation on a form prescribed by PSI's
Comptroller. A reallocation shall become effective as
of the first day of the first calendar quarter of a
Plan Year (or as of any other day or days of a Plan
Year as designated by PSI's Comptroller) that follows
by 15 days (or any shorter period of time as designated
by PSI's Comptroller) receipt of the proper form by
PSI's Manager, Payroll-Benefits."
(d) Section 7.6(b)(4) as Amended
Article 7.6(b)(4), as hereby amended, reads as follows:
"(4) A Participant may not reallocate the Fund
balances of his Employer Matching Account or his
Incentive Matching Amount with regard to Employer
Matching Contributions made on or after January 1,
1992. Instead, these amounts must remain invested
in the Stock Fund until the Participant attains
age 55 (age 50 effective January 1, 1996) at which
time the Fund balances may be reallocated, at
least once during any calendar quarter, in
multiples of five percent, among the Fund options
upon the receipt by PSI's Manager, Payroll-
Benefits of a written reallocation on a form
prescribed by PSI's Comptroller. A reallocation
shall become effective as of the first day of the
first calendar quarter of a Plan Year (or as of
any other day or days of a Plan Year as designated
by PSI's Comptroller) that follows by 15 days (or
any shorter period of time as designated by PSI's
Comptroller) receipt of the proper form by PSI's
Manager, Payroll-Benefits."
(3) Amendments Effective April 1, 1996
(a) Section 14.1 as Amended
Section 14.1, as hereby amended, reads as follows:
"14.1 Effective Date
Upon proper application by a Participant, in a manner
prescribed by PSI's Comptroller and delivered to PSI's
Manager, Payroll-Benefits, who shall administer the
Plan's loan program, PSI may direct the Trustee to make
a loan to a Participant subject to the requirements of
this Article and any other rules as PSI may prescribe.
In deciding whether to approve or deny any written
request for a loan, PSI's Manager, Payroll-Benefits
shall take into consideration the factors applied by
commercial banks in making loan decisions, including
the Participant's creditworthiness and the available
security for the loan. PSI shall apply the eligibility
requirements and rules for a loan uniformly to all
Participants. For purposes of this Article, the term
`Participant' includes Employees and former Employees
and Beneficiaries who are `parties in interest,' as
defined in ERISA Section 3(14)."
(b) Section 14.2(b) as Amended
Section 14.2(b), as hereby amended, reads as follows:
"(b) There is no minimum principal amount
requirement for a loan. The principal amount of
any loan to be made plus the principal amount of
all loans to a Participant outstanding at the time
the loan is to be made shall not exceed the lesser
of (1) 50% of the balance of the Participant's
Deferred Compensation Account, ESOP Transfer
Account, and Rollover Account, and (2) $50,000
reduced by the excess of the highest outstanding
balance of loans to the Participant from the Plan
during the period beginning one year and one day
before the day the loan is to be made over the
outstanding balance of loans from the Plan on the
date on which the loan is to be made. A
Participant may have no more than two loans
outstanding at any time. A loan shall be made
within 30 days after the loan is approved by PSI
or as soon thereafter as administratively
feasible. All charges, including all expenses and
fees incurred in connection with the processing,
record keeping, or refinancing of any loan are, to
the extent administratively feasible, charged to
the Participant who received the loan, except to
the extent paid by the Employers."
(c) Section 14.2(h) as Amended
Section 14.2(h), as hereby amended, reads as follows:
"(h) Amounts equal to any loans shall be
transferred pro rata from the Participant's
subaccounts under his Deferred Compensation
Account, ESOP Transfer Account, and Rollover
Account in proportion to the principal amount of
the loan. PSI's Comptroller shall establish,
operate, and maintain a loan subaccount or
otherwise account for the receipt of amounts
transferred from the Participant's Fund
subaccounts. Appropriate accounting entries
reflecting transfers shall be concurrent with the
disbursement to the Participant of amounts
borrowed. Interest received by the Trustee in
respect of amounts borrowed by a Participant shall
be credited to the Participant's loan subaccount
or otherwise properly credited at the end of each
month. Interest so allocated to a Participant
shall then be allocated proportionately among the
Participant's Fund subaccounts in accordance with
the Participant's investment directions in effect
when the loan was made. A repayment of principal
by a Participant shall be invested among the Funds
and credited proportionately to the Participant's
appropriate Fund subaccounts in accordance with
the Participant's investment directions in effect
when the loan was made. If contributions on
behalf of the Participant have been suspended or
discontinued for any other reason at the time of
any interest payment or principal repayment, the
payments or repayments shall be invested in
accordance with the investment direction in effect
when the loan was made."
(4) Amendments Effective July 1, 1996
(a) Section 1.13 as Amended
Section 1.13, as hereby amended, reads as follows:
"1.13 `Compensation' means, effective July 1,
1996, with respect to any Exempt Employee for any
period of reference, the sum of the Employee's
(1) Base Salary, (2) Overtime Pay, and (3)
Performance Lump Sum Pay, plus (4) any Deferred
Compensation Contributions made on behalf of the
Employee for the Plan Year and other elective
contributions made by the Employer on behalf of
the Employee during the Plan Year that are not
includible in gross income under Code Section
125, Paragraph 402(a)(8), Subsection 402(h), or
Subsection 403(d), provided, however, that annual
Compensation taken into account under the Plan
for any Plan Year beginning on or after January
1, 1989, shall not exceed the limitation
specified in Code Paragraph 401(a)(17) (as
adjusted for increases in the limitation pursuant
to Code Subparagraph 401(a)(17)(B)). For Plan
Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation
specified in Code Paragraph 401(a)(17) shall mean
the OBRA '93 Annual Compensation Limit. In
determining an Employee's Compensation, the rules
of Code Paragraph 414(q)(6) shall apply, except
that in applying those rules, the term `family'
shall include only the Employee's spouse and
lineal descendants who have not attained age 19
before the close of the Plan Year.
With respect to a Non-Exempt Employee,
`Compensation' means, effective July 1, 1996,
the sum of the Employee's (1) Base Wage, (2)
Overtime Pay, and (3) Performance Lump Sum Pay,
plus (4) Deferred Compensation Contributions made
on behalf of the Employee for the Plan Year and
other elective contributions made by the Employer
on behalf of the Employee during the Plan Year
that are not includable in gross income under
Code Section 125, Paragraph 402(a)(8), Subsection
402(h), or Subsection 403(b), provided, however,
that annual Compensation taken into account under
the Plan for any Plan Year beginning on or after
January 1, 1989, shall not exceed the limitation
specified in Code Paragraph 401(a)(17) (as
adjusted for increases in the limitation pursuant
to Code Subparagraph 401(a)(17)(B)). For Plan
Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation
specified in Code Paragraph 401(a)(17) shall mean
the OBRA '93 Annual Compensation Limit. In
determining an Employee's Compensation, the rules
of Code Paragraph 414(q)(6) shall apply, except
that in applying those rules, the term `family'
shall include only the Employee's spouse and
lineal descendants who have not attained age 19
before the close of the Plan Year.
Notwithstanding anything in this Subsection to
the contrary, with respect to any Exempt Employee
or Non-Exempt Employee, the term `Compensation'
shall not include Overtime Pay for purposes of
Article 6 (Employer Contributions)."
(b) Section 1.79 as Added
Section 1.79, as hereby added, reads as follows:
"1.79 `Overtime Pay' means, with respect to a Non-
Exempt Employee, the pay received at one-half times the
Employee's regular rate of pay as remuneration for
hours worked in a work day or a work week in excess of
8 hours or 40 hours, respectively, for the relevant
period. With respect to an Exempt Employee, `Overtime
Pay' means the pay received in excess of the Employee's
regular rate of pay as remuneration for hours worked in
a work day or work week in excess of the Employee's
regularly scheduled hours pursuant to the Employer's
overtime pay policy applicable to Exempt Employees ."
(c) Section 5.1(a) as Amended
Section 5.1(a), as hereby amended, reads as follows:
"(a) Deferred Compensation Contributions. Subject
to the limitations set forth in Section 5.6
(Deferred Compensation Contribution Limitation),
each Employer shall contribute to the Trust Fund,
on behalf of each Participant employed by the
Employer as a Deferred Compensation Contribution
an amount elected by the Participant equal to not
less than one percent nor more than 15 percent
(expressed as a whole percentage) of the
Participant's Compensation for the first full
Payroll Period of the month for which the
Participant's election to defer Compensation is to
become effective and shall continue for each
subsequent Payroll Period that the election is in
effect. However, if a Participant receives a
hardship withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1
(Hardship Withdrawals) of the PSI Energy, Inc.
Union Employees' 401(k) Savings Plan, the
Participant's Deferred Compensation Contributions
shall be suspended for a period of 12 months after
the receipt of the hardship withdrawal. An
election shall be made by the Participant filing
with PSI's Manager, Payroll-Benefits the written
form prescribed by PSI's Comptroller at least 15
days (or such shorter period of time as may be
designated by PSI's Comptroller) before the first
day of the month during which the election is to
be effective. The total sum of Deferred
Compensation Contributions made under this Plan
when combined with the amount of elective
deferrals made under any other Employer plan
established and maintained by any Employer or
Affiliate under Code Subsection 401(k) for a
Participant's taxable year, shall not exceed the
excess deferral limitation set forth in Code
Paragraph 402(g)(1), as adjusted pursuant to Code
Paragraph 402(g)(5). However, if a Participant
receives a hardship withdrawal under Section 12.1
(Hardship Withdrawals) of the Plan or under
Section 12.1 (Hardship Withdrawals) of the PSI
Energy, Inc. Union Employees' 401(k) Savings Plan,
the Participant may not make Deferred Compensation
Contributions for the Participant's taxable year
immediately following the taxable year of the
hardship withdrawal in excess of the applicable
limit under Code Subsection 402(g) for the next
taxable year less the amount of the Participant's
Deferred Compensation Contributions for the
taxable year of the hardship withdrawal. The
Deferred Compensation Contribution attributed to
each Participant shall be allocated to the
Participant's Deferred Compensation Account."
(d) Section 5.1(c) as Amended
Section 5.1(c), as hereby amended, reads as follows:
"(c) After-Tax Contributions. A Participant may
also elect to make an After-Tax Contribution of
his Compensation to the Trust Fund on his behalf
in an amount (expressed as a whole percentage)
which together with his Deferred Compensation
Contributions, shall not exceed 15 percent of his
Compensation (1) for the first full Payroll Period
of the month for which the Participant's election
(as described in this Paragraph) to make After-Tax
Contributions is to become effective and shall
continue for each subsequent Payroll Period that
the election is in effect (payroll deduction). In
the alternative, a Participant may elect to make
once per Plan Year an After-Tax Contribution in
lump sum payment by a check or money order by the
Participant payable to the Trustee and submitted
to PSI's Manager, Payroll-Benefits. However, the
amount of a Participant's After-Tax Contributions
for a Plan Year shall not cause the Participant's
Annual Addition to exceed his Maximum Permissible
Amount. If a Participant receives a hardship
withdrawal under Section 12.1 (Hardship
Withdrawals) of the Plan or under Section 12.1
(Hardship Withdrawals) of the PSI Energy, Inc.
Union Employees' 401(k) Savings Plan, the
Participant's After-Tax Contributions shall be
suspended for a period of 12 months after the
receipt of the hardship withdrawal. If a
Participant receives a withdrawal under Section
12.2 (Withdrawals from After-Tax Contribution
Account) of the Plan, the Participant's After-Tax
Contributions shall be suspended for a period of
12 months after the receipt of the withdrawal.
The After-Tax Contribution attributed to each
Participant shall be allocated to the
Participant's After-Tax Contribution Account. Any
election described in this Subsection shall be
made by the Participant in the same manner
described in Subsection 5.1(a) with respect to
Deferred Compensation Contributions."
This Amendment is executed and approved by the duly
authorized officers of PSI Energy, Inc., effective as of the
dates set forth herein.
PSI ENERGY, INC.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman and
Chief Executive Officer
Dated: December 30, 1996
APPROVED:
By: CHERYL M. FOLEY
Cheryl M. Foley
Vice President, General Counsel
and Corporate Secretary
Dated: December 30, 1996
AGREEMENT
This Agreement is made and entered into as of the _____ day of
____________, 1996, by and among PSI Energy, Inc. ("PSI"), an
Indiana corporation, Cinergy Corp., a Delaware corporation,
individually and on behalf of its subsidiaries (the "Company"),
and John M. Mutz (the "Executive").
WHEREAS, as of October 4, 1993, the Executive entered into an
Employment Agreement with PSI Resources, Inc., an Indiana
corporation, and PSI (the "Employment Agreement"); and
WHEREAS, the Company and PSI, pursuant to the terms of the
Employment Agreement, have assumed and agreed to perform the
obligations of the parties to the Employment Agreement other than
the Executive; and
WHEREAS, the Company and the Executive desire to amend and
clarify certain provisions of the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual premises,
covenants and agreements set forth below, it is hereby agreed as
follows:
1. The parties agree that Section 2 (a) of the Employment
Agreement is hereby amended to reflect that during the remaining
term of the Employment Agreement the Executive shall hold the
titles of President of PSI Energy, Inc. and Vice President of
Cinergy Corp., and that he shall have such authority, duties and
responsibilities as may be mutually agreed upon, from time to
time, by Executive and James E. Rogers, Vice Chairman and Chief
Executive Officer of the Company.
2. The parties agree that Section 4 (d) of the Employment
Agreement is hereby amended to reflect that the Executive must
give the Company at least two (2) months advance written notice
to terminate the Employment Agreement for Good Reason.
3. The parties agree that Executive, at any time during the
remaining term of the Employment Agreement, has the right to
terminate the Employment Agreement for Good Reason, to deliver a
Notice of Termination, and to receive the benefits provided for
in Section 5(a)(i) and (ii).
4. Provided that Executive gives proper and timely Notice of
Termination of the Employment Agreement for Good Reason, the
Company and PSI hereby waive any right to object to the
Executive's decision during the remaining term of the Employment
Agreement to terminate his employment for Good Reason, deliver a
Notice of Termination to the Company or PSI relating to such
termination, and to receive the benefits provided for in Sections
5(a)(i) and (ii) on the grounds that Executive consented to the
material reduction of his title, authority, duties, or
responsibilities as specified in Section 2(a) or to any material
breach of the Employment Agreement by the Company, or waived his
right to exercise such rights and receive the benefits to which
he would thereby be entitled, or on grounds of laches, or for any
other reason related to Executive's decision at this time not to
deliver a Notice of Termination or terminate his employment for
Good Reason.
5. Pursuant to Section 5(c) of the Employment Agreement, PSI and
the Company agree to pay all of Executive's legal fees and
expenses incurred by the Executive in connection with this
Agreement, which fees shall not exceed $10,000.
6. The parties agree that in computing benefits payable pursuant
to Section 5(a)(ii) of the Employment Agreement, in addition to
all other benefits provided for in such section, at the time of
his termination of his employment for Good Reason, (i) the
Executive would be entitled to receive from the Company the
difference between the fair market value of all shares of Cinergy
Corp. common stock subject to stock options held by him which are
not fully vested at the time of Executive's termination of
employment and the aggregate exercise price of such options,
assuming they are 100% vested, and that for such purposes, the
"fair market value" shall mean the average of the high and low
sales prices of a share of Cinergy Corp. common stock as reported
by the "NYSE - Composite Transactions" in The Wall Street Journal
on the date of the Executive's termination of employment or the
preceding trading day, if that date is not a trading day, and
(ii) the Executive would be entitled to receive the present value
of any Performance Share Awards held by him on the date of
termination of his employment, based on the assumptions that the
Committee had made a determination to vest them as permitted by
Section 10.3(b) of the Performance Shares Plan and that the
Executive continued to work until the last day of the applicable
Performance Period for Performance Share Awards held by him
(adjusted to reflect, on a pro rata basis, the percentage of
service during the applicable Performance Period represented by
five years of service through October 4, 1998).
IN WITNESS WHEREOF, the Executive and PSI and the Company have
caused this Agreement to be executed as of the day and year first
written above.
CINERGY CORP., on behalf of itself and all of its
subsidiaries, including PSI ENERGY, INC.
By: JAMES E. ROGERS
James E. Rogers, Vice Chairman and
Chief Executive Officer
JOHN M. MUTZ
John M. Mutz
THE CINCINNATI GAS &
ELECTRIC COMPANY
DEFERRED
COMPENSATION
AND
INVESTMENT
PLAN
As Amended and Restated Effective January 1, 1995
TABLE OF CONTENTS
ARTICLE PAGE
1: INTRODUCTION 1
2: DEFINITIONS 3
3: PARTICIPATION 6
4: CONTRIBUTIONS 18
5: INVESTMENTS 32
6: ACCOUNTS 40
7: VESTING AND FORFEITURES 43
8: DISTRIBUTIONS 49
9: WITHDRAWALS DURING EMPLOYMENT 67
10: LOANS 78
11: DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES 90
12: FIDUCIARIES: AUTHORITY & RESPONSIBILITY 100
13: ADMINISTRATIVE PROVISIONS 109
14: MISCELLANEOUS PROVISIONS 119
15: DISCRIMINATION TESTING 122
16: LIMITATION ON ANNUAL ADDITIONS 137
17: AMENDMENT AND TERMINATION OF THE PLAN 143
18: TOP-HEAVY PROVISIONS 146
INDEX 154
INTRODUCTION
ARTICLE
I. : INTRODUCTION
A. History. The Cincinnati Gas & Electric
Company (CG&E) instituted the Employee Incentive
Thrift Plan in 1967. CG&E amended the plan on
October 1, 1983 for executive, supervisory,
administrative and professional employees to enable
those employees to delay the payment of some income
taxes and to choose from a wider variety of
investment options. As a result of the extensive
amendments, the plan was renamed The Cincinnati Gas &
Electric Company Deferred Compensation and Investment
Plan.
A. Purpose. The plan is designed to provide
retirement income to the executive, supervisory,
administrative and professional paid employees of
CG&E and certain death benefits to their
beneficiaries. The plan is designed to supplement
the participants' Management Retirement Plan benefits
which in turn are to be supplemented by the benefits
payable under the Social Security Act, and their
personal savings for retirement.
A. Plan Qualification. CG&E has designed this
plan to comply with the provisions of Internal Reve-
nue Code 401(a), 401(k), and 501 as a qualified
pension plan and to conform to the provisions of the
Employee Retirement Income Security Act of 1974, as
amended (ERISA). All plan provisions are subject to
change at any time to the extent necessary to retain
the qualified status of the plan or to bring it into
compliance with ERISA. The plan and trust agreement
shall be construed and interpreted in a manner that
gives effect to the intent of retaining the qualified
status of the plan.
A. Effective Date. Except as otherwise noted
with respect to a particular provision, the effective
date of the amendment and restatement of this plan is
January 1, 1995. Earlier or later amendments to this
plan become effective on the date specifically
designated in the plan document.
ADMINISTRATIVE NOTES
DEFINITIONS
ARTICLE
I. : DEFINITIONS
A. Scope of this Article. Definitions of terms
relevant to more than one article of the plan are
generally included in this Article. Definitions of
terms which are used primarily in a single article
are defined in that article.
B. List of Defined Terms. This section contains
a complete list of all defined terms used in this
plan. Each defined term is followed by a reference
to the section in which it is defined.
account
ACP
ADP
aggregation group
alternate payee
annual addition
base pay
beneficial owner
beneficiary
board of directors
break in service
CG&E
CINergy
Committee
company
company-matched contributions , ,
company-matched stock incentive contributions , ,
company stock fund
compensation
DCIP
deferred compensation contribution
defined benefit fraction
defined benefit plan
defined contribution fraction
defined contribution plan
determination date
distribution
distribution valuation date
DRO
eligible employee , ,
eligible retirement plan
employee
entry date ,
ERISA
excess aggregate contribution
excess amount
excess contribution
Fidelity Equity-Income Fund
Fidelity Intermediate Bond Fund
Fidelity Magellan Fund
Fidelity Retirement Money Market Fund
fiduciary
flipover provision ,
forfeiture ,
hardship
hardship withdrawals
highly compensated employee ,
hour of service
IRC
key employee
loan fund
mandatory distribution year ,
military leaves
money market fund ,
non-eligible employee
optional contributions
parental leaves
participant
plan
plan participation forms
plan year
present value
projected annual benefit
quarterly account statements
rollover contributions
SIP
sub-account ,
terminated participant
the PNC fund
top heavy
top heavy group
trust
trust agreement
trustee
vesting
VIR Line
window cashouts
withdrawal
year of service
year of vesting service
1% owner
5% owner
A. Board of Directors. The board of directors is
the board of directors of The Cincinnati Gas &
Electric Company.
A. CG&E. CG&E is The Cincinnati Gas & Electric
Company, the plan's sponsor, and any related company
which has adopted the plan and has employees
participating in the plan.
A. CINergy. CINergy is CINergy Corp., the name
of the parent holding company of CG&E.
A. DCIP. The DCIP is the CG&E Deferred
Compensation and Investment Plan.
A. ERISA. ERISA is the Employee Retirement
Income Security Act of 1974, as amended.
A. IRC. IRC is the Internal Revenue Code of
1986, as amended.
A. MRP. The MRP is the CG&E Management
Retirement Plan.
A. Plan. The plan is the CG&E Deferred
Compensation and Investment Plan, as set forth in
this document.
A. Plan Year. The plan year is the calendar
year.
A. SIP. The CG&E Savings Incentive Plan.
A. Related Company. A related company is any
entity which is:
1. A member of a controlled group of
corporations, as defined in IRC 1563(a),
ignoring IRC 1563(e)(C)(3), and, solely for the
purpose of , modifying the IRC 1563 (a) phrase
"at least 80%" to read "more than 50%", and
1. An unincorporated trade or business which is
under common control with The Cincinnati Gas &
Electric Company, as determined under IRC
414(c), and
1. A member of an affiliated service group as
defined in IRC 414(m), and
1. Any entity required to be aggregated with
The Cincinnati Gas & Electric Company under IRC
414(o), and
1. Any other subsidiary or affiliate of The
Cincinnati Gas & Electric Company designated by
its board of directors to be a related company.
PARTICIPATION
ARTICLE
I. : PARTICIPATION
A. Employee. An employee is any person earning a
wage or salary from CG&E, including leased
employees.
A. Participation.
1. Eligible Employee. An eligible employee is
any full-time employee on the CG&E executive,
supervisory, administrative or professional
(ESA&P) payroll who has completed a year of
service pursuant to 3.8. The term eligible
employee shall include employees who have
completed a year of service with a related
company. A year of service performed for a
related company prior to the date the
relationship with The Cincinnati Gas & Electric
Company began is included for the purpose of
determining eligibility to participate in this
plan. The term eligible employee shall include
an individual who is a citizen of the United
States and is an employee of a related company,
if that company has entered into an agreement
under IRC 3121(l).
[This sub-section should be deleted effective 08-01-
95.]
1. Eligible Employee. An eligible employee is
any full-time employee who works 30 or more hours
per week on a regular work schedule, or part-time
employee who works less than 30 hours per week on
a regular work schedule, on the CG&E executive,
supervisory, administrative or professional
(ESA&P) payroll who has completed a year of
service pursuant to 3.8. The term eligible
employee shall include employees who have
completed a year of service with a related
company. A year of service performed for a
related company prior to the date the
relationship with The Cincinnati Gas & Electric
Company began is included for the purpose of
determining eligibility to participate in this
plan. The term eligible employee shall include an
individual who is a citizen of the United States
and is an employee of a related company, if that
company has entered into an agreement under IRC
3121(l).
[This sub-section becomes effective on 08-01-95 and
should be deleted effective 01-01-96.]
1. Eligible Employee. An eligible employee is
any full-time employee who works 30 or more hours
per week on a regular work schedule, or part-time
employee who works less than 30 hours per week on
a regular work schedule, on the CG&E executive,
supervisory, administrative or professional
(ESA&P) payroll. The term eligible employee
shall include an individual who is a citizen of
the United States and is an employee of a related
company, if that company has entered into an
agreement under IRC 3121(l).
[This sub-section becomes effective on 01-01-96.]
1. Non-Eligible Employees. The following
defined classes of employees are excluded from
plan participation.
a) Co-op Employees. Co-op employees are
students working for CG&E through a
recognized cooperative education program.
a) Summer Employees. Summer employees are
students employed by CG&E during the summer.
a) Temporary Employees. Temporary
employees are employees of an employment
agency who perform services for CG&E on
specific tasks and/or for a specified time
period. Generally, temporary employees are
directly supervised by CG&E employees.
a) Part-time Employees. Part-time
employees are employees whose regular work
schedule is limited to less than 1,000 hours
in any given calendar year.
[This sub-section 4) should be deleted effective
08-01-95.]
a) Leased Employees. Leased employees are
any persons who are not on CG&E's payroll and
who have performed services for CG&E pursuant
to an agreement between CG&E and any other
person on a substantially full time basis for
a period of at least one year. The period
for which these employees are leased
employees under the terms of this plan is
limited to the term of service for which they
are assigned to CG&E.
a) Hourly-Paid Employees. Hourly paid
employees are full-time CG&E employees whose
compensation for a given payroll period is
calculated based on the number of hours
worked during the period, times an hourly
rate.
a) Weekly-Paid Employees. Weekly paid
employees are full-time CG&E employees whose
compensation for a weekly payroll period is
predetermined.
a) Independent Contractors. Independent
contractors are persons or entities with whom
CG&E contracts to complete specific tasks
without supervision by CG&E employees.
Employees of entities which are independent
contractors regarding tasks performed for
CG&E may be classified as leased employees if
they fall within the definition in above.
a) Participants in Other 401(k) Plans.
Employees who are eligible to participate in
a qualified plan which includes IRC 401(k)
features sponsored by any related company are
not eligible to participate in this plan.
1. Fail-Safe Provision. In the event that any
co-op employee, summer employee, or part-time
employee completes a year of service, that
employee shall be permitted to participate in
this plan.
[This sub-section should be deleted effective 08-
01-95.]
1. Fail-Safe Provision. In the event that any
co-op employee or summer employee completes a
year of service, that employee shall be permitted
to participate in this plan.
[This sub-section becomes effective on 08-01-95.]
A. Participant. A participant is any eligible
employee who has assets in the plan. (See also )
A. Terminated Participant. A terminated
participant is a participant who has terminated
employment with CG&E by reason of death, disability,
discharge, retirement, or resignation, but who has
assets remaining in the plan.
A. Determining Participation and Vesting. An
hour of service is the basic unit of measurement used
to determine an employee's participation and vesting
in the plan.
A. Hour of Service.
1. Current Pay. An employee earns an hour of
service for each hour for which s/he is directly
or indirectly paid or entitled to payment by CG&E
during the applicable computation period. These
hours are for either the performance of duties or
on account of a period of time during which no
duties are performed (irrespective of whether the
employment relationship is terminated) due to
vacation, holiday, jury duty, personal days,
incapacity (including disability) and lay-off. In
these cases participants will be credited with 8
hours of service for each normally scheduled
working day during which no duties are performed.
An hour of service for which no duties are
performed shall be calculated pursuant to
2530.200b-2 of the U.S. Department of Labor
regulations, which are incorporated herein by
reference.
1. Back Pay. A participant earns an hour of
service for each hour for which back pay,
irrespective of mitigation of damages, has been
either awarded or agreed to by CG&E. The same
hours of service shall not be credited under both
sub-section above and under this sub-section.
These hours will be credited to the employee for
the computation period or periods to which the
award or agreement pertains, rather than the
computation period in which the award, agreement,
or payment is made.
1. Salaried Employees. Salaried employees are
employees whose pay is not determined on the
basis of certain amounts for each hour worked
during a given period and whose hours are not
required to be counted and recorded by any
federal law. Salaried employees shall be
credited with 8 hours of service per day in which
the employee would be credited with an hour of
service pursuant to and above, provided that
the employee is credited with no less than 1,000
hours of service per computation period.
1. Effect of Leaves of Absence. Generally, an
employee will not earn hours of service while
s/he is on a leave of absence. However, hours of
service credited during certain military leaves
and parental leaves under the provisions of
also apply for purposes of determining
eligibility to participate in the plan.
1. Consistent Personnel Practices. All leaves
of absence affecting accreditation of service
under this plan shall be authorized by CG&E in
accordance with standard personnel policies
applied in a nondiscriminatory manner to all
employees similarly situated.
A. Limitation Upon Earning Hours of Service.
Hours of service earned by CG&E employees generally
not eligible to participate in the plan shall be
credited, but only for determining the vesting rights
of these employees upon their change of status to
plan participants. The provisions of and govern-
ing transfers of participants and plan assets to and
from the SIP are an exception to the general rule.
A. Year of Service. A year of service is 12
consecutive months of employment with CG&E, beginning
with the first hour of service, during which the
employee completes at least 1,000 hours of service.
Eligible employees who do not complete a year of
service by the first anniversary of their employment
commencement date shall be credited with a year of
service if they complete at least 1,000 hours of
service during a period of 12 consecutive months
beginning with the first, and, if necessary, any
subsequent anniversary of their employment
commencement date.
[This section should be deleted effective 01-01-96.]
A. Year of Service. A year of service is 12
consecutive months of employment with CG&E, beginning
with the first hour of service, during which a co-op
employee or summer employee completes at least 1,000
hours of service. Co-op employees or summer
employees who do not complete a year of service by
the first anniversary of their employment
commencement date shall be credited with a year of
service if they complete at least 1,000 hours of
service during a period of 12 consecutive months
beginning with the first, and, if necessary, any
subsequent anniversary of their employment
commencement date.
[This section becomes effective on 01-01-96.]
A. Break in Service. A break in service is any
period of 12 consecutive months beginning on the
employee's employment commencement date, and on any
subsequent anniversary of that date, during which the
employee completes less than 501 hours of service.
A. Commencement of Participation. Except with
respect to the company-matched stock incentive
contributions (see ), an eligible employee must file
a completed set of plan participation forms with the
Committee to become a participant. See also .
[This section should be deleted effective 01-01-96.]
A. Commencement of Participation. An eligible
employee must notify the Committee of his or her
intent to participate in the plan, except with
respect to the company-matched stock incentive
contributions (see and ), through the use of the
voice or other electronic response system or other
media authorized by CG&E.
[This section becomes effective on 01-01-96.]
A. Entry Date. The entry date is the date an
eligible employee becomes a participant in the plan.
The entry date is the first monthly or semi-monthly
pay date of the month that is at least 30 days
following the date the Committee receives the plan
participation forms from the eligible employee.
[This section should be deleted effective 01-01-96.]
A. Entry Date. The entry date is the date an
eligible employee becomes a participant in the plan.
The entry date is the date an eligible employee first
completes an hour of service.
[This section becomes effective on 01-01-96.]
A. Plan Participation Forms. Plan participation
forms are the set of documents which the eligible
employee must file with the Committee in order to
participate in the plan, except with respect to the
company-matched stock incentive contributions. (See
). The forms are:
1. The plan participation agreement ; and
1. The beneficiary form.
[This section should be deleted effective 01-01-96.]
A. Beneficiary. The beneficiary is the person or
entity designated in writing by a participant to
receive plan benefits after the participant's death.
(See and )
A. Beneficial Owner. The beneficial owner is the
owner or beneficiary of an account with the plan. A
beneficial owner may be a participant, a terminated
participant, a participant's spouse, or an alternate
payee.
A. Beneficiary Designation. A participant must
designate a beneficiary. Married participants must
designate their spouse as beneficiary, unless the
participant's spouse consents to someone else being
named as beneficiary. The consent must be in writing
on the form approved by the Committee and the
spouse's signature must be notarized. The form must
be filed with the Committee to become effective. A
consenting spouse may withdraw consent by written
notice to the Committee, notarized in the same manner
as the consent. Once the retraction of consent has
been filed with and accepted by the Committee, the
spouse is reinstated by plan operation as the
participant's beneficiary.
A. Transfer to Weekly or Hourly Payroll. A
participant who transfers to the weekly or hourly
payroll is no longer eligible to participate in the
plan. All of the participant's contributions to the
plan shall cease, effective with his or her last pay
date as an employee on the executive, supervisory,
administrative and professional payroll.
A. Transfers From The Weekly or Hourly Payroll.
1. Transfers of SIP Accounts. The trustee
shall transfer to this plan the SIP account of
any employee who becomes eligible for
participation. The transfer shall be made as
soon as possible following the date that the
employee becomes eligible. The transferred
account shall be allocated to the sub-accounts
and the investment funds in the manner most
similar to the participant's SIP sub-accounts.
1. Continuing Contributions. The contribution
percentages and investment directions of any SIP
participant who becomes eligible for
participation in this plan will continue as
contributions and investment directions to this
plan.
A. Participatory Restrictions on the Activities
of Terminated Participants. Subject to the
limitations of , and of this plan, a terminated
participant's account will remain in this plan until
s/he takes a distribution. A terminated participant
may not contribute to the plan, withdraw from an
optional sub-account, or obtain hardship withdrawals
or loans. A terminated participant may not
reallocate past contributions except in conjunction
with a distribution.
[This section should be deleted effective 08-01-95.]
A. Participatory Restrictions on the Activities
of Terminated Participants. Subject to the
limitations of , , , , and of this plan, a
terminated participant's account will remain in this
plan until s/he takes a distribution. A terminated
participant may not contribute to the plan, withdraw
from an optional sub-account, or obtain hardship
withdrawals or loans.
[This section becomes effective on 08-01-95.]
A. Participation of Rehired Participants.
1. Non-Vested Participants.
a) 5 or Fewer Breaks in Service. Any
terminated participant in this plan or in the
SIP, who is not yet vested in company-matched
contributions or company-matched stock
incentive contributions under this plan or
the SIP and who is subsequently rehired on
the executive, supervisory, administrative
and professional payroll before the
completion of 5 consecutive breaks in
service, becomes an eligible employee on his
or her date of rehire. See regarding
restoration of the company-matched sub-
account.
a) More than 5 Breaks in Service. If the
individual described in sub-section above is
rehired after incurring 5 consecutive breaks
in service, eligibility will be subject to
the requirements of and of this plan,
beginning with the date of rehire.
1. Vested Participants. Any terminated
participant in this plan or in the SIP, who is
vested in company-matched contributions or
company-matched stock incentive contributions
under this plan or the SIP and who is
subsequently rehired on the executive,
supervisory, administrative and professional
payroll becomes an eligible employee on his or
her reemployment date.
[This section should be deleted effective 01-01-96.]
A. Participation of Rehired Participants. Any
terminated participant in this plan or the SIP who is
subsequently rehired on or after January 1, 1996, on
the executive, supervisory, administrative and
professional payroll becomes an eligible employee on
his or her reemployment date.
[This section becomes effective on 01-01-96.]
CONTRIBUTIONS
ARTICLE
I. : CONTRIBUTIONS
A. Base Pay.
1. Definition. Base pay is the annual salary
paid by CG&E to a participant determined as of
each pay period. Base pay excludes bonuses,
shift differentials, overtime, incentive pay,
moving allowances, living and similar allowances,
and imputed income. Base pay includes the amount
of all elective contributions made by CG&E on
behalf of the participant pursuant to salary
reduction agreements, if the amount is not
included in the gross income of the participant
under IRC 125. Base pay includes deferred
compensation contributions made under this plan.
[This sub-section should be deleted effective 07-01-
96.]
1. Definition. Base pay is the annual salary
paid by CG&E to a participant determined as of
each pay period. Base pay excludes bonuses,
shift differentials, incentive pay, moving
allowances, living and similar allowances, and
imputed income. Base pay includes the amount of
all elective contributions made by CG&E on behalf
of the participant pursuant to salary reduction
agreements, if the amount is not included in the
gross income of the participant under IRC 125.
Base pay includes deferred compensation
contributions made under this plan. For purposes
of determining deferred compensation and optional
contributions, base pay includes overtime. For
purposes of determining company-matched
contributions and company-matched stock incentive
contributions, base pay excludes overtime.
[This sub-section becomes effective on 07-01-96 and
should be deleted effective 01-01-97.]
1. Definition. Base pay is the annual salary
paid by CG&E to a participant determined as of
each pay period. Base pay excludes shift
differentials, incentive pay, moving allowances,
living and similar allowances, and imputed
income. Base pay includes the amount of all
elective contributions made by CG&E on behalf of
the participant pursuant to salary reduction
agreements, if the amount is not included in the
gross income of the participant under IRC 125.
Base pay includes deferred compensation
contributions made under this plan. For purposes
of determining deferred compensation and optional
contributions, base pay includes overtime and
bonuses. For purposes of determining company-
matched contributions and company-matched stock
incentive contributions, base pay excludes
overtime, but includes bonuses.
[This sub-section becomes effective on 01-01-97.]
1. Use of Base Pay. Base pay shall be taken
into account only while an employee is a
participant in the plan.
1. Limitation on Base Pay. Base pay taken into
account for determining contributions under the
plan shall not exceed $150,000, as adjusted by
the Commissioner of the Internal Revenue Service
for increases in the cost of living in accordance
with IRC 401(a)(17)(B).
1. Use of Base Pay Limitation. In determining
the base pay of a participant for the purpose of
determining the participant's accruals under this
plan, the rules of IRC 414(q)(6) shall generally
apply. However, the term "family" shall include
only the spouse of the participant and any lineal
descendants of the participant who have not
attained age 19 prior to the close of the plan
year. If, as a result of this application, the
adjusted $150,000 limitation is exceeded, then
the limitation shall be prorated among the
affected individuals in proportion to each such
individual's base pay prior to the application of
the limitation.
[This sub-section should be deleted effective 01-01-
97.]
A. Contributions. The plan will accept four
types of contributions:
1. Deferred Compensation Contributions. A
deferred compensation contribution is the amount
by which a participant directs CG&E to reduce his
or her base pay and which CG&E is obligated to
contribute to the plan. Participants may elect to
have their base pay reduced by executing a plan
participation agreement. CG&E will then make a
contribution to the plan in an amount equal to
the participant's selected reduction each pay
period. The amount reduced, expressed in 1/2%
increments, shall not exceed 15% of the
participant's base pay.
1. Optional Contributions. An optional
contribution is the participant's voluntary
contribution made to the plan through payroll
deduction after taxes have been withheld.
Participants may choose to make contributions to
the plan each pay period through payroll
deduction. These optional contributions,
expressed in 1/2% increments, are deducted after
taxes have been withheld. The amount of the
optional contribution together with the deferred
compensation contribution, shall not exceed 15%
of the participant's base pay.
1. Company-Matched Contributions. The company-
matched contribution is the amount contributed by
CG&E to the participant's plan account from its
earnings based upon the participant's deferred
compensation contributions and/or optional
contributions, as applicable. For each pay
period of the participant, CG&E will contribute
out of its accumulated earnings an amount,
together with forfeitures, equal to 55% of each
participant's deferred compensation and optional
contributions up to and including 5% of the
participant's base pay. Participants'
contributions exceeding 5% of base pay will not
be matched.
1. Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy stock
equal in value to between $0.10 and $0.30 for
each dollar of a participant's deferred
compensation and optional contributions up to and
including 4% of the participant's base pay for
that year. Participants' contributions exceeding
4% of base pay will not be matched. If a
participant did not make any deferred
compensation or optional contributions during the
year, s/he may still receive a company-matched
stock incentive contribution based on the
hypothetical assumption that s/he made deferred
compensation or optional contributions of 1% of
his or her base pay for that year.
[This section should be deleted effective 01-01-96.]
A. Contributions. The plan will accept five types
of contributions:
1. Deferred Compensation Contributions. A
deferred compensation contribution is the amount
by which a participant directs CG&E to reduce his
or her base pay and which CG&E is obligated to
contribute to the plan. Participants may elect to
have their base pay reduced by informing the
Committee through the voice or electronic
response system or other media authorized by
CG&E. CG&E will then make a contribution to the
plan in an amount equal to the participant's
selected reduction each pay period. The amount
reduced, expressed in 1/2% increments, shall not
exceed 15% of the participant's base pay.
1. Optional Contributions. An optional
contribution is the participant's voluntary
contribution made to the plan through payroll
deduction after taxes have been withheld.
Participants may choose to make contributions to
the plan each pay period through payroll
deduction. These optional contributions,
expressed in 1/2% increments, are deducted after
taxes have been withheld. The amount of the
optional contribution together with the deferred
compensation contribution, shall not exceed 15%
of the participant's base pay.
1. Company-Matched Contributions. The company-
matched contribution is the amount contributed by
CG&E to the participant's plan account from its
earnings based upon the participant's deferred
compensation contributions and/or optional
contributions, as applicable. For each pay
period of the participant, CG&E will contribute
out of its accumulated earnings an amount,
together with forfeitures, equal to 55% of each
participant's deferred compensation and optional
contributions up to and including 5% of the
participant's base pay. Participants'
contributions exceeding 5% of base pay will not
be matched.
[This sub-section should be deleted effective 01-01-
97.]
1. Company-Matched Contributions. The company-
matched contribution is the amount contributed by
CG&E to the participant's plan account from its
earnings based upon the participant's deferred
compensation contributions. For each pay period
of the participant, CG&E will contribute out of
its accumulated earnings an amount, together with
forfeitures, equal to 60% of each participant's
deferred compensation contributions up to and
including 5% of the participant's base pay.
Participants' contributions exceeding 5% of base
pay will not be matched.
[This sub-section becomes effective on 01-01-97.]
1. Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy stock
between $0.10 and $0.30 for each dollar of a
participant's deferred compensation and optional
contributions up to and including 4% of the
participant's base pay for that year.
Participants' contributions exceeding 4% of base
pay will not be matched. If a participant did
not make any deferred compensation or optional
contributions during the year, s/he may still
receive a company-matched stock incentive
contribution based on the hypothetical assumption
that s/he made deferred compensation or optional
contributions of 1% of his or her base pay for
that year.
[This sub-section should be deleted effective 01-01-
97.]
1. Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy stock
between $0.20 and $0.40 for each dollar of a
participant's deferred compensation contributions
up to and including 5% of the participant's base
pay for that year. Participants' deferred
compensation contributions exceeding 5% of base
pay will not be matched. If a participant did
not make any deferred compensation contributions
during the year, s/he may still receive a
company-matched stock incentive contribution
based on the hypothetical assumption that s/he
made deferred compensation contributions of 1% of
his or her base pay for that year.
[This sub-section becomes effective on 01-01-97.]
1. Rollover Contributions. A rollover
contribution is the amount contributed by a
participant to his or her plan account
attributable to a distribution from a retirement
plan of a former employer. A participant must
make a written request to the Committee to make a
rollover contribution. The request must include
a statement detailing the type of property to be
rolled over and that such property is an eligible
rollover contribution. If the Committee so
permits, the participant may transfer the amount
of the rollover contribution to the trustee.
[This section becomes effective on 01-01-96.]
A. Contributions Due to Military Leave.
Notwithstanding any provision of this plan to the
contrary, contributions with respect to qualified
military service will be provided in accordance with
IRC 414(u).
A. Contributions from Sources other than Base Pay.
1. Settlement of Disputes. Prior to the time a
participant becomes entitled to receive a lump
sum payment of wages in settlement of a dispute
with CG&E, the participant may direct
contributions to this plan from the lump sum
payment in the same percentages and allocation to
funds as are in effect at the time when the lump
sum amount is paid. CG&E may also make
company-matched contributions and/or company-
matched stock incentive contributions on the
settlement amount.
1. Lump Sum Payment in Lieu of Salary. If a
class of participants is designated by CG&E to
receive certain pay in the form of a lump sum,
the determination of whether that special pay may
be used as base pay for making contributions to
this plan shall be determined by CG&E. CG&E may
also make a determination whether it will make
company-matched contributions and/or company-
matched stock incentive contributions for each
payment of a special lump sum. In the event that
the special pay is permitted to be used as base
pay for plan contributions, those contributions
must be in the same percentages designated by the
participant and in effect at the time when the
lump sum amount is paid.
A. Changing the Percentage of Contributions.
1. Participants. A participant may change the
percentage of deferred compensation
contributions or optional contributions four
times per year.
[This sub-section should be deleted effective
01-01-96.]
1. Participants. A participant may change the
percentage of deferred compensation contributions
and/or optional contributions at anytime through
the voice or other electronic response system or
other media authorized by CG&E.
[This sub-section becomes effective on 01-01-96.]
1. Other Beneficial Owners. Terminated
participants, beneficiaries and alternate payees
may not contribute to this plan.
A. Limitation on Deferred Compensation
Contributions.
1. Maximum Amount. A participant's deferred
compensation contributions shall not exceed the
maximum deferred amount in effect for that tax
year pursuant to IRC 402(g) . The maximum
amount for 1995 is $9,240 and is adjusted
annually as announced by the Internal Revenue
Service.
1. Flipover Provision. At the time the IRC
402(g) limit is reached for the amount being
deferred by a participant, the same percentage
contribution shall be continued as an optional
contribution for that participant for the
remainder of the year. These optional
contributions will be allocated to investment
funds in accordance with the most recent
directions filed by the participant regarding
optional contributions. If the participant has
never filed an Allocation of Future Contributions
form including directions for optional
contributions, the contributions will be invested
in the money market fund until the directions for
optional contributions are filed with the
Committee.
[This sub-section should be deleted effective 01-01-96.]
1. Flipover Provision. At the time the IRC
402(g) limit is reached for the amount being
deferred by a participant, the same percentage
contribution shall be continued as an optional
contribution for that participant for the
remainder of the year. These optional
contributions will be allocated to investment
funds in accordance with the most recent
directions given by the participant through the
voice or other electronic response system or
other media authorized by CG&E regarding optional
contributions. If the participant never
furnished such directions, the contributions will
be invested in the money market fund until the
directions for optional contributions are
provided by the participant to the Committee.
[This sub-section becomes effective on 01-01-96.]
1. Suspended Participants. When a participant
affected by this section is under suspension of
optional contributions under below, the or
flipover provisions will not be effective.
When the limit is reached, all contributions by
the suspended participant shall stop.
1. Excess Deferred Compensation Contributions.
If a participant files a plan participation
agreement which causes CG&E to inadvertently
defer more than is permitted in above, the
excess deferred compensation contribution shall
be returned to the participant.
[This sub-section should be deleted effective 01-01-
96.]
1. Excess Deferred Compensation Contributions.
If a participant informs the Committee through
the voice or other electronic response system or
other media authorized by CG&E which causes CG&E
to inadvertently defer more than is permitted in
above, the excess deferred compensation
contribution shall be returned to the
participant.
[This sub-section becomes effective on 01-01-96.]
A. Voluntary Suspension of Contributions.
1. General Rule. Participants may suspend
either their deferred compensation or optional
contributions, or both by filing an application
to suspend contributions with the Committee.
1. Effective Date. Voluntary suspensions shall
become effective on a pay date no later than 30
days after the application to suspend
contributions was filed with the Committee.
1. Period of Suspension. Participants may not
make the suspended type of contributions to the
plan for at least 12 months from the effective
date of the suspension.
1. Makeup of Contributions. Participants may
not make up suspended contributions.
[This section should be deleted effective 01-01-96.]
A. Involuntary Suspension of Contributions.
1. Hardship Withdrawals. Participants who have
obtained a hardship withdrawal shall be
automatically suspended from making deferred or
optional contributions for a period of 12 months
beginning from the date of the distribution of
the hardship withdrawal.
1. Leaves of Absence. Contributions to the
plan are automatically suspended during a
participant's leave of absence, because the
participant earns no base pay from which to
contribute. When the participant returns to work
for CG&E, contributions shall automatically
resume with the first pay check in accordance
with the terms of the most recent plan
participation agreement.
[This sub-section should be deleted effective 01-01-
96.]
1. Leaves of Absence. Contributions to the
plan are automatically suspended during a
participant's leave of absence, because the
participant earns no base pay from which to
contribute. When the participant returns to work
for CG&E, contributions shall automatically
resume with the first pay check in accordance
with the terms most recently provided by the
participant on the voice or other electronic
response system or other media authorized by
CG&E.
[This sub-section becomes effective on 01-01-96.]
A. Resumption of Contributions. Upon the
expiration of the required period of suspension,
participants may resume making contributions to the
plan by filing a resumption of contributions form
with the Committee. The resumption will be effective
on the first pay date of the month no later than 30
days after the date the resumption of contributions
form was filed with the Committee. Contributions
will resume at the same percentages of base pay as
were in effect at suspension. If the resumption of
contributions form was filed during the period of
suspension, it will become effective on the first pay
date of the month following the period of suspension.
[This section should be deleted effective 01-01-96.]
A. Resumption of Contributions. Upon the
expiration of the required period of suspension,
participants may resume making contributions to the
plan by informing the Committee through the voice or
other electronic response system or other media
authorized by CG&E. The resumption will be effective
on the first pay date of the month no later than 30
days after the date the participant informs the
Committee of his or her intent to resume
contributions. Contributions will resume at the same
percentages of base pay as were in effect at
suspension. If the participant informs the Committee
during his or her suspension, the resumption of
contributions will become effective on the first pay
date of the month following the period of suspension.
[This section becomes effective on 01-01-96.]
A. Remittance of Contributions. CG&E will
generally forward all deferred compensation,
optional, and company-matched contributions to the
trustee on the pay date for which the contributions
are effective. In any event, CG&E must transmit
these contributions promptly after the end of the
month in which the contributions are taken.
A. Return of Company-Matched Contributions and
Company-Matched Stock Incentive Contributions.
1. General Rule. Except as provided in , , ,
and , and in this section, the assets of the plan
shall never revert to or be used by CG&E.
a) Mistaken Contributions. Company-matched
contributions and company-matched stock
incentive contributions made to the trust by
reason of a mistake of fact may be returned
to CG&E within one year after the payment of
the contribution.
a) Non-deductible Contributions.
Company-matched contributions and company-
matched stock incentive contributions made to
the plan which are deemed non-deductible
pursuant to IRC 404 shall be returned to
CG&E within one year after the disallowance
of the deduction. If any portion of the
non-deductible amount is from a participant's
deferred compensation contribution, that
amount shall be returned to the participant.
INVESTMENTS
ARTICLE
I. : INVESTMENTS
A. Principles of Investment Fund Selection. The
Committee will establish and direct the trustee to
maintain in the trust at least three investment
funds, which collectively are intended to comply
with ERISA 404 c) and the regulations thereunder.
A. Selection of Investment Funds. One of the
investment funds will be the company stock fund. The
Committee will select the other investment funds,
following the principles of . If a fund is added or
deleted, beneficial owners will be given the
opportunity to reallocate their past contributions
and redirect their sub-accounts among the authorized
investment funds.
A. Investment Funds in the Plan. The following
are the investment funds maintained in the plan
trust:
1. Company Stock Fund. The company stock fund
is a unitized fund which consists largely of
shares of CINergy common stock, and a
proportionately small amount of cash. It has
been available (formerly with CG&E common stock)
since the plan was established on October 1,
1983. The stock will be purchased at fair market
value on the open market or from CINergy through
the issuance of authorized but previously
unissued shares at the option of CINergy. The
stock may also be obtained through the exercise
of stock rights. Stock received by the trustee
as a stock dividend distribution or right is
reflected by an increase in the unit value.
1. Fidelity Magellan Fund. The Fidelity
Magellan Fund seeks capital appreciation by in-
vesting primarily in common stock and securities
convertible into common stock. It was added as
an additional investment option on 10-01-92.
1. Fidelity Equity-Income Fund. The Fidelity
Equity- Income Fund seeks reasonable income by
investing primarily in income-producing equity
securities. It has been available since the
plan was established on October 1, 1983.
1. Fidelity Intermediate Bond Fund. The
Fidelity Intermediate Bond Fund seeks to obtain a
high level of current income by investing
primarily in high and upper-medium grade
fixed-income obligations. It has been available
since the plan was established on October 1,
1983.
1. The PNC Fund (Sower Money Market Fund -
Money Market Portfolio). The investment
objective of this portfolio is to provide as high
a level of current interest income as is
consistent with maintaining liquidity and
stability of principal. This fund is called
the money market fund throughout this plan. A
money market fund, but not necessarily this
particular fund, has been available since the
plan was established on October 1, 1983.
[This sub-section should be deleted effective 01-01-96.]
1. Fidelity Retirement Money Market Fund. The
investment objective of this portfolio is to
provide as high a level of current interest
income as is consistent with maintaining
liquidity and stability of principal. This fund
is called the money market fund throughout this
plan. A money market fund, but not necessarily
this particular fund, has been available since
the plan was established on October 1, 1983.
[T
hi
s
su
b-
se
ct
io
n
be
co
me
s
ef
fe
ct
iv
e
on
01
- -
01
- -
96
.]
1. Loan Fund. The loan fund consists of all
promissory notes securing plan loans to
participants. The loan fund is administered as
described in Article .
A. Vested Interest Response Line (VIR Line). The
vested interest response line is the telephone line
established and maintained by the trustee for use by
participants to access their account information and
to effectuate certain transactions affecting their
accounts. The Vested Interest Response Line is
referred to as the VIR Line throughout this plan.
A. Participant Investment Elections. A
participant selects investment funds for his or her
future contributions by using the investment election
menu on the VIR Line. Investments must be made in
whole percentage increments.
A. Investment of Contributions. The trustee
shall invest the participants' contributions from
CG&E in the participants' current designated
investment selections. If the trustee has no record
of a current investment selection for a participant's
contribution, it shall invest the contribution in the
money market fund. The trustee shall invest all
company-matched contributions and company-matched
stock incentive contributions in the company stock
fund.
[This section should be deleted effective 01-01-96.]
A. Investment of Contributions. The trustee shall
invest the participants' contributions from CG&E in
the participants' current designated investment
selections. If the trustee has no record of a
current investment selection for a participant's
contribution, it shall invest the contribution in the
money market fund. The trustee shall invest all
company-matched contributions and company-matched
stock incentive contributions in the company stock
fund. However, a participant who has reached age
50 may elect to invest his or her company-matched
contributions and company-matched stock incentive
contributions in any one or more of the investment
funds as s/he directs by informing the Committee
through the voice or other electronic response system
or other media authorized by CG&E. Allocations must
be made in whole percentages.
[This section becomes effective on 01-01-96.]
A. Initial Allocation of Deferred and Optional
Contributions. A participant's deferred compensation
and/or optional contributions will be allocated to
any one or more of the investment funds as s/he
directs by filing an allocation of future
contributions form with the Committee. Allocations
must be made in any whole percentage. Allocations
will apply to all contributions made on or after the
entry date (see ). Participants' contributions will
be invested in the investment funds as of the
valuation date coinciding with or next following the
date on which they are received by the trustee. If
the allocation form is not yet received by the
trustee when it must allocate contributions, the
contributions will be invested in the money market
fund, until the directions for allocations are filed
with the Committee.
[This section should be deleted effective 01-01-96.]
A. Initial Allocation of Deferred and Optional
Contributions. A participant's deferred compensation
and/or optional contributions, collectively, will be
allocated to any one or more of the investment funds
as s/he directs by informing the Committee through
the voice or other electronic response system or
other media authorized by CG&E. Allocations must be
made in any whole percentage. Allocations will apply
to all contributions made on or after the entry date
(see ). Participants' contributions will be
invested in the investment funds as of the valuation
date coinciding with or next following the date on
which they are received by the trustee. If the
trustee has not yet received the participant's
investment directions when it must allocate
contributions, the contributions will be invested in
the money market fund, until the directions for
allocations are provided by the participant to the
Committee.
[This section becomes effective on 01-01-96.]
A. Investment Fund Transfers of Current Balances.
A participant can select reallocation of his or her
current account balance in different investment funds
and/or different percentages of allocation by using
the fund transfers menu on the VIR Line.
Investments must be made in whole percentage
increments. A participant may elect or change
investment funds and/or the percentages in which
contributions will be allocated once per quarter.
[This section should be deleted effective 08-01-95.]
A. Investment Fund Transfers of Current Balances.
Except for participants or terminated participants
whose accounts are frozen due to pending domestic
relations orders, any participant or terminated
participant with an account balance under the plan
can select reallocation of his or her current account
balance in different investment funds and/or
different percentages of allocation by using the fund
transfers menu on the VIR Line. Investments must
be made in whole percentage increments. A
participant or terminated participant may elect or
change investment funds and/or the percentages in
which allocation will be allocated once per quarter.
[This section becomes effective on 08-01-95 and should be
deleted effective 01-01-96.]
A. Investment Fund Transfers of Current Balances.
Except for participants or terminated participants
whose accounts are frozen due to pending domestic
relations orders, any participant or terminated
participant with an account balance under the plan
can select reallocation of his or her current account
balance in different investment funds and/or
different percentages of allocation by using the fund
transfers menu on the VIR Line. Investments must
be made in whole percentage increments. A
participant or terminated participant may elect or
change investment funds and/or the percentages in
which allocations will be allocated at anytime.
[This section becomes effective on 01-01-96.]
A. Risk of Loss. The participant (or terminated
participant) bears the effect for all gain or loss in
market value of the investments selected for his or
her plan assets. The participant (or terminated
participant) also bears the effect of any market
fluctuations which occur between the time his or her
instructions are delivered to the Committee or the
trustee and the time that the instructions are
effectuated. The trustee, the Committee, the
individual Committee members, and CG&E will not be
responsible or liable to participants (or terminated
participants) for the negative or positive effect of
market fluctuations or reasonable delay in processing
transactions upon their accounts.
A. Voting CINergy Stock.
1. Participation Instructions. The trustee
shall vote the shares of CINergy stock credited
to the accounts of beneficial owners in
accordance with the instructions given by the
beneficial owner. If the instructions are not
received by the trustee by a date the trustee
designates prior to any meeting of shareholders
of CINergy, the trustee shall vote such
uninstructed shares at its discretion.
1. Trustee Discretion. The trustee shall vote
at its discretion the CINergy stock held in the
company stock fund which have not been allocated
to beneficial owners' accounts as of the record
date of any meeting of shareholders of CINergy.
ACCOUNTS
ARTICLE
I. : ACCOUNTS
A. Accounts and Sub-accounts.
1. Account. Each beneficial owner's total
assets in the plan shall be maintained in a
separate account. The account shall reflect all
transactions regarding the beneficial owner's
assets. The assets in an account shall be
allocated among sub-accounts.
1. Sub-account. Each account must include one
or more of the following sub-accounts:
a) a deferred compensation sub-account ;
a) an optional sub-account; and
a) a company-matched sub-account.
[This sub-section should be deleted effective 01-01-96.]
1. Sub-account. Each account must include one
or more of the following sub accounts:
1) a deferred compensation sub-account;
2) an optional sub-account;
3) a company-matched sub-account; and
4) a rollover sub-account.
[Thi
s
sub-
sect
ion
beco
mes
effe
ctiv
e on
01-
01-
96.]
1. A
ccoun
t
Value
.
Each
parti
cipan
t's
accou
nt is
value
d
daily
.
The
value
of an
accou
nt
refle
cts
the
numbe
r of
units
of
each
inves
tment
fund
owned
by
the
parti
cipan
t and
is
based
upon
the
unit
price
of
each
fund.
Both
the
units
owned
and
the
price
refle
ct a
close
of
busin
ess
valua
tion.
2. Investment Ownership. The trustee owns
all plan assets as a fiduciary on behalf of the
beneficial owners .
A. Quarterly Statements. The trustee shall
prepare an individual statement of account for each
beneficial owner on a quarterly basis. The
statements will reflect the status of the account and
sub-accounts of the beneficial owner. The trustee
shall mail the statements to the beneficial owners as
soon as practical after each quarter end.
VESTING AND FORFEITURES
ARTICLE
I. : VESTING AND FORFEITURES
A. Vesting. The process by which an employee
becomes entitled to a nonforfeitable benefit under
this plan.
A. Year of Vesting Service. Each period of 12
consecutive months of employment, beginning with the
date on which the employee first performed an hour of
service for CG&E or any related company, during which
he or she completes at least 1,000 hours of service.
The calculation period begins on the date (and
subsequent anniversaries of that date) the employee
first performed an hour of service for CG&E or a
related company. Hours of service prior to the date
on which the relationship to the Cincinnati Gas &
Electric Company began are not included for the
purpose of vesting under this plan. The hours of
service of non-participating employees, leased
employees and co-ops are included in determining
their years of vesting service.
[This section should be deleted effective 01-01-96.]
A. Vested Benefits.
1. Vested Accrued Benefit. The portion of a
participant's account available for distribution
to the participant upon termination of employment
with CG&E.
1. Deferred Compensation Sub-account and
Optional
Sub-account. Participants are immediately vested
in their deferred compensation sub-accounts and
optional sub-accounts.
[This sub-section should be deleted effective 01-01-
96.]
1. Deferred Compensation Sub-account, Optional
Sub-account and Rollover Sub-account.
Participants are immediately vested in their
deferred compensation sub-accounts, optional sub-
accounts and rollover sub-accounts.
[This sub-section becomes effective on 01-01-96.]
1. Company-Matched Sub-account. Participants
are vested in their company-matched sub-accounts
upon occurrence of any of the following:
a) termination of this plan,
a) partial termination of this plan with
respect to affected participants,
a) the participant attains 5 years of
vesting service,
a) the participant dies,
a) the participant becomes disabled,
a) the participant retires under the
MRP,
a) the participant is permanently laid
off for lack of work,
a) the participant attains age 65.
[This sub-section should be deleted effective 01-01-96.]
1. C
omp
any
- -
Mat
che
d
Sub
- -
acc
oun
t.
Par
tic
ipa
nts
who
are
cre
dit
ed
wit
h
one
hou
r
of
ser
vic
e
on
or
aft
er
Jan
uar
y 1
,
199
6
are
imm
edi
ate
ly
ves
ted
in
the
ir
com
pan
y-
mat
che
d
sub
- -
acc
oun
ts.
[This sub-section becomes effective on 01-01-96.]
A. Vesting of Former Employees.
1. Impact of Breaks in Service. Non-vested
former employees who resume employment will be
credited for vesting purposes with their prior
years of service so long as the number of
consecutive breaks in service (see ) incurred by
the employees do not exceed five.
[This sub-section should be deleted effective 01-01-2001.]
1. Impact of Breaks in Service. Terminated
participants who are credited with an hour of
service on or after January 1, 1996 are not
subject to the break in service rules provided in
.
[This sub-section becomes effective on 01-01-96.]
1. Immediate Vesting. Former employees or
participants who were vested in SIP or DCIP prior
to termination of employment will retain or
immediately obtain vested status in this plan.
A. Special Vesting Rules.
1. Parental Leaves. For the purpose of deter-
mining a participant's years of vesting service,
a non-vested participant who is granted a leave
of absence for the purpose of giving birth to
and/or nurturing a newborn, or adopting a child,
will be granted credit for 190 hours of vesting
service per month, not to exceed a total of 501
hours, during that leave of absence. Hours of
vesting service will be granted in the year in
which the absence commences to the extent
necessary to prevent the employee from incurring
a break in service for vesting purposes. To the
extent the hours of vesting service are not
needed to prevent a break in vesting service, the
employee will be credited with the hours of
vesting service in the immediately following year
to prevent the occurrence of a break in vesting
service during that year.
1. Military Leaves. Notwithstanding any
provision of this plan to the contrary, credit
for vesting service with respect to qualified
military service will be provided in accordance
with IRC 414(u) .
A. Forfeitures and Restorations.
1. Forfeiture. A participant who terminates
employment with CG&E and is not vested in his or
her company-matched sub-account will forfeit the
amount in the company-matched sub-account. The
participant shall be deemed to have received a
distribution of zero for the company-matched
account. The forfeiture will occur upon the
participant's termination of employment with
CG&E. This forfeiture may be restored in
accordance with below.
[This sub-section should be deleted effective 01-01-2001.]
1. Forfeiture. A participant's benefit will be
forfeited only in accordance with if the
participant is credited with an hour of service
on or after
January 1, 1996.
[This sub-section becomes effective on 01-01-96.]
1. Use of Forfeitures. Forfeitures shall be
used to reduce the company-matched contributions
which are to be made in accordance with , and
.
1. Restoration of Forfeitures. A terminated
participant, described in above, who resumes
employment with CG&E before incurring 5
consecutive breaks in service shall have his or
her company-matched sub-account restored, without
dividends earned in the interim.
[This sub-section should be deleted effective 01-01-96.]
1. Restoration of Forfeitures. A terminated
participant who is credited with an hour of
service on or after January 1, 1996, shall have
his or her benefit restored in accordance with .
[This sub-section becomes effective on 01-01-96.]
1. Source of Restorations. Restorations of
the company-matched sub-account shall be made
from forfeitures during the plan year of the
restoration. If there are insufficient
forfeitures to cover restorations in any given
plan year, CG&E shall make additional
contributions to cover the deficit.
DISTRIBUTIONS
ARTICLE
I. : DISTRIBUTIONS
A. Distribution. A distribution is the delivery
of all of the vested assets in a plan account to its
beneficial owner.
A. Eligibility for Distribution.
1. Termination. Terminated participants are
eligible to receive distribution upon termination
of employment for any reason .
1. Disability. Participants and terminated
participants are eligible to receive distribution
as of the dates on which they become eligible to
receive disability benefits under the MRP if
they:
a) have been granted disability benefits
by the Social Security Administration, or
a) are determined to be disabled by
CG&E's medical director.
[This sub-section should be deleted effective 01-01-
97.]
1. Death. Beneficiaries are eligible to
receive distribution upon the death of the
participant from whom their interests are
derived.
1. Acceptance of a DRO. An alternate payee
under a DRO which has been accepted by the plan
is given a window opportunity to elect
distribution. See .
1. Plan Termination. The Committee shall make
a distribution to all participants if the plan is
terminated without the establishment of a
successor plan.
[This sub-section should be deleted effective 01-01-
96.]
1. Plan Termination. The Benefits Manager
shall make a distribution to all participants if
the plan is terminated without the establishment
of a successor plan.
[This sub-section becomes effective on 01-01-96.]
1. Sale of CG&E. The Committee shall make a
distribution to all participants if substantially
all of CG&E's assets are sold.
[This sub-section should be deleted effective 01-01-
96.]
1. Sale of CG&E. The Benefits Manager shall
make a distribution to all participants if
substantially all of CG&E's assets are sold.
[This sub-section becomes effective on 01-01-96.]
1. Sale of a Subsidiary. The Committee shall
make a distribution to participants who are
employed by a CG&E subsidiary if the subsidiary
is sold and the participants are no longer
employed by CG&E. If CG&E sells a subsidiary,
but retains the employees who formerly worked for
that subsidiary, those employees will not qualify
for a distribution as a result of the sale.
[This sub-section should be deleted effective 01-01-
96.]
1. Sale of a Subsidiary. The Benefits
Manager shall make a distribution to participants
who are employed by a CG&E subsidiary if the
subsidiary is sold and the participants are no
longer employed by CG&E. If CG&E sells a
subsidiary, but retains the employees who
formerly worked for that subsidiary, those
employees will not qualify for a distribution as
a result of the sale.
[This sub-section becomes effective on 01-01-96.]
A. Distribution Valuation Date. The distribution
valuation date for a beneficial owner is the business
day on which the beneficial owner's units in the
funds are sold for the purpose of disbursing funds
for a loan, a withdrawal or a distribution.
A. Valuing a Distribution. The value of an
account for the purpose of distribution shall be
based upon the value of the units in the CINergy
stock funds and the mutual funds, determined as of
the distribution valuation date .
A. Events Triggering Distribution. As used in
this Article, an event consists of a participant's
termination, retirement, permanent layoff for lack of
work, disability, or death.
1. Vested Benefit of $3,500 or Less. If the
vested benefit is $3,500 or less, the Committee
shall make a distribution in a lump sum.
[This sub-section should be deleted effective 01-01-
96.]
1. Vested Benefit of $3,500 or Less. If the
vested benefit is $3,500 or less, the Benefits
Manager shall make a distribution in a lump sum.
[This sub-section becomes effective on 01-01-96.]
1. Vested Benefit Over $3,500. If the vested
benefit is over $3,500, the participant or
beneficiary shall elect to receive or delay the
distribution. The election must be filed with
the Committee within 60 days of the event. A
participant or beneficiary who has elected to
delay the distribution can elect a distribution
at a later time by filing an application for
distribution with the Committee.
[This sub-section should be deleted effective 01-01-96.]
1. Vested Benefit Over $3,500. If the vested
benefit is over $3,500, the participant or
beneficiary shall elect to receive or delay the
distribution. The election must be received by
the Benefits Manager within 60 days of the event.
A participant or beneficiary who has elected to
delay the distribution can elect a distribution
at a later time by informing the Benefits Manager
through the voice or other electronic response
system or other media authorized by CG&E.
[Thi
s
sub-
sect
ion
beco
mes
effe
ctiv
e on
01-
01-
96.]
1. Mandatory Distribution After an Event. The
Committee shall disburse a distribution no later
than the 60th day after the close of the calendar
year in which the terminated participant who has
been affected by an event attains or would have
attained age 65. If the terminated employee is
age 65 or older on the date of the event, the
distribution shall be made within 60 days of the
year end during which the event occurred.
[This sub-section should be deleted effective 01-
01-96.]
1. Mandatory Distribution After an Event. The
Benefits Manager shall disburse a distribution no
later than the 60th day after the close of the
calendar year in which the terminated participant
who has been affected by an event attains or
would have attained age 65. If the terminated
employee is age 65 or older on the date of the
event, the distribution shall be made within 60
days of the year end during which the event
occurred.
[This sub-section becomes effective on 01-01-96.]
A. Participant's Mandatory Distribution Year.
The following rules shall apply regardless of any
other distribution provision in the plan.
1. Definition. A participant's mandatory
distribution year is the year in which s/he
attains age 70 1/2.
1. Lump Sum Distribution. The Committee shall
make a distribution of all vested benefits
accrued as of the September 30 of a participant's
mandatory distribution year. The distribution
shall be in a lump sum. The distribution shall
be disbursed by April 1 following the end of the
participant's mandatory distribution year.
[This sub-section should be deleted effective 01-01-
96.]
1. Lump Sum Distribution. The Benefits Manager
shall make a distribution of all vested benefits
accrued as of the September 30 of a participant's
mandatory distribution year. The distribution
shall be in a lump sum. The distribution shall
be disbursed by April 1 following the end of the
participant's mandatory distribution year.
[This sub-section becomes effective on 01-01-96.]
1. Subsequent Annual Distributions. If the
participant has assets in the plan after the
mandatory distribution year, the Committee shall
distribute all vested benefits accrued as of
September 30 each subsequent year, by December
31st of that year.
[This sub-section should be deleted effective 01-01-
96.]
1. Subsequent Annual Distributions. If the
participant has assets in the plan after the
mandatory distribution year, the Benefits Manager
shall distribute all vested benefits accrued as
of September 30 each subsequent year, by December
31st of that year.
[This sub-section becomes effective on 01-01-96.]
1. Continuing Contributions. Participants
may continue to contribute to the plan after
their mandatory distribution year.
[This section should be deleted effective 01-01-97 for all
participants, except 5% owners.]
A. Participant's (Other than 5% Owner's)
Mandatory Distribution Year. The following rules
shall apply regardless of any other distribution
provision in the plan.
1. Definition. A participant's (other than a
5% owner's) mandatory distribution year is the
later of the year in which s/he attains age 70
1/2 or retires. A 5% owner's mandatory
distribution year is the year in which s/he
attains age 70 1/2. See above for details.
1. Lump Sum Distribution. The Benefits Manager
shall make a distribution of all vested benefits
accrued as of the September 30 of a participant's
(other than a 5% owner's) mandatory distribution
year. The distribution shall be in a lump sum.
The distribution shall be disbursed by April 1
following the end of the participant's (other
than a 5% owner's) mandatory distribution year.
1. Subsequent Annual Distributions. If the
participant (other than a 5% owner) has assets in
the plan after the mandatory distribution year,
the Benefits Manager shall distribute all vested
benefits accrued as of September 30 each
subsequent year, by December 31st of that year.
[This section becomes effective on 01-01-97 for all
participants, except 5% owners.]
A. Filing Forms for Distribution or Delay.
1. General Rule. A beneficial owner
generally must file an application for
distribution 90 days in advance of disbursement
of a distribution from the plan.
[This sub-section should be deleted effective 01-01-
96.]
1. General Rule. A beneficial owner generally
must apply for distribution by the voice or other
electronic response system or other media
authorized by CG&E 90 days in advance of
disbursement of a distribution from the plan.
[This sub-section becomes effective on 01-01-96.]
1. Timing A Distribution. A beneficial owner
must file an application for distribution with
the Committee at least 15 business days before
disbursement of a distribution from the plan.
[This sub-section should be deleted effective 01-01-
96.]
1. Timing A Distribution. A beneficial owner
must apply for distribution with the Benefits
Manager through the voice or other electronic
response system or other media authorized by CG&E
at least 15 business days before disbursement of
a distribution from the plan.
[This sub-section becomes effective on 01-01-96.]
1. Required Elections. If a beneficial owner
fails to make a required election to immediately
receive distribution or to delay distribution,
the plan may process an election to delay
distribution filed by the Committee on behalf of
the beneficial owner.
[This sub-section should be deleted effective 01-01-
96.]
1. Required Elections. If a beneficial owner
fails to make a required election to immediately
receive distribution or to delay distribution,
the plan may process an election to delay
distribution as requested by the Benefits Manager
on behalf of the beneficial owner.
[This sub-section becomes effective on 01-01-96.]
1. Mandatory Distributions. Any mandatory
distribution required by the plan or the Internal
Revenue Code may be made under the authority of
an application for distribution filed by the
Committee on behalf of the beneficial owner.
[This sub-section should be deleted effective 01-01-96.]
1. Mandatory Distributions. Any mandatory
distribution required by the plan or the Internal
Revenue Code may be made under the authority of a
request for distribution made by the Benefits
Manager on behalf of the beneficial owner.
[This sub-section becomes effective on 01-01-96.]
A. Timing of Distributions. The Committee will
disburse distributions as a lump sum or in 5 annual
installments.
1. Lump Sum Distributions. The trustee shall
mail a lump sum payment to the beneficial owner
approximately 15 business days following the day
on which the application for distribution was
filed with the Committee.
1. Five Annual Installments. A participant
whose employment is terminated by reason of
retirement under the terms of the MRP,
disability, or permanent layoff for lack of work,
may irrevocably elect to receive his or her
account in five annual installments.
Installment distributions are not available to
beneficiaries or to participants terminated for
other reasons.
1. Timing of Installments. The eligible
participant may elect to receive the first
installment as soon as practical after the end of
the month that the event occurs, or as soon as
practical after the end of the year in which the
event occurs. The trustee shall disburse the
first installment no later than March 1
following the calendar year when the event
occurred which triggered the distribution.
a) Amount of Each Installment. Those
who have elected 5 annual installments shall
receive their accounts as follows: 1/5 of the
account in the first installment, 1/4 of the
account at the time of the second install-
ment, 1/3 of the account at the time of the
third installment, 1/2 of the account at the
time of the fourth installment, and the
balance of the account at the time of the
last installment.
a) Subsequent Installments. The payment
date for each subsequent installment shall be
as soon as is practicable within each plan
year following the anniversary date of the
initial payment. The balance of the account
shall be revalued in accordance with and
any CINergy stock will continue to be voted
by such a participant in accordance with .
If a participant dies prior to receiving all
installments, the remainder in his or her
account will be paid in a lump sum to the
beneficiary or, if none, in accordance with
.
[This section should be deleted effective 01-01-96.]
A. Timing of Distributions. The Benefits Manager
will disburse distributions as a lump sum or in 5
annual installments.
1. Lump Sum Distributions. The trustee shall
mail a lump sum payment to the beneficial owner
approximately 15 business days following the day
on which the Benefits Manager was informed of the
participant's request for distribution through
the voice or other electronic response system or
other media authorized by CG&E.
1. Five Annual Installments. A participant
whose employment is terminated by reason of
retirement under the terms of the MRP,
disability, or permanent layoff for lack of work,
may irrevocably elect to receive his or her
account in five annual installments.
Installment distributions are not available to
beneficiaries or to participants terminated for
other reasons.
1. Timing of Installments. The eligible
participant may elect to receive the first
installment as soon as practical after the end of
the month that the event occurs, or as soon as
practical after the end of the year in which the
event occurs. The trustee shall disburse the
first installment no later than March 1
following the calendar year when the event
occurred which triggered the distribution.
a) Amount of Each Installment. Those
who have elected 5 annual installments shall
receive their accounts as follows: 1/5 of the
account in the first installment, 1/4 of the
account at the time of the second install-
ment, 1/3 of the account at the time of the
third installment, 1/2 of the account at the
time of the fourth installment, and the
balance of the account at the time of the
last installment.
a) Subsequent Installments. The payment
date for each subsequent installment shall be
as soon as is practicable within each plan
year following the anniversary date of the
initial payment. The balance of the account
shall be revalued in accordance with and
any CINergy stock will continue to be voted
by such a participant in accordance with .
If a participant dies prior to receiving all
installments, the remainder in his or her
account will be paid in a lump sum to the
beneficiary or, if none, in accordance with
.
[This section becomes effective on 01-01-96.]
A. In Kind Distribution.
1. General Rule. Distributions generally
consist of a CINergy stock certificate reflecting
the value of the units of the CINergy stock fund
in the account as of the distribution valuation
date, plus cash from the sale of all other plan
investments and incidental cash from the CINergy
stock fund.
1. Company Stock Fund. To the extent that a
beneficial owner's account includes units of the
CINergy stock fund as of the distribution
valuation date, s/he may elect to receive cash in
lieu of a CINergy stock certificate.
1. Fidelity Funds. The beneficial owner can
direct the trustee to transfer his or her
Fidelity Equity Income, Intermediate Bond and/or
Magellan funds, upon distribution, to an
individual account at Fidelity by submitting an
application to the Committee.
[This sub-section should be deleted effective 01-01-96.]
1. Fidelity Funds. The beneficial owner can
direct the trustee to transfer his or her
Fidelity Equity Income, Intermediate Bond and/or
Magellan funds, upon distribution, to an
individual account at Fidelity by informing the
Benefits Manager through the voice or other
electronic response system or other media
authorized by CG&E.
[This sub-section becomes effective on 01-01-96.]
A. Direct Rollovers to Other Plans.
1. Election.
a) Who May Elect. Participants,
terminated participants, their beneficiaries
who are surviving spouses, and alternate
payees who are former spouses of
participants, may elect to have any portion
of an eligible rollover distribution paid
directly to their designated eligible
retirement plan. Those making this
election must be entitled to distribution or
withdrawal of their plan assets, under the
terms of this plan. The only plan assets
subject to direct rollover are those acquired
by reason of being a participant, a surviving
spouse or a former spouse alternate payee.
a) Manner of Election. This election must
be made at the time and in the manner
prescribed by the Committee.
1. Distributions Eligible for Rollover. An
eligible rollover distribution is any
distribution or withdrawal, except as stated in
below, of all or any portion of the account of
one of the persons listed in above.
1. Distributions Not Eligible for Rollover.
a) Portions of Mandatory Distributions.
The portion of a mandatory distribution under
which is required to be distributed under IRC
401(a)(9) is not eligible for direct
rollover.
[This sub-section should be deleted effective 01-
01-97 for all participants, except 5% owners.]
a) Portions of Mandatory Distributions.
The portion of a mandatory distribution under
which is required to be distributed under IRC
401(a)(9) is not eligible for direct
rollover.
[This sub-section becomes effective on 01-01-97
for all participants, except 5% owners.]
a) Portions Excluded from Gross Income.
The portion of any distribution which is not
able to be included in the gross income of
the beneficial owner is not eligible for
direct rollover. For this purpose, gross
income can include any unrealized
appreciation of CINergy stock.
a) Optional Contributions. Optional
contributions are not eligible for direct
rollover. However, interest and earnings
attributable to optional contributions are
eligible for direct rollover.
a) Deemed Distributions. A deemed
distribution which has occurred because of a
participant's failure to make one or more
loan payments is not eligible for direct
rollover.
a) Loan Offsets. The portion of a
distribution due to termination of the
participant's employment with CG&E which
offsets the unpaid portion of a plan loan
will not be eligible for direct rollover.
a) Periodic Distributions. Any
distribution that is one of a series of
substantially equal periodic payments, made
at least annually, to be paid over the life
of the beneficial owner or the joint lives of
the beneficial owner and his or her
designated beneficiary, or to be paid for a
specified period of at least 10 years is not
eligible for direct rollover.
a) Other. Returns of elective deferrals
and corrective distributions of excess
contributions and attributable net income are
not eligible for direct rollover. Returns
of deferrals in excess of the IRC 402(g)
limits or in excess of the 415 limits are
not eligible for direct rollover.
1. Eligible Retirement Plan. The definition
of an eligible retirement plan for the purpose of
accepting direct rollovers varies with the class
of the person electing the direct rollover. The
eligible retirement plan must be willing to
accept the rollover distribution.
a) Participants and Former Spouse
Alternate Payees. Participants and former
spouse alternate payees may direct rollovers
to an individual retirement account , an
individual retirement annuity , an annuity
plan or a qualified trust.
b) Surviving Spouses. Surviving spouses
may direct rollovers only to an individual
retirement account, or an individual
retirement annuity.
A. Settlement Statement. The trustee shall
furnish a settlement statement with every
distribution.
A. Distribution Upon Death of a Participant or
Beneficiary. In the event that the participant dies
with assets remaining in the plan, the assets will be
distributed to the participant's beneficiary. If
there is no beneficiary, the assets will be
distributed to the participant's surviving spouse.
If the participant has no beneficiary or surviving
spouse at the time of the participant's death, assets
will be distributed to the participant's estate. If
the beneficiary of a deceased participant dies while
assets remain in the plan, the assets will be
distributed to the estate of the beneficiary. In the
event an alternate payee dies with assets remaining
in the plan, the assets will be paid to the estate of
the alternate payee. In each case, the assets will
be distributed no later than the close of the plan
year which contains the fifth anniversary of the
participant's death. If the spouse of a participant
or terminated participant is the beneficiary of the
plan account, the spouse may delay distribution until
the end of the calendar year in which the participant
or terminated participant would have attained age 65.
See and .
A. Plan Hierchary for Distributions. Any sale of a
participant's plan assets, which is necessary to
generate cash for the purpose of disbursing cash in
the amount of after-tax contributions, will be made
using the plan hierarchy.
WITHDRAWALS DURING EMPLOYMENT
ARTICLE
I. : WITHDRAWALS DURING EMPLOYMENT
A. Withdrawal. A withdrawal is disbursement of
any part of the vested assets of a participant to
that participant. Distribution installments are not
withdrawals. Only participants are eligible to take
withdrawals. All other beneficial owners are
eligible only for distributions.
A. Withdrawals from Company-Matched Sub-Accounts.
A participant may not withdraw from the
company-matched sub-account during the period s/he is
employed by CG&E.
A. Withdrawals from Optional Sub-Accounts.
Participants may withdraw from their optional
sub-accounts plan by filing an application for
withdrawal with the Committee. The trustee will
disburse the withdrawal directly to the
participant , or to another plan if the participant
elects and the withdrawal qualifies for direct
rollover. See .
[This section should be deleted effective 01-01-96.]
A. Withdrawals from Optional Sub-Accounts.
Participants may withdraw from their optional
sub-accounts by the voice or other electronic
response system or other media authorized by CG&E.
The trustee will disburse the withdrawal directly to
the participant , or to another plan if the
participant elects and the withdrawal qualifies for
direct rollover. See .
[This section becomes effective on 01-01-96.]
A. Amount Available for Optional Withdrawal.
Participants may withdraw either a specific whole
dollar amount or the entire balance from their
optional sub-accounts. If the participant withdraws
less than 100% of his or her optional sub-account
balance and requests a second withdrawal within a 12
month period, s/he will be required to withdraw the
remaining balance.
B. Plan Hierarchy For Withdrawals. If the
portion of the participant's account which is to be
withdrawn is invested in more than one fund, the
withdrawal amount will be deducted from the
investment funds using the plan hierarchy. Each
fund will be exhausted before the withdrawal draws
upon the next fund in the hierarchy.
A. Form of Withdrawals. Withdrawals generally
consist of a CINergy stock certificate for the units
of the CINergy stock fund in the sub-account as of
the distribution valuation date, plus cash from the
sale of all other plan investments and incidental
cash from the CINergy stock fund.
A. Cash In Lieu of Stock. A participant may
elect to receive cash in lieu of a CINergy stock
certificate for his or her assets in the company
stock fund.
A. Hardship. A hardship is an immediate and
heavy financial need of a participant which cannot be
met except through a withdrawal from the
participant's deferred compensation sub-account in
the plan.
A. Hardship Withdrawals. A participant may apply
to the Committee for a withdrawal of all or a portion
of his or her deferred compensation sub-account. The
Committee shall not grant the request unless it
qualifies under the criteria listed in .
[This section should be deleted effective 01-01-96.]
A. Hardship Withdrawals. A participant may apply
to the Benefits Manager for a withdrawal of all or a
portion of his or her deferred compensation
sub-account. The Benefits Manager shall not grant
the request unless it qualifies under the criteria
listed in .
[This section becomes effective on 01-01-96.]
A. Amount Available for Hardship Withdrawals.
The amount available for a hardship withdrawal
includes all deferred compensation contributions made
in years prior to 1989, including any earnings and
losses thereon, and deferred compensation
contributions made on or after 01-01-89, excluding
earnings and losses thereon. Hardship withdrawals
are limited to the actual amount in the participant's
account.
A. Criteria for Granting a Hardship Withdrawal.
The Committee shall use the following criteria when
considering an application for a hardship withdrawal:
1. Immediate and Heavy Financial Need. The
request must be to satisfy an immediate and heavy
financial need for one of the following reasons:
a) Medical Expenses. Unreimbursed
medical expenses, as described in IRC
213(d), incurred by the participant, the
participant's spouse, or any dependents of
the participant, as defined in IRC 152, or
necessary for those persons to obtain medical
care as described in IRC 213(d).
a) Purchase of a Principal Residence.
Purchase, excluding mortgage payments, of a
principal residence of the participant.
a) Tuition. Payment of tuition, related
educational fees, and room and board for the
next 12 months of post-secondary education
for the participant, the participant's
spouse, children, or dependents.
a) Prevention of Foreclosure. Prevention
of eviction from, or foreclosure of the
mortgage upon, the principal residence of the
participant.
a) Funeral Expenses. Payment of the
funeral expenses of the participant's spouse,
children or dependents.
a) Other Expenses. Any other expense
identified by the Internal Revenue
Commissioner as an immediate and heavy
financial need.
1. Amount Necessary to Satisfy the Need. The
hardship withdrawal is limited to the amount
necessary to satisfy the need, plus any amounts
necessary to pay federal, state or local income
taxes or penalties reasonably anticipated to
result from the hardship withdrawal. The
participant must submit reasonable documentation
of the existence and amount of the need. There
must be no other resources reasonably available
to satisfy the need. The participant must first
take all available non-hardship
distributions/loans from all of CG&E's other
plans: RIP, SIP, MRP . This includes a
withdrawal of available funds from the optional
sub-account. If a plan loan is either
unavailable to the participant, or the available
loan is insufficient to meet the need of a
participant, and the other criteria of this
section are met, the Committee may grant a
hardship withdrawal.
[This section should be deleted effective 01-01-96.]
A. Criteria for Granting a Hardship Withdrawal.
The Benefits Manager shall use the following
criteria when considering a request for a hardship
withdrawal:
1. Immediate and Heavy Financial Need. The
request must be to satisfy an immediate and heavy
financial need for one of the following reasons:
a) Medical Expenses. Unreimbursed
medical expenses, as described in IRC
213(d), incurred by the participant, the
participant's spouse, or any dependents of
the participant, as defined in IRC 152, or
necessary for those persons to obtain medical
care as described in IRC 213(d).
a) Purchase of a Principal Residence.
Purchase, excluding mortgage payments, of a
principal residence of the participant.
a) Tuition. Payment of tuition, related
educational fees, and room and board for the
next 12 months of post-secondary education
for the participant, the participant's
spouse, children, or dependents.
a) Prevention of Foreclosure. Prevention
of eviction from, or foreclosure of the
mortgage upon, the principal residence of the
participant.
a) Funeral Expenses. Payment of the
funeral expenses of the participant's spouse,
children or dependents.
a) Other Expenses. Any other expense
identified by the Internal Revenue
Commissioner as an immediate and heavy
financial need.
1. Amount Necessary to Satisfy the Need. The
hardship withdrawal is limited to the amount
necessary to satisfy the need, plus any amounts
necessary to pay federal, state or local income
taxes or penalties reasonably anticipated to
result from the hardship withdrawal. The
participant must submit reasonable documentation
of the existence and amount of the need. There
must be no other resources reasonably available
to satisfy the need. The participant must first
take all available non-hardship
distributions/loans from all of CG&E's other
plans: RIP, SIP, MRP . This includes a
withdrawal of available funds from the optional
sub-account. If a plan loan is either
unavailable to the participant, or the available
loan is insufficient to meet the need of a
participant, and the other criteria of this
section are met, the Benefits Manager may grant a
hardship withdrawal.
[This section becomes effective on 01-01-96.]
A. Required Documentation for Hardship
Withdrawals. The participant must file the following
documents with the Committee for consideration of a
hardship withdrawal:
1. Application. The participant must complete
an application for hardship withdrawal, including
the spouse's signature acknowledging notice of
the application, if the participant is married.
1. Documentation. The participant must attach
photocopies of all papers which document the
existence and the amount of the need.
1. Written Explanation. The participant must
provide a clear and concise explanation, in his
or her own words, of how the funds are to be
used.
1. Quarterly Statement. The Committee will
provide a copy of the participant's most recent
quarterly statement indicating the amount of
funds that are available to the participant.
1. Personal Financial Statement. A personal
financial statement of the participant's assets
and liabilities, including the spouse's notarized
signature, if the participant is married.
[This section should be deleted effective 01-01-96.]
A. Required Substantiation for Hardship
Withdrawals. The participant must provide the
following information to the Benefits Manager for
consideration of a hardship withdrawal:
a) Request. The participant must make a request
to the Benefits Manager for a hardship withdrawal
through the voice or other electronic response
system or other media authorized by CG&E. If the
participant is married, the participant must
furnish the Benefits Manager with the signature
of the participant's spouse acknowledging notice
by the spouse of the request.
b) Documentation. The participant must furnish
photocopies of all papers which document the
existence and the amount of the need.
c) Explanation. The participant must provide a
clear and concise explanation, in his or her own
words, of how the funds are to be used through
the voice or other electronic response system or
other media authorized by CG&E.
d) Quarterly Statement. The Benefits Manager
will provide a copy of the participant's most
recent quarterly statement indicating the amount
of funds that are available to the participant.
e) Personal Financial Statement. A personal
financial statement of the participant's assets
and liabilities, including the spouse's notarized
signature, if the participant is married.
[This section becomes effective on 01-01-96.]
A. Disbursement of Hardship Withdrawals. The
trustee will disburse a hardship withdrawal which
has been accepted by the Committee directly to the
participant.
[This section should be deleted effective 01-01-96.]
A. Disbursement of Hardship Withdrawals. The
trustee will disburse a hardship withdrawal which
has been accepted by the Benefits Manager directly to
the participant.
[This section becomes effective on 01-01-96.]
A. Settlement Statement. The trustee shall
furnish a settlement statement with every
distribution.
A. Suspension Following Withdrawal.
1. Optional Sub-Account Withdrawal.
Participants who have withdrawn from their
optional sub-accounts will not be permitted to
make optional contributions to the plan until at
least 12 months from the date of disbursement of
the withdrawal.
1. Hardship Withdrawal. A participant who is
granted a hardship withdrawal shall not be
permitted to make deferred compensation or
optional contributions to the plan until at
least 12 months from the date of the hardship
withdrawal disbursement. The IRC 402(g) limit
on a participant's deferred compensation
contributions for the taxable year of the
participant following the taxable year in which
the hardship withdrawal occurred shall be reduced
by the amount of the participant's deferred
compensation contributions during the taxable
year in which the hardship withdrawal occurred.
LOANS
ARTICLE
I. : LOANS
A. Eligibility for Loans . Participants currently
receiving pay from CG&E may apply for and receive a
loan from their deferred compensation sub-accounts.
No other beneficial owners are eligible for loans.
Specifically, participants on leaves of absence,
terminated participants, beneficiaries and alternate
payees are not eligible to receive loans.
A. Loan Requests. Participants may request loans
through the current process established by the
Committee. The participant must complete and
return the promissory note to the trustee. Upon
receipt of the completed promissory note, the trustee
will send a check for the loan amount to the
participant.
[This section should be deleted effective 01-01-96.]
A. Loan Requests. Participants may request loans
through the current process established by the
Committee. The participant must execute the
promissory note. The promissory note, at the sole
discretion of the Committee, may be provided on the
back of the check which is issued to the participant
for the loan amount. The promissory note will be
properly executed and legally enforceable once the
participant endorses the back of the check. The
participant's endorsement evidences that s/he agrees
to the repayment terms.
[This section becomes effective on 01-01-96.]
A. Limitation of Two Loans at any Given Time. A
participant may apply for and obtain a second loan
while the first loan remains outstanding. The second
loan will be granted at the then prevailing rate of
interest and for an entirely separate term of five
years or less. The outstanding balance in the
participant's loan account will reflect the total of
the two loans, although the loans will remain
separate and distinct on the trustee's records. The
dollar limitation imposed by the plan for one loan
will apply to the total outstanding balance for two
loans for any given participant. A participant is
limited to two outstanding loans at any given time.
A. Granting Loans. Loans will be granted from the
plan for any reason.
A. Loan Amount.
1. 50% of Vested Account Limited by Deferred
Compensation Sub-Account. The loaned amount
cannot exceed the lesser of $50,000 or 50% of the
balance of the participant's vested accrued
benefit (company-matched, deferred compensation
and optional sub-accounts) and will be further
limited by the actual amount in the deferred
compensation contribution sub-account on the
distribution valuation date for the loan.
[This sub-section should be deleted effective 01-01-
96.]
1. 50% of Vested Account Limited by Deferred
Compensation Sub-Account and Rollover Sub-
Account. The loaned amount cannot exceed the
lesser of $50,000 or 50% of the balance of the
participant's vested accrued benefit (company-
matched, deferred compensation, optional and
rollover sub-accounts) and will be further
limited by the actual amount in the deferred
compensation contribution sub-account and
rollover sub-account on the distribution
valuation date for the loan.
[This sub-section becomes effective on 01-01-96.]
1. Reduction of $50,000 Maximum. The $50,000
maximum loan amount is reduced by the excess (if
any) of the highest outstanding balance of loans
to that participant during the one-year period
ending on the day before the date the loan is
made, over the outstanding balances of loans to
that participant made under all qualified plans
sponsored by CG&E on the date the loan is made.
A. Denial of Loans. The trustee shall not loan
funds to a participant if granting the loan would
result in a violation of any federal or state
statute or regulation regarding loans.
A. Plan Hierarchy For Loans. If the participant's
deferred compensation sub-account is invested in more
than one fund, the loan amount will be deducted from
the investments funds using the plan hierarchy.
Each fund will be exhausted before the loan draws
upon the next fund in the hierarchy.
[This section should be deleted effective 01-01-96.]
A. Pro-rata Liquidation for Loans. The trustee
shall liquidate the participant's deferred
compensation sub-account investments and rollover
sub-account investments in the same proportion that
each investment bears to the entire deferred
compensation contribution sub-account and rollover
sub-account except for the loan fund. The trustee
will disburse the cash produced to the participant
minus any administrative fee.
[This section becomes effective on 01-01-96.]
A. Valuing an Account For A Loan. The trustee
shall use the value of the account as of the opening
of the business day on which it writes the check for
the loan to the participant to determine the amount
available for the loan.
A. Collateral for Loans.
1. Assignment and Restriction of Withdrawals.
The participant shall assign 50% of his or her
vested accrued account, and shall sign a
promissory note for the amount of the loan,
including interest, payable to the order of the
trustee. No collateral other than the
participant's interest in the plan will be
accepted as security for a plan loan. If a
participant's optional sub-account becomes
collateral for his or her loan, s/he will only be
able to withdraw from the optional sub-account
the difference between its total value and the
portion of the balance of the optional
sub-account necessary as collateral for the
unpaid loan balance.
1. Effect of a DRO Upon Loan Collateral. If
there are insufficient assets in the deferred
compensation sub-account of a participant to
satisfy the terms of a DRO because of one or more
outstanding loans, the trustee will first take
additional assets from the participant's optional
sub-account, second from the company-matched sub-
account, and finally from the loan account
portion of the deferred compensation sub-account,
in order to satisfy the DRO.
[This sub-section should be deleted effective 01-01-
96.]
1. Effect of a DRO Upon Loan Collateral. If
there are insufficient assets in the deferred
compensation sub-account, or next in the rollover
sub-account, if any, of a participant to satisfy
the terms of a DRO because of one or more
outstanding loans, the trustee will first take
additional assets from the participant's optional
sub-account, second from the company-matched sub-
account, third, from the loan account portion of
the deferred compensation sub-account, and
finally from the loan account portion of the
rollover sub-account, if any, in order to satisfy
the DRO.
[This sub-section becomes effective on 01-01-96.]
A. Interest Rate for Loans. The rate of interest
charged on loans will be 1/2 of 1% above the prime
rate charged by the trustee in its banking business
on the first business day of the month during which
the application is received by the trustee.
[This section should be deleted effective 01-01-96.]
A. Interest Rate for Loans. The rate of interest
charged on loans will be a reasonable rate based on
commercial standards in the lending industry.
[This section becomes effective on 01-01-96.]
A. Payment of Loans. A participant who applies for
a loan must authorize CG&E to deduct loan payments
from his or her pay. CG&E will remit loan
deductions to the trustee concurrent with
disbursements of the payroll.
A. Minimum and Maximum Term of Loans. The
participant shall specify the number of months for
payment of the loan, with 12 months being the minimum
term, and 60 months the maximum term.
[This section should be deleted effective 01-01-96.]
A. Minimum and Maximum Term of Loans. The
participant shall specify the number of months for
payment of the loan, with 12 months being the minimum
term, and 54 months the maximum term.
[This section becomes effective on 01-01-96.]
A. Investment of Loan Payments. The trustee will
direct loan payments to the investment funds
according to the participant's most recent allocation
of future contributions form that is on file.
[This section should be deleted effective 01-01-96.]
A. Investment of Loan Payments. The trustee will
direct loan payments to the investment funds
according to the most recently provided directions
given by the participant through the voice or other
electronic response system or other media authorized
by CG&E.
[This section becomes effective on 01-01-96.]
A. Outstanding Loans for Terminated Participants.
Upon termination of employment, any outstanding loan
of a terminated participant is due immediately or the
outstanding amount of the loan will be in default
pursuant to or and reclassified as a partial
distribution.
[This section becomes effective on 01-01-96.]
A. Outstanding Loans for Participants on Military
Leave. Subject to the Committee's approval of such a
policy, loan repayments will be suspended under this
plan as permitted under IRC 414(u)(4).
A. Prepayment of Loans. A participant may pay the
remaining loan balance at any time without any
pre-payment penalties by check or money order made
payable to the trustee. The prepayment should be sent
or delivered to the Committee.
A. Loan Default. A participant's loan will go into
default upon failure to make one or more payments
during a calendar year, violation of any term of the
promissory note signed by the participant, or upon
declaration of the Committee at its discretion
under the terms of the promissory note.
[This section should be deleted effective ___________.]
A. Loan Default. A participant's loan will go into
default upon failure to timely make any payment
during a calendar year or violation of any term of
the promissory note signed by the participant.
[This section becomes effective on __________.]
A. Tax Effects of Loan Default. The participant
shall pay the tax incurred for any events which arise
out of any loan transaction with the plan or any
failure to make payments under plan and promissory
note requirements.
A. Curing Loan Default. A participant who has
missed one or more loan payments during a plan year
may make those payments up by direct payment to the
Committee with a check or money order made payable to
the order of the trustee in the amount of the
payment, plus interest, on or before the final
valuation date of the plan year to cure the default
without tax or recharacterization consequences.
[This section should be deleted effective _________.]
A. Curing Loan Default. A participant who misses
any loan payment may make up the missed payment by
direct payment to the Committee with a check or money
order made payable to the order of the trustee in the
amount of the payment, plus interest, on or before
the last day of the calendar quarter following the
calendar quarter in which the required payment was
due to cure the default without tax consequences.
[This section becomes effective on __________.]
A. Reamortization of Loans. A participant may
reamortize a loan so long as the total time for
repayment of the loan does not exceed 60 months.
Loan reamortizations will be under the plan terms and
conditions in effect at the time of the
reamortization.
[This section should be deleted effective 01-01-96.]
A. Reamortization of Loans. A participant who is
on a leave of absence (other than military leave) for
not longer than one year may reamortize a loan so
long as the total time for repayment of the loan does
not exceed 54 months and the loan payments due after
the leave expires (or, if earlier, after the first
year of the leave) are not less than those required
under the original terms of the loan. Loan
reamortizations will be under the plan terms and
conditions in effect at the time of the
reamortization.
[This section becomes effective on 01-01-96.]
A. Recharacterization of Sub-accounts . Effective
as of the final valuation date of each plan year, the
trustee shall recharacterize all or any portion of
the optional and/or company-matched sub-accounts of a
participant who has failed to make any loan
payment(s) during the year, if those missed payments
are still outstanding at the final valuation date.
The amount recharacterized shall be limited to the
amount of the missed payments. The amount rechar-
acterized will be credited to the participant's
deferred compensation sub-account as a loan payment.
The trustee will notify the participant of the
taxable amount of the distribution. The Committee
does not waive its ability to determine that a loan
is in default, or to foreclose upon a loan, by
exercising its right to recharacterize the
participant's sub-accounts under this provision.
[This section should be deleted effective ___________.]
A. Loan Fund Administration.
1. Single Loans. The promissory notes securing
payment of loans from plan assets will be
reflected on participants' quarterly statements
under the loan fund assets. When participants
receive plan loans, their investment allocations
will reflect credits to their loan funds in an
amount equal to the principal amount of the loan.
Their other sub-accounts will reflect a total
reduction in value equivalent to the principal
amount of the loan. As participants make loan
payments, the value of the participants' loan
funds will be reduced by the amount of the
payments attributable to the principal of the
loans. Principal and interest, as they are paid,
will be allocated to investments per the most
recent directions given by the participant. Once
the loan is completely repaid, the participant's
quarterly statement will reflect no investment in
the loan fund.
1. Multiple Loans. The trustee shall maintain
separate records of principal, interest, and
payment schedule for each loan that a participant
has outstanding at any given time. The
participant's statement will not reflect each
separate loan. The loan fund segment of the
quarterly statements distributed to participants
will reflect the total of all current loans
outstanding to the participant.
1. Loans and DROs. The trustee will allocate
as much of the participant's loan fund to the
alternate payee as is necessary to satisfy the
terms of the DRO if there are insufficient other
assets in the participant's account due to the
amount of the participant's assets on loan. To
the extent possible, loans extended prior to the
Committee's receipt of the DRO will be allocated
to the alternate payee. However, loans extended
after receipt of the DRO will be allocated, if
necessary to meet the terms of the DRO. The
participant will remain solely responsible for
loan payments, even if some portion of a loan or
loans has been allocated to an alternate payee to
satisfy the terms of a DRO.
DOMESTIC RELATIONS ORDERS
AND ALTERNATE PAYEES
ARTICLE
I. : DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES
A. Domestic Relations Order (DRO). A domestic
relations order is any judgment, decree or order,
made pursuant to a state domestic relations law,
which provides that child support, alimony,
maintenance payments or marital property allocation
will be made from the plan assets of a participant.
A domestic relations order is referred to as a DRO
throughout the plan.
A. General Rule. The benefits due or to become due
to any participant are subject to a domestic
relations order accepted by the Committee.
A. Qualification and Acceptance of a DRO.
1. Initial Order. The DRO must meet the
requirements of IRC 414(p) and use the sample
DRO language that has been approved by the
Committee to be considered as qualified and to
be accepted by the plan. The Committee shall
determine whether or not a DRO is qualified. A
court order which contains language presuming
that it is qualified shall not be binding upon
the plan.
1. Amended Orders. A DRO which modifies the
terms of a previously qualified DRO may be
accepted by the Committee. The amended DRO must
meet the qualifications of above, and must be
filed with the Committee before any irrevocable
action has been taken on execution of the initial
DRO. Irrevocable actions include executed
cash-outs and any transaction which the Committee
decides is impossible or impractical to attempt
to reverse.
A. Special Conditions Applicable to DROs.
1. Prohibition of Allocating Identical Assets
Multiple Times. No DRO may allocate benefits
which have been allocated by a previously
qualified and accepted DRO. However, an amended
DRO which is accepted by the plan may reallocate
benefits previously allocated without violating
this provision.
1. Applicable Plan(s). The nature of benefits
allocated to an alternate payee will be
determined in accord with the terms of the plan
in effect on the date the DRO is entered onto the
records of the issuing court.
A. Alternate Payee. An alternate payee is a
participant's child, spouse, former spouse or other
dependent who is designated to receive benefits under
the plan by a DRO. The Committee may rely upon the
determination of the court which issues the DRO that
the designated alternate payee in the order is
entitled, under the law of the appropriate state, to
be so named.
A. Acknowledgment and Acceptance or Rejection of a
DRO. As soon as practical after the Committee
receives a DRO, it will send the participant and
designated alternate payee an acknowledgment of
receipt, notice of acceptance or rejection and a copy
of the plan procedures for acceptance or rejection of
DROs. The Committee will send a copy of the DRO
and notice of acceptance or rejection to the trustee.
The Committee shall accept or reject a DRO within 18
months of receiving it.
A. Division of Assets By the Trustee.
1. On Receipt of a DRO. The trustee shall
freeze the account of the participant upon
receiving notice from any plan agent that an
Order purporting to be a DRO has been received.
Participants with frozen accounts may not obtain
loans or withdrawals from the plan, and may not
reallocate among funds. Distributions on frozen
accounts are subject to delay, pending acceptance
of a DRO.
1. On Rejection of a DRO. If the order is
rejected, the trustee shall keep the account of
the participant frozen for a reasonable period of
time, pending receipt of an amended DRO which is
accepted by the Committee, or direction from the
Committee that the participant's account may
become active.
1. On Acceptance of a DRO. The trustee shall
segregate the plan assets into two or more
accounts as directed by the order as soon as it
receives notification that an order is accepted.
The trustee shall set up new accounts in the name
of each alternate payee under the order. The
assets in the sub-accounts of the alternate
payees shall be allocated among the investment
funds in the same proportions as allocated in the
sub-accounts of the participant from which they
originated.
1. Participant with Outstanding Loans. If a
participant has one or more loans outstanding and
insufficient liquid deferred compensation
sub-account assets to satisfy the terms of an
accepted DRO, the trustee shall avoid allocating
loan investment assets if possible. The trustee
shall first take the necessary additional assets
from the optional sub-account until it is
exhausted. Second, the trustee shall take the
necessary additional assets from the
company-matched sub-account until it is
exhausted. Finally, the trustee shall allocate
the remaining funds necessary to satisfy the DRO
from the loan investment portion of the deferred
sub-account. (See ).
[This sub-section should be deleted effective 01-01-
96.]
1. Participant with Outstanding Loans. If a
participant has one or more loans outstanding and
insufficient liquid deferred compensation
sub-account assets or next rollover sub-account
assets, if any, to satisfy the terms of an
accepted DRO, the trustee shall avoid allocating
loan investment assets if possible. The trustee
shall first take the necessary additional assets
from the optional sub-account until it is
exhausted. Second, the trustee shall take the
necessary additional assets from the
company-matched sub-account until it is
exhausted. Third, the trustee shall take the
necessary additional assets from the loan
investment portion of the deferred sub-account.
Finally, the trustee shall allocate the remaining
funds necessary to satisfy the DRO from the loan
investment portion of the rollover sub-account.
(See ).
[This sub-section becomes effective on 01-01-96.]
1. Denial of DRO within 18 Months. If within
18 months of the original receipt of a DRO it, or
a successor DRO, is determined to be not
qualified, and no amended DRO acceptable to the
plan has been submitted to the Committee, the
assets in the alternate payees' sub-accounts will
be restored to the sub-accounts of the partici-
pant. The trustee shall restore the
participant's account to active status.
A. Participatory Functions of Alternate Payees.
Alternate payees may not withdraw from any
sub-account, contribute to any sub-account, apply for
loans, apply for hardship withdrawals, or elect an
installment distribution. An alternate payee may not
change his or her investment direction of
sub-accounts, except in conjunction with a
distribution. The rights of an alternate payee are
limited to: receipt of a quarterly statement of his
or her account, receipt of the account proceeds in
accord with the terms of the DRO or the plan, a
change in the allocation of past contributions in
conjunction with a distribution , the right to all
claims procedures mandated by ERISA and the right to
obtain copies of the plan document and summary plan
description as mandated by ERISA. None of these
rights under the plan will be in effect until the
Committee certifies the pertinent DRO as qualified
and so notifies the alternate payee.
A. Distribution of Assets Valued at $3,500 or Less.
The Committee shall distribute any alternate payee's
account assets valued at $3,500 or less at any
valuation date. Upon the determination of the value
of the account, the alternate payee must file an
application for distribution. The Committee shall
file an application for distribution on behalf of the
alternate payee if s/he does not do so within 60 days
of the determination of the value of the account
pursuant to . If insufficient cash assets are
available to distribute because of loans allocated to
the account of the alternate payee, this mandatory
distribution will be delayed until there are
sufficient cash assets in the account.
[This section should be deleted effective 01-01-96.]
A. Distribution of Assets Valued at $3,500 or Less.
The Benefits Manager shall distribute any alternate
payee's account assets valued at $3,500 or less at
any valuation date. Upon the determination of the
value of the account, the alternate payee must apply
for distribution through the voice or other
electronic response system or other media authorized
by CG&E. The Benefits Manager shall apply for
distribution on behalf of the alternate payee if s/he
does not do so within 60 days of the determination of
the value of the account pursuant to . If
insufficient cash assets are available to distribute
because of loans allocated to the account of the
alternate payee, this mandatory distribution will be
delayed until there are sufficient cash assets in the
account.
[This section becomes effective on 01-01-96.]
A. Distribution of Assets Valued Over $3,500. If
an alternate payee's assets in the plan are valued
over $3,500, s/he is not eligible to receive a lump
sum distribution until the participant from whom
the account was derived reaches age 50, terminates
employment, or dies. An alternate payee who becomes
eligible for a distribution must file an application
for a lump sum distribution with the Committee no
later than the 90 days before the end of the year in
which the participant from whom the account was
derived becomes age 65. If the alternate payee does
not file the application for distribution in a timely
manner, the Committee shall file the application on
his or her behalf pursuant to .
[This section should be deleted effective 01-01-96.]
A. Distribution of Assets Valued Over $3,500. If
an alternate payee's assets in the plan are valued
over $3,500, s/he is not eligible to receive a lump
sum distribution until the participant from whom
the account was derived reaches age 50, terminates
employment, or dies. An alternate payee who becomes
eligible for a distribution must apply for a lump sum
distribution with the Benefits Manager through the
voice or other electronic response system or other
media authorized by CG&E no later than the 90 days
before the end of the year in which the participant
from whom the account was derived becomes age 65. If
the alternate payee does not apply for distribution
in a timely manner, the Benefits Manager shall apply
on his or her behalf pursuant to .
[This section becomes effective on 01-01-96.]
A. Window Cashouts for Alternate Payees.
1. Effective Date. Alternate payees who have
been awarded benefits from this plan shall be
given a one-time opportunity to receive a lump
sum payment of all their plan interest,
regardless of the amount of the present value of
the benefit.
1. Retroactivity of Provision. Alternate
payees who had been awarded plan benefits prior
to the effective date of this provision (April 1,
1991) shall also be given this one-time
opportunity to receive their total plan benefit.
1. Notification to Alternate Payees.
Notification to the alternate payee of this offer
shall allow a minimum of 30 days and a maximum of
90 days to make the irrevocable election to
receive the lump sum benefit.
1. Timing of Notification. The Committee shall
notify the alternate payee of the availability of
the window cashout as soon as practical after the
assets have been allocated to the account of the
alternate payee. Notice of the window
distribution shall be sent to alternate payee
with an account containing loan fund assets, but
shall indicate the delay in availability. See .
1. Effect of Failure to Elect Window Cashout.
The plan assets of an alternate payee who does
not elect a cashout under this section shall be
governed by the other plan rules regarding
distributions to alternate payees.
A. Death. In the event of an alternate payee's
death, his or her remaining plan assets will be
distributed to his or her estate.
A. Alternate Payees' Responsibilities. Alternate
payees must notify the Committee in writing of any
address changes, or the name and address of a
designated representative. The notification should
be signed and dated by the alternate payee and should
reference this plan, and the name of the participant
from whom the account derives.
A. Limitation on Distribution to Alternate Payees.
An alternate payee may not receive any mandatory or
elective distribution until the alternate payee's
account no longer includes loan fund assets, unless
the mandatory distribution is required by the IRC or
ERISA. An alternate payee may not receive any
elective distribution until all assets allocated to
the account of the alternate payee have become
vested.
FIDUCIARIES:
AUTHORITY & RESPONSIBILITY
ARTICLE
I. : FIDUCIARIES: AUTHORITY & RESPONSIBILITY
A. Fiduciary. Any person who exercises any
discretionary authority or discretionary control
respecting management or administration of the plan
or the trust pursuant to the provisions of ERISA.
A. Fiduciaries. The following are named as
fiduciaries:
1. the members of the Committee, and
1. the trustee.
A. Trustee.
1. Appointment. The board of directors shall
appoint a trustee for the plan. All assets of
the plan shall be held for use in accordance with
the plan in providing the benefits payable under
the plan and for such investment expenses as may
properly be incurred by the trustee.
1. Amendment. The trust agreement may be
amended and the trustee changed in the manner
provided in the trust agreement.
1. Responsibility. The responsibility for the
retention of the trust shall lie with the trustee
and not with the Committee.
1. Voting. The trustee shall vote the shares
of CINergy stock credited to the accounts of
beneficial owners in accordance with the
instructions given by the beneficial owner. If
the instructions are not received by the trustee
by the date it has designated prior to any annual
or special meeting of shareholders of CINergy,
the trustee shall vote the uninstructed shares at
its discretion. The trustee shall also vote at
its discretion the shares of CINergy stock held
in the company stock fund that have not been
allocated to participants' accounts as of the
record date of any annual or special meeting of
shareholders of CINergy.
A. Establishment of the Committee. The Committee
is the plan administrator, commonly referred to as
the DCIP Committee other than in this plan document.
The Committee shall consist of not more than five nor
less than three members, who shall be appointed by,
and serve at the pleasure of, the board of directors.
Members of the Committee may resign by delivering
written resignation to the board of directors.
Resignations shall become effective at delivery or at
any later date specified within the written
statement.
A. Organization of the Committee. The Committee
shall elect a chairperson from their number, and a
secretary and such other officers as the Committee
may designate, who may, but need not, be members of
the Committee, to serve at the pleasure of the
Committee. No member of the Committee who is also an
employee shall receive any compensation for services
as such member.
A. Powers of the Committee. The powers of the
Committee shall include, but not be limited to, the
following:
1. Appoint Committees. The Committee may ap-
point committees with any powers it deems neces-
sary, including an executive committee to
exercise all powers of the Committee between
meetings of the Committee.
1. Set Meetings. The Committee may determine
the times and places for holding meetings of the
Committee, and the notice to be given of the
meetings.
1. Establish a Quorum. The Committee shall
determine the number of members of the Committee
necessary to constitute a quorum for the
transaction of business. A quorum must be at
least a majority of the committee members.
1. Engage Assistants. The Committee may engage
agents and assistants, counsel, clerical,
medical, vocational, and accounting services as
required to carry out the provisions of the plan.
1. Establish an Agent. The Committee may
authorize one or more of their members or any
employee as its agent to make any payment, or to
execute or deliver any instrument on behalf of
the Committee or to perform any other function of
the Committee.
[This sub-section should be deleted effective 01-01-
96.]
1. Establish an Agent. The Committee may
authorize one or more of their members or any
employee as its agent to make any payment, or to
execute or deliver any instrument on behalf of
the Committee or to perform any other function of
the Committee. The Benefits Manager and the
General Manager of Human Resources Services shall
serve as agents of the Committee with respect to
the duties assigned to these persons under the
plan.
[This sub-section becomes effective on 01-01-96.]
1. Select Investment Funds. The Committee
shall establish, and change as appropriate, an
overall plan for providing a diversified group of
investments for the trust assets. The Committee
shall also select, and change as appropriate, the
various investment funds.
1. Litigate on Behalf of the Plan. The
Committee shall commence or defend litigation on
behalf of the plan and represent the plan in all
such proceedings before any court or other
tribunal.
1. Interpret the Plan. The Committee shall
interpret the
plan, resolve any ambiguities in the plan and
establish provisions for any circumstances not
provided for in the plan, in a manner fair to
plan participants in similar circumstances and
consistent with other plan provisions.
1. Determine Eligibility for Benefits. The
Committee shall determine eligibility for
benefits under the plan, including claims to
determine a participant's rights to benefits
under any former plan provision.
[This sub-section should be deleted effective 01-01-96.]
1. Determine Eligibility for Benefits. The
Benefits Manager, the General Manager of Human
Resources Services and the Committee shall
determine eligibility for benefits under the
plan, including claims to determine a
participant's rights to benefits under any former
plan provision.
[This sub-section becomes effective on 01-01-96.]
1. Approve or Deny Requests for Hardship
Withdrawals. The Committee shall approve or deny
requests for hardship withdrawals, subject to
the availability of monies, under the provisions
of the plan.
[This sub-section should be deleted effective 10-17-
95.]
1. Approve or Deny Requests for Hardship
Withdrawals. The Senior Manager of Human
Resource Strategy shall approve or deny requests
for hardship withdrawals, subject to the
availability of monies, under the provisions of
the plan.
[This sub-section becomes effective on 10-17-95 and
should be deleted effective 01-01-96.]
1. Approve or Deny Requests for Hardship
Withdrawals. The Benefits Manager shall approve
or deny requests for hardship withdrawals,
subject to the availability of monies, under the
provisions of the plan. If a request for a
hardship withdrawal is denied or a participant
does not receive a response within 30 days from
the day the request was made to the Benefits
Manager, then the participant may make a request
to the General Manager of Human Resources
Services for a hardship withdrawal. If a
participant's request is denied by the General
Manager of Human Resources Services, or a
participant does not receive a response within 60
days from the day the request was made to the
General Manager of Human Resources Services, then
the participant may petition the Committee to
receive a hardship withdrawal. The Committee's
decision as to a participant's hardship
withdrawal request shall be final. See .
[This sub-section becomes effective on 01-01-96.]
1. Accept or Reject DROs . The Committee
shall determine if a DRO which directs allocation
of plan benefits to one or more alternate payees
is qualified.
1. Adopt Procedures. The Committee may estab-
lish rules, regulations and procedures
necessary for the administration of the plan and
the transaction of its business.
1. Amend the Plan. The Committee may adopt any
amendment to ensure the continued qualification
of the plan and trust under IRC 401(a) and
501(a), to comply with the provisions of any
federal statute or regulation impacting pension
plans, to enhance the delivery of benefits to
participants and beneficiaries, to ease plan
administration, or to respond to the withdrawal
of CG&E or any of its subsidiaries from the plan.
No amendment shall substantially increase the
cost of the plan without the consent of the board
of directors.
1. Require Accounting. The Committee may
request accounting and other information from the
trustee.
1. Direct the Trustee. The Committee may
direct the trustee, by written instrument, to
take action consistent with plan administration
and the trust agreement.
1. Approve or Deny Requests for Rollover
Contributions. The Committee shall approve or
deny requests for rollover contributions to the
plan.
[This sub-section becomes effective on 01-01-96.]
A. Committee Actions. All resolutions or other
actions taken by the Committee at any meeting shall
be by the vote of a majority of the members of the
Committee attending the meeting. Any decision or
determination reduced to writing and signed by a
majority of the members of the Committee shall be as
fully effective as if it had been made by a majority
vote at a meeting.
A. Accounts and Reports. The Committee shall
maintain records of its actions and other data
necessary for the administration of the plan. The
Committee shall prepare and file any reports required
by ERISA or the IRC. A copy of these reports shall
be maintained in the office of the secretary of the
Committee.
A. Action Taken in Good Faith. CG&E, the board of
directors, officers and employees of CG&E shall be
entitled to rely upon all information furnished by
the accountant, trustee, and all opinions given by
legal counsel. CG&E, the board of directors,
officers and employees of CG&E, and any person acting
as a fiduciary under the plan shall be fully pro-
tected from liability for any action taken, or
permitted by them in good faith, in reliance upon any
such information furnished by the accountant,
trustee, or legal counsel.
A. Decisions Final and Binding. The decisions of
the Committee on any matter within its authority
shall be made in the sole discretion of the Committee
and shall be final and binding on all parties,
including, but not limited to, CG&E, participants,
terminated participants, beneficiaries and alternate
payees.
A. Insurance. CG&E may purchase insurance to cover
liability of one or more persons who serve in a
fiduciary capacity with regard to this plan.
A. Trust. The fund established under the trust
agreement to which all deferred contributions,
optional contributions, company-matched
contributions, and company-matched stock incentive
contributions are made and from which benefits are
solely paid under the terms of the plan. Neither
CG&E nor its subsidiaries shall be required to make
direct payment of any benefit under the plan.
[This section should be deleted effective 01-01-96.]
A. Trust. The fund established under the trust
agreement to which all deferred contributions,
optional contributions, company-matched
contributions, company-matched stock incentive
contributions, and rollover contributions are made
and from which benefits are solely paid under the
terms of the plan. Neither CG&E nor its subsidiaries
shall be required to make direct payment of any
benefit under the plan.
[This section becomes effective on 01-01-96.]
A. Trust Agreement. The trust agreement is the
contract between CG&E's board of directors and the
trustee governing the duties and rights of the
trustee with regard to plan funds. In accordance
with the trust agreement, the trustee shall invest
all deferred contributions, optional contributions,
company-matched contributions, and company-matched
stock incentive contributions, and earnings thereon,
in the various investment funds.
[This section should be deleted effective 01-01-96.]
A. Trust Agreement. The trust agreement is the
contract between CG&E's board of directors and the
trustee governing the duties and rights of the
trustee with regard to plan funds. In accordance
with the trust agreement, the trustee shall invest
all deferred contributions, optional contributions,
company-matched contributions, company-matched stock
incentive contributions, and rollover contributions,
and earnings thereon, in the various investment
funds.
[This section becomes effective on 01-01-96.]
A. Plan and Employer Identification Numbers. The
three-digit plan identification number is 004.
CG&E's employer identification number is 31-0240030.
The Committee's employer identification number is 31-
0910812.
ADMINISTRATIVE PROVISIONS
ARTICLE
I. : ADMINISTRATIVE PROVISIONS
A. Filing Documents with the Plan.
1. Filing Date. Generally, documents addressed
to the Committee or forms prepared for use by
plan participants will be considered to be filed
with the Committee or the plan on the day when
they are received by any employee benefits
coordinator within CG&E's Human Resources
Department or the monthly payroll administrator.
1. DROs. On the day a DRO is received by
CG&E's Legal Department, Human Resources
Department, or the secretary of the Committee, it
will be considered to be filed with the
Committee.
1. Forms. Forms prepared under the aegis of
the SIP Committee or the Committee for the plan
will be accepted for use under the plan unless
the particular form is inappropriate for use
under this plan or has been supplanted by a
revised form.
A. Benefit Claims Process.
1. Written Request. Any person who claims a
benefit under this plan must file the request in
writing with the Committee.
1. Denial of a Claim. If the Committee denies
the benefit in full or in part, it will send a
detailed written reply to the claimant within 90
days after the claim was filed. The written
reply will include the following:
a) the specific reason(s) for the denial,
referencing any specific plan provisions upon
which the decision depends; and
a) a request for any additional information
available to the claimant in support of his
or her position and an explanation, if any,
of why it would be of assistance in resolving
the claim; and
a) the procedures available for a further
review of the claim.
1. Automatic Denial. If the Committee has not
responded in writing to the participant within 90
days of the filing of the benefit claim, the
participant may consider the claim to have been
denied and pursue the request for
reconsideration.
1. Acceptance of a Claim. If the Committee
grants the claim, payment will commence within 90
days of receipt of the claim, or a notice of
acceptance will be sent to the claimant if
commencement of payment is not feasible within
that time frame.
1. Reconsideration of Denial. The claimant may
apply in writing to the Committee for
reconsideration of the claim. The claimant must
file for reconsideration within 60 days of
receiving the notice of denial. The claimant or
his or her authorized representative may request
the opportunity to review pertinent plan
documents and submit a written statement of
issues and comments, in conjunction with the
request for reconsideration.
1. Time-frame for Reconsideration. The
Committee will render a decision within 60 days
after it receives the request for
reconsideration. If special circumstances
require extension of time for processing the
request, the decision by the Committee will be
issued within 120 days after it receives the re-
quest for reconsideration.
1. Claimant's Representative. A claimant for
plan benefits may act on his or her own behalf,
or may use a representative who is authorized to
act on behalf of the claimant, throughout the
administrative claim process.
1. Exhaustion of Administrative Remedies. If
the claim for benefits is denied or ignored in
full or in part, the claimant may file suit in
federal court to pursue the claim.
[This section should be deleted effective 01-01-96.]
A. Benefit Claims Process.
a) Written Request. Any person who claims a
benefit under this plan must file the request in
writing with the Benefits Manager.
b) Denial of a Claim or Failure to Respond by
Benefits Manager. If the Benefits Manager denies
the benefit in full or in part or fails to
respond within 30 days from the day a claimant
files his or her written request, then the
claimant may petition the General Manager of
Human Resources Services to review the claim.
c) Denial of a Claim by the General Manager of
Human Resources Services. If the General Manager
of Human Resources Services denies the benefit in
full or in part, he or she will send a detailed
written reply to the claimant within 60 days
after the claim was filed with the General
Manager of Human Resources Services. The written
reply will include the following:
1) the specific reason(s) for the denial,
referencing any specific plan provisions upon
which the decision depends; and
2) a request for any additional information
available to the claimant in support of his
or her position and an explanation, if any,
of why it would be of assistance in resolving
the claim; and
3) the procedures available for a further
review of the claim by the Committee.
d) Automatic Denial. If the General Manager of
Human Resources Services has not responded in
writing to the claimant within 60 days of the
filing of the benefit claim with the General
Manager of Human Resources Services, the claimant
may consider the claim to have been denied and
pursue the request for reconsideration with the
Committee.
e) Acceptance of a Claim. If the General Manager
of Human Resources Services grants the claim,
payment will commence within 60 days of receipt
of the claim by the General Manager of Human
Resources Services, or a notice of acceptance
will be sent to the claimant if commencement of
payment is not feasible within that time frame.
f) Reconsideration of Denial by the Committee.
The claimant may apply in writing to the
Committee for reconsideration of the claim. The
claimant must file for reconsideration within 60
days of receiving the notice of denial from the
General Manager of Human Resources Services. The
claimant or his or her authorized representative
may request the opportunity to review pertinent
plan documents and submit a written statement of
issues and comments, in conjunction with the
request for reconsideration.
g) Time-frame for Reconsideration. The Committee
will render a decision within 60 days after it
receives the request for reconsideration. If
special circumstances require extension of time
for processing the request, the decision by the
Committee will be issued within 120 days after it
receives the request for reconsideration.
h) Claimant's Representative. A claimant for
plan benefits may act on his or her own behalf,
or may use a representative who is authorized to
act on behalf of the claimant, throughout the
administrative claim process.
i) Exhaustion of Administrative Remedies. If the
claim for benefits is denied or ignored in full
or in part upon reconsideration by the Committee,
the claimant may file suit in federal court to
pursue the claim.
[This section becomes effective on 01-01-96.]
A. Uniform Administration. Decisions or actions of
the Committee with respect to the eligibility for or
nature of benefits to be provided under this plan
shall be uniformly applied to all persons similarly
situated.
[This section should be deleted effective 01-01-96.]
A. Uniform Administration. Decisions or actions of
the Benefits Manager, the General Manager of Human
Resources Services, and the Committee with respect to
the eligibility for or nature of benefits to be
provided under this plan shall be uniformly applied
to all persons similarly situated.
[This section becomes effective on 01-01-96.]
A. Statutory Construction. The plan shall be
construed, enforced, and administered according to
the laws of the State of Ohio as to any matter not
preempted by ERISA. In any case that a provision of
the plan is held illegal or invalid for any reason,
it shall not affect the remaining provisions of the
plan. However, the plan shall be construed,
enforced, and administered as if the illegal
provision had not been included in the plan.
A. Limitation of Rights of the Employee. The plan
is strictly a voluntary undertaking on the part of
CG&E. The plan is not a contract between CG&E and
any employee. The plan does not constitute
consideration for, or an inducement or condition of,
the employment of any employee. Nothing contained in
the plan gives any employee the right to be retained
in the service of CG&E or to interfere with the right
of CG&E to discharge any employee at any time. A
participant does not have any right or claim to a
benefit under the plan except upon fulfilling all of
the conditions of eligibility and qualification. The
participant's right to receive the benefit must have
become fixed under the terms of the plan and there
must be funds available in the trust sufficient to
pay the benefit.
A. Alienation of Benefits. Benefits under the plan
shall not be subject in any manner to alienation or
assignment. Any attempt to assign or alienate plan
benefits shall be void, whether such sums remain with
the trustee or are in the course of transmission to
the person entitled to them. However, benefits are
subject to DROs accepted by the Committee.
A. Response to Attempted Alienation. If any
participant, pensioner, beneficiary, or alternate
payee under the plan becomes bankrupt or attempts to
alienate or assign any benefit under the plan, except
as specifically provided in the plan or by law, then
his or her benefit shall terminate. In that event
the Committee shall hold the assets of the affected
participant, pensioner, beneficiary, or alternate
payee for his or her benefit.
A. Correction of Inadvertent Error. The Committee
may, in its discretion, recoup any benefit payment,
or correct any loan, withdrawal, or other error made
in contravention of any plan provision, whether by
mistake, inadvertence or misrepresentation. Recovery
of overpayment may be accomplished by withholding
from future benefits due the individual who was
enriched by the overpayment, or may be pursued by any
other feasible and appropriate manner of collection.
Other corrections shall be made in the manner deemed
most feasible by the Committee.
A. Information from Beneficial Owners.
1. Each beneficial owner shall be required to
furnish the Committee, in the form prescribed by
it, such personal data, affidavits, authorization
to obtain information, and other information as
the Committee may deem appropriate for the proper
operation and administration of the plan.
1. Misrepresentations of fact by a beneficial
owner to the extent that affects their
participation or benefits hereunder shall be
handled in accordance with the rules of the
Committee. In no event shall CG&E, the
Committee, or the trustee have an obligation to
provide such a beneficial owner with benefits in
excess of those which would have been provided
under the plan if there had been no misstatement
or misrepresentation.
A. Facility of Payment. If the Committee
determines from evidence that a claimant entitled to
receive benefits under this plan is (at the time the
benefit is payable) physically, mentally, or legally
incompetent to receive such benefit and give valid
receipt therefore, and that another person or an
institution is then maintaining or has custody of
such incompetent individual, and that no guardian,
custodian or other representative of the estate of
such incompetent individual has been appointed, the
Committee may cause payment to be made to that person
or institution having custody or maintaining the
participant, former participant or beneficiary. The
payment, to the extent made, shall operate as a
complete discharge of the Committee, CG&E, and the
trustee.
[This section should be deleted effective 01-01-96.]
A. Facility of Payment. If the Benefits Manager
determines from evidence that a claimant entitled to
receive benefits under this plan is (at the time the
benefit is payable) physically, mentally, or legally
incompetent to receive such benefit and give valid
receipt therefore, and that another person or an
institution is then maintaining or has custody of
such incompetent individual, and that no guardian,
custodian or other representative of the estate of
such incompetent individual has been appointed, the
Benefits Manager may cause payment to be made to that
person or institution having custody or maintaining
the participant, former participant or beneficiary.
The payment, to the extent made, shall operate as a
complete discharge of the Committee, CG&E, and the
trustee.
[This section becomes effective on 01-01-96.]
A. Lost Beneficial Owner. Any benefit payment
under the plan shall be forfeited if the Committee,
after reasonable effort, is unable to locate the
person to whom payment is due. However, any
forfeited benefit shall be restored if a valid claim
is made for the forfeited benefit; first from
forfeitures, and then from company-matched
contributions and company-matched stock incentive
contributions.
[This section should be deleted effective 01-01-96.]
A. Lost Beneficial Owner. Any benefit payment
under the plan shall be forfeited if the Benefits
Manager, after reasonable effort, is unable to locate
the person to whom payment is due. However, any
forfeited benefit shall be restored if a valid claim
is made for the forfeited benefit; first from
forfeitures, and then from company-matched
contributions and company-matched stock incentive
contributions.
[This section becomes effective on 01-01-96.]
A. Vested Right. No person shall have any vested
rights under the plan except to the extent that
vested rights may accrue to him or her as provided
under the plan. Furthermore, any person with vested
rights under the plan shall look solely to the assets
of the plan for satisfaction of his or her vested
rights.
A. Satisfaction of Claims. Any payment to any
beneficial owner in accordance with the terms of the
plan shall, to the extent thereof, be in full
satisfaction of all claims hereunder, whether they be
against CG&E, the Committee, or the trustee, any of
whom may require the beneficial owner or his or her
legal representative, as a condition precedent to any
payment, to execute a release and receipt therefore.
A. Plan Amendment Procedure. This plan may be
amended from time to time as necessary for compliance
with laws or regulations, or to meet the needs of
covered employees or the plan sponsor. The board of
directors, Committee members, human resources
personnel, trustee and/or record keeper personnel,
plan accountants, actuaries and attorneys, and plan
participants or beneficial owners may propose or
recommend amendments. Proposed amendments will be
discussed and adopted or rejected at Committee
meetings. Those proposing amendments are not
entitled to attend the meetings when the amendments
are considered. In general the Committee has the
authority to adopt amendments, but the board of
directors reserves the authority to adopt amendments
which have a significant effect upon the funding or
cost of the plan. Amendments adopted will be
reflected in the appropriate meeting minutes. Plan
attorneys will incorporate adopted amendments into
the plan document. Material modifications will be
included in the summary of material modifications
sent to participants periodically for attachment to
the summary plan description of this plan, and
eventually incorporated into the summary plan
description itself.
MISCELLANEOUS PROVISIONS
ARTICLE
I. : MISCELLANEOUS PROVISIONS
A. Expenses. The operating expenses of the plan,
including fees paid to a servicing organization and
fees for professional services and technical or
clerical assistance, are generally paid by CG&E with
some charges specifically allocated to participants
by plan terms. CG&E reserves the right to shift some
or all of the expenses it pays to the investment
funds and/or to the individual beneficial owners.
A. Number. Any use of the singular shall be
interpreted to include the plural and the plural the
singular.
A. Plan Procedures.
1. Conflicts between Plan and Procedures.
Procedures must be in accordance with the plan as
it is then being administered. Any conflict
between written procedures and written plan
terms, or plan terms required by law, adopted by
the board of directors, or the Committee pursuant
to the authority delegated to it, shall be
resolved in favor of the plan terms, as
administered.
1. Sunset Provision. Any procedure, if not
examined and re-authorized by the Committee,
shall automatically expire on the date 5 years
from its date of publication.
1. Expired Procedures. Any expired procedure
may be consulted for its historical value in
relation to plan administration, but it shall not
be dispositive of the administrative decision.
A. Titles and Headings. The names of articles,
table of contents, section and sub-section headings,
and the index of the plan have been inserted for
convenience of reference. In the event of any
conflict, the text of the plan, rather than titles,
headings, etc., shall control.
A. Merger, Consolidation, and Transfer of Assets.
Before this plan can be merged or consolidated with
any other plan, or its assets or liabilities
transferred to another plan, each participant in the
plan must be entitled to receive a benefit
immediately after the merger, transfer, or
consolidation (as if the plan had then terminated)
which is equal to or greater than the benefit he/she
would have been entitled to receive immediately
before the merger, consolidation or transfer (as if
the plan had then terminated). This plan will accept
the transfer of funds from the SIP in accordance with
. As a general rule, this plan will not accept a
transfer of assets from any other plan for any
reason, including rollovers and mergers.
[This section should be deleted effective 01-01-96.]
A. Merger, Consolidation, and Transfer of Assets.
Before this plan can be merged or consolidated with
any other plan, or its assets or liabilities
transferred to another plan, each participant in the
plan must be entitled to receive a benefit
immediately after the merger, transfer, or
consolidation (as if the plan had then terminated)
which is equal to or greater than the benefit he/she
would have been entitled to receive immediately
before the merger, consolidation or transfer (as if
the plan had then terminated). This plan will accept
the transfer of funds from the SIP in accordance with
. This plan will accept rollovers from other
qualified retirement plans.
[This section becomes effective on 01-01-96.]
A. Transfer of ESOP Funds. The plan will accept a
one-time transfer of assets, at the election of
participants in the CG&E Employee Stock Ownership
Plan (ESOP), from the terminated ESOP at the time the
ESOP assets are disbursed directly from the ESOP Plan
Trustee to the Trustee of this plan.
A. Service of Process. The secretary of the
Committee shall be the designated agent of the plan
for the service of process in connection with all
matters affecting the plan.
A. Warranties. Neither CG&E nor the Committee nor
the trustee warrant against any loss or diminution in
the value of accounts.
A. Adoption of the Plan by Subsidiaries. Any
subsidiary of CG&E may participate in the plan by
indicating its intention to that effect in writing
and delivering a copy of the instrument to the board
of directors and the trustee for acceptance in
writing. Upon acceptance by the board and the
trustee, the subsidiary will be bound by the terms of
the plan and the trust agreement, and all subsequent
plan amendments. Plan amendments are not subject to
review or approval by any subsidiary which has
elected to participate in the plan. A subsidiary may
withdraw from plan participation at any time by
delivery of its written intent to withdraw at least
60 days in advance of the effective date of the
withdrawal.
DISCRIMINATION TESTING
ARTICLE
I. : DISCRIMINATION TESTING
A. Definitions. The following terms are defined
for the purpose of this Article only.
1. Average Contribution Percentage (ACP). The
ACP is the average of the ratios, calculated
separately for each eligible employee [see ,
and ], of the sum of the eligible employee's
optional contributions, company-matched
contributions, company-matched stock incentive
contributions which are fully vested or are for
participants who actually make deferred
compensation or optional contributions for the
plan year, and any recharacterized deferred
compensation contributions, to the eligible
employee's compensation for the plan year.
[This sub-section should be deleted effective 01-01-97.]
1. Average Contribution Percentage (ACP). The
ACP is the average of the ratios, calculated
separately for each eligible employee [see ,
and ], of the sum of the eligible employee's
optional contributions, company-matched
contributions, company-matched stock incentive
contributions which are fully vested or are for
participants who actually make deferred
compensation contributions for the plan year, and
any recharacterized deferred compensation
contributions, to the eligible employee's
compensation for the plan year.
[This sub-section becomes effective on 01-01-97.]
1. Actual Deferral Percentage (ADP). The ADP
is the average of the ratios, calculated
separately for each eligible employee, of the
amount of deferred compensation contributions
made on behalf of the eligible employee for the
plan year, to the eligible employee's
compensation for that plan year.
1. Compensation. Compensation is the total
wages earned and other compensation including
amounts paid for sick pay, moving expense
payments and reimbursements that are not
deductible under IRC 217. Compensation also
includes employer contributions under this plan
and Code Section 125 plans which are not
currently taxable to the employee. Premiums for
group term life insurance that exceed the IRC
79(a) limits are also included in compensation.
Compensation is limited to $150,000 as adjusted
by the Internal Revenue Commissioner for
increases in the cost of living in accordance
with IRC 401(a)(17)(B) in the same manner as
base pay is limited.
1. Excess Aggregate Contributions. A
participant's excess aggregate contribution for
any year is the excess of
a) The total amount of the
contributions taken into account in
computing the numerator of the ACP for a plan
year for that participant over
a) the maximum amount of that participant's
contributions permitted by the ACP test.
1. Excess Contributions. A participant's
excess contribution for any year is the excess of
a) The total amount of his or her
contributions taken into account in computing
the numerator of the ADP for a plan year over
a) the maximum amount of his or her
contributions permitted by the ADP test.
1. Highly Compensated Employee.
a) A highly compensated employee is any
employee who, during the plan year or the
preceding plan year, (A) was at any time a 5%
owner, (B) received compensation in excess of
$75,000 (or such larger amount as may be
determined by the Secretary of Treasury
pursuant to IRC 415(d)), (C) received
compensation in excess of $50,000 (or such
larger amount as may be determined by the
Secretary of Treasury pursuant to IRC 415(d)
and was in the top-paid group of employees
for such plan year, or (D) was at any time an
officer and received compensation greater
than 50% of the amount in effect under IRC
415(b)(1)(A) for such plan year. Provided,
sub-sections (B) through (D) shall apply to
an employee meeting such criteria in the plan
year only if such employee is also one of the
100 employees who received the most
compensation from CG&E during the plan year.
For purposes of this sub-section ,
"compensation" shall include compensation
from CG&E and any employer required to be
aggregated with CG&E under IRC 414(b), c),
(m) or (o).
a) A highly compensated employee is any
employee who (A) separated from service with
CG&E, or is deemed to have separated from
service, prior to the plan year, (B) performs
no service for CG&E during the plan year, and
was a highly compensated employee during
either the plan year in which such separation
from service occurred or in any plan year
ending on or after the employee's 55th
birthday.
a) The maximum number of officers which
will be considered highly compensated
employees for a plan year or preceding plan
year pursuant to 1)D) above is the lesser of
(A) 50 or (B) the greater of three employees
or 10% of CG&E's employees. If no officer of
CG&E received compensation greater than 50%
of the amount in effect under IRC
415(b)(1)(A) for the plan year or the
preceding plan year, the highest paid officer
for such plan year shall be treated as a
highly compensated employee.
a) For purposes of 15.1g)1)(C) above, an
employee shall be considered a member of the
"top paid group" for any year if such
employee is in the group consisting of the
top 20% of the employees of CG&E when ranked
on the basis of compensation paid during the
year, pursuant to IRC 414(q)(4).
a) If an employee is a "family member" of a
highly compensated employee who is a 5% owner
(or an employee who was a highly compensated
employee by reason of being a 5% owner during
the plan year in which the employee separated
from service with CG&E or any plan year
ending on or after the employee's 55th
birthday) during the plan year or the
preceding plan year, or a family member of
one of the 10 most highly compensated
employees of CG&E ranked on the basis of
compensation paid by CG&E during the plan
year, then the family member and the highly
compensated employee shall be aggregated. In
such case, the family member and highly
compensated employee shall be treated as a
single employee receiving compensation and
contributions equal to the sum of the
compensation and contributions of the family
member and highly compensated employee. For
purposes of , the term "family member" shall
include the spouse, lineal ascendants and
descendants of an employee or former employee
and the spouses of such lineal ascendants and
descendants.
a) For purposes of determining whether an
employee is a highly compensated employee,
the provisions of IRC 414(q), and the
regulations thereunder, shall apply.
[This sub-section should be deleted effective 01-01-
97.]
1. Highly Compensated Employee.
a) A highly compensated employee is any
employee who (A) was at any time a 5% owner
during the plan year or the preceding plan
year, or (B) received compensation for the
preceding plan year in excess of $80,000 (or
such larger amount as may be determined by
the Secretary of Treasury pursuant to IRC
415(d)) and if CG&E elects, was in the
top-paid group of employees for such
preceding plan year.
a) A highly compensated employee is any
employee who (A) separated from service with
CG&E, or is deemed to have separated from
service, prior to the plan year, (B) performs
no service for CG&E during the plan year, and
was a highly compensated employee during
either the plan year in which such separation
from service occurred or in any plan year
ending on or after the employee's 55th
birthday.
a) For purposes of 15.1h)1)(B) above, an
employee shall be considered a member of the
"top paid group" for any year if such
employee is in the group consisting of the
top 20% of the employees of CG&E when ranked
on the basis of compensation paid during the
preceding plan year, pursuant to IRC
414(q)(4).
a) For purposes of determining whether an
employee is a highly compensated employee,
the provisions of IRC 414(q), and the
regulations thereunder, shall apply.
[This sub-section becomes effective on 01-01-97.]
A. ADP Testing. The ADP for highly compensated
eligible employees for each plan year must satisfy
one of the following tests :
1. The ADP Test. The ADP for highly
compensated eligible employees for the plan year
shall not exceed the ADP for non-highly
compensated eligible employees for the plan year,
multiplied by 1.25.
1. The ADP Alternative Limitation Test. The
ADP for highly compensated eligible employees for
the plan year shall not exceed the lesser of
a) 2 times the ADP for non-highly
compensated eligible employees for the plan
year or,
a) 2 percentage points, plus the ADP, for
non-highly compensated eligible employees.
[This section should be deleted effective 01-01-97.]
A. ADP Testing. The ADP for highly compensated
eligible employees for each plan year must satisfy
one of the following tests :
1. The ADP Test. The ADP for highly
compensated eligible employees for the plan year
shall not exceed the ADP for non-highly
compensated eligible employees for the preceding
plan year (unless CG&E elects to use current plan
year percentages), multiplied by 1.25.
1. The ADP Alternative Limitation Test. The
ADP for highly compensated eligible employees for
the plan year shall not exceed the lesser of
a) 2 times the ADP for non-highly
compensated eligible employees for the
preceding plan year (unless CG&E elects to
use current plan year percentages) or,
a) 2 percentage points, plus the ADP, for
non-highly compensated eligible employees for
the preceding plan year (unless CG&E elects
to use current plan year percentages).
[This section becomes effective on 01-01-97.]
A. ACP Testing. The ACP test will be performed
following any recharacterization of deferred
contributions required by . The ACP for highly
compensated eligible employees for each plan year
must satisfy one of the following tests :
1. The ACP Test. The ACP for highly
compensated eligible employees for the plan year
shall not exceed the ACP for non-highly
compensated eligible employees for the plan year,
multiplied by 1.25.
1. The ACP Alternative Limitation Test. The
ACP for highly compensated eligible employees for
the plan year shall not exceed the lesser of
a) 2 times the ACP for non-highly
compensated eligible employees for the plan
year or,
a) 2 percentage points, plus the ACP, for
non-highly compensated eligible employees.
[This section should be deleted effective 01-01-97.]
A. ACP Testing. The ACP test will be performed
following any recharacterization of deferred
contributions required by . The ACP for highly
compensated eligible employees for each plan year
must satisfy one of the following tests :
1. The ACP Test. The ACP for highly
compensated eligible employees for the plan year
shall not exceed the ACP for non-highly
compensated eligible employees for the preceding
plan year (unless CG&E elects to use current plan
year percentages), multiplied by 1.25.
1. The ACP Alternative Limitation Test. The
ACP for highly compensated eligible employees for
the plan year shall not exceed the lesser of
a) 2 times the ACP for non-highly
compensated eligible employees for the
preceding plan year (unless CG&E elects to
use current plan year percentages) or,
a) 2 percentage points, plus the ACP, for
non-highly compensated eligible employees for
the preceding plan year (unless CG&E elects
to use current plan year percentages).
[This section becomes effective on 01-01-97.]
A. Multiple Use of Alternative Limitation. If
neither the ADP nor the ACP for highly compensated
employees meets the tests in and , the multiple
use test of the alternative limitation must be
satisfied for the plan year. In order to satisfy the
multiple use test of the alternative limitation, the
sum of the ACP for highly compensated employees and
the ADP for highly compensated employees may not
exceed the greater of the following :
1. the sum of:
a) 1.25 times the greater of the ADP or the
ACP for non-highly compensated eligible
employees, and
a) the lesser of:
(1) 2 percentage points plus the lesser
of the ADP or ACP for the non-highly
compensated eligible employees, or
(1) 2 times the lesser of the ADP or ACP
of the non-highly compensated eligible
employees; or
1. the sum of:
a) 1.25 times the lesser of the ADP or the
ACP for non-highly compensated eligible
employees, and
a) the lesser of:
(1) 2 percentage points plus the greater
of the ADP or ACP of non-highly
compensated eligible employees, or
(1) 2 times the greater of the ADP or
ACP of non-highly compensated eligible
employees.
[This section should be deleted effective 01-01-97.]
A. Multiple Use of Alternative Limitation. If
neither the ADP nor the ACP for highly compensated
employees meets the tests in and , the multiple
use test of the alternative limitation must be
satisfied for the plan year. In order to satisfy the
multiple use test of the alternative limitation, the
sum of the ACP for highly compensated employees and
the ADP for highly compensated employees may not
exceed the greater of the following :
1. the sum of:
a) 1.25 times the greater of the ADP or the
ACP for non-highly compensated eligible
employees for the preceding plan year (unless
CG&E elects to use current plan year
percentages), and
a) the lesser of:
(1) 2 percentage points plus the lesser
of the ADP or ACP for the non-highly
compensated eligible employees for the
preceding plan year (unless CG&E elects
to use current plan year percentages), or
(1) 2 times the lesser of the ADP or ACP
of the non-highly compensated eligible
employees for the preceding plan year
(unless CG&E elects to use current plan
year percentages); or
1. the sum of:
a) 1.25 times the lesser of the ADP or the
ACP for non-highly compensated eligible
employees for the preceding plan year (unless
CG&E elects to use current plan year
percentages), and
a) the lesser of:
(1) 2 percentage points plus the greater
of the ADP or ACP of non-highly
compensated eligible employees for the
preceding plan year (unless CG&E elects
to use current plan year percentages), or
(1) 2 times the greater of the ADP or
ACP of non-highly compensated eligible
employees for the preceding plan year
(unless CG&E elects to use current plan
year percentages).
[This section becomes effective on 01-01-97.]
A. Corrective Procedure If ADP Limitation Exceeded.
If the plan fails the ADP test provided for in this
Article, the following procedure will be followed:
1. Reduction of Highly Compensated
Participants' ADP. The ADP for highly
compensated participants shall be reduced to the
maximum acceptable level determined by the ADP
test. In determining the amount of excess
contributions for each highly compensated
participant, the highest ratio will be reduced to
the next highest ratio until the maximum allowed
percentage is reached .
[This sub-section should be deleted effective 01-01-
97.]
1. Reduction of Highly Compensated
Participants' ADP. The ADP for highly
compensated participants shall be reduced to the
maximum acceptable level determined by the ADP
test. Excess contributions will be returned to
the highly compensated participants who
contributed the largest dollar amounts until the
maximum allowed percentage is reached .
[This sub-section becomes effective on 01-01-97.]
1. Recharacterization of Excess Contributions.
The amount resulting from a reduction in a
participant's deferred compensation contributions
in or above shall be recharacterized as
optional contributions and treated as taxable
income to the participant in the tax year in
which the participant would have received them if
he or she had originally elected to receive them
in cash. This recharacterization normally will
be made within 2 1/2 months after the close of
the plan year .
A. Corrective Procedure if ACP Limitation Exceeded.
If the plan fails the ACP test, the following
procedure will be followed, after recharacterizing
any deferred compensation contributions required
under or :
1. Reduction of Highly Compensated
Participants' ACP. The ACP for highly
compensated participants shall be reduced to the
maximum acceptable level determined by the ACP
test. In determining the amount of excess
aggregate contributions for each highly
compensated participant, the highest ratio will
be reduced to the next highest ratio until the
maximum allowed percentage is reached.
[This sub-section should be deleted effective 01-01-
97.]
1. Reduction of Highly Compensated
Participants' ACP. The ACP for highly
compensated participants shall be reduced to the
maximum acceptable level determined by the ACP
test. Excess aggregate contributions will be
returned to the highly compensated participants
who contributed the largest dollar amounts until
the maximum allowed percentage is reached.
[This sub-section becomes effective on 01-01-97.]
1. Disposition of Excess Aggregate
Contributions. The aggregate excess
contributions resulting from a reduction in a
highly compensated participant's ACP ratio in
shall be disposed of as follows:
a) Excess Optional Contributions. Any
excess optional contributions, plus the net
of any income or loss attributable to
optional contributions as of the last day of
the plan year, normally will be distributed
to the participant within 2 1/2 months after
the end of the plan year. However, if
distributions are not made by that time,
distributions shall be made within 12 months
after the close of the plan year.
a) Excess Company-Matched Contributions.
Any excess company-matched contributions
which are not vested will be treated as
forfeitures under . Any excess vested
company-matched contributions plus the net
of any income or loss attributable to the
excess company-matched contributions as of
the end of the plan year, shall normally be
distributed to the participant within 2 1/2
months after the end of the plan year.
However, if distributions are not made by
that time, distributions shall be made within
12 months after the close of the plan year.
a) Excess Company-Matched Stock Incentive
Contributions. Any excess company-matched
stock incentive contributions which are not
vested will be treated as forfeitures under
. Any excess vested company-matched stock
incentive contributions plus the net of any
income or loss attributable to the excess
company-matched stock incentive contributions
as of the end of the plan year, shall
normally be distributed to the participant
within 2 1/2 months after the end of the plan
year. However, if distributions are not
made by that time, distributions shall be
made within 12 months after the close of the
plan year.
A. Corrective Procedure if the Test for the
Multiple Use of Alternative Limitation is Exceeded.
If the plan fails the test for the multiple use of
the alternative limitation, the following procedure
will be followed:
1. Simultaneous Reduction of the ADP and ACP of
Highly Compensated Participants. After
determining the amount of excess contributions
and excess aggregate contributions for each
highly compensated participant, the participants
with the highest individual ADP and ACP ratios
will have their ratios reduced to the next
highest ADP and ACP ratio, until the maximum
multiple use limit is reached.
[This sub-section should be deleted effective 01-01-
97.]
1. Simultaneous Reduction of the ADP and ACP of
Highly Compensated Participants. After
determining the amount of excess contributions
and excess aggregate contributions for each
highly compensated participant, the participants
who contributed the largest dollar amounts will
have their contributions returned, until the
maximum multiple use limit is reached.
[This sub-section becomes effective on 01-01-97.]
1. Disposition of Excess Contributions and
Excess Optional Contributions and Excess Vested
Company-Matched Contributions and Excess Vested
Company-Matched Stock Incentive Contributions.
Any excess contributions, optional contributions,
vested company-matched contributions and vested
company-matched stock incentive contributions
which are determined by the application of or ,
plus the net of any income or loss attributable
to the excess contributions, optional
contributions, vested company-matched
contributions and vested company-matched stock
incentive contributions as of the last day of the
plan year, shall normally be distributed to the
participant within 2 1/2 months after the end of
the plan year. However, if distributions are
not made by that time, distributions shall be
made within 12 months after the close of the plan
year.
LIMITATION ON ANNUAL ADDITIONS
ARTICLE
I. : LIMITATION ON ANNUAL ADDITIONS
A. Definitions.
The following terms are defined solely for purposes
of this Article:
1. Annual Addition. A participant's annual
addition is the sum of the following amounts
credited to the participant's account for a plan
year:
a) deferred compensation contributions;
a) company-matched contributions;
a) company-matched stock incentive
contributions;
a) optional contributions; and
a) forfeitures.
1. Compensation. A participant's
compensation for any plan year consists of his or
her total wages earned and other compensation
including amounts paid for sick pay, moving
expense payments and reimbursements that are not
deductible under IRC 217, and premiums for group
term life insurance that exceed IRC 79(a)
limits. Compensation also includes any
distribution from any non-qualified deferred
compensation plan paid to the participant while
s/he remains employed. Compensation does not
include employer contributions under this plan or
any IRC 125 plan which are not currently taxable
to the employee or any distributions from a
qualified deferred compensation plan, regardless
of whether such amounts are includable in the
employee's gross income when distributed.
1. Defined Benefit Fraction. The defined
benefit plan fraction applicable to a participant
for any plan year is a fraction: 1) the
numerator of which is the participant's projected
annual benefit (determined as of the close of
the plan year) under the MRP; and 2) the denomi-
nator of which is the lesser of 1.25 multiplied
by the dollar limitation under IRC 415 for
defined benefit plans for such year, or 1.4
multiplied by the participant's average
compensation for the 3 consecutive calendar years
aggregating the greatest compensation from CG&E
during which s/he participated in the plan.
1. Defined Benefit Plan. A qualified plan as
defined in IRC 414(j).
1. Defined Contribution Fraction. The defined
contribution fraction applicable to a participant
for any plan year is a fraction: 1) the
numerator of which is the sum of annual additions
to the participant's account under the plan as of
the close of the limitation year; and 2) the
denominator of which is the sum of the lesser of
the following amounts determined for the
limitation year and for each prior limitation
year of service with CG&E:
(1) the product of 1.25 multiplied by the
dollar limitation under IRC 415(c)(1)(A)
for defined contribution plans for such
year, or
(2) the product of 1.4 multiplied by 25%
of the participant's compensation for
such year.
1. Defined Contribution Plan. A qualified plan
as defined in IRC 414(i).
1. Company. The employer that adopts this
plan, and all members of a controlled group of
corporations, all commonly controlled trades or
businesses or affiliated service groups of which
the adopting employer is a part, and any other
entity required to be aggregated with the
employer pursuant to IRC 414(o) regulations.
1. Excess Amount. The excess of the
participant's annual additions for the plan year
over the maximum annual additions permitted under
this Article for the plan year.
1. Projected Annual Benefit. A participant's
projected annual benefit is an amount equal to
the annual benefit that the participant would be
entitled to receive under the terms of the
defined benefit plan in which he is a
participant, assuming that:
a) the participant continues employment
until his or her normal retirement age;
a) that his or her compensation continues
at the same rate as in effect in the plan
year under consideration; and
a) that all relevant factors used to
determine benefits under such plan remain
constant.
Projected annual benefit is a benefit expressed
in the form of a single life annuity disregarding
any ancillary benefits or benefits attributable
to a rollover contribution.
A. General Limitations. Notwithstanding any other
provisions of this plan, the maximum annual addition
credited to the account of a participant for any plan
year shall not exceed the lesser of:
1. $30,000, or
1. 25% of the participant's compensation for
that plan year.
A. Estimation of Compensation. Prior to the
determination of a participant's actual compensation
for a plan year, the maximum annual addition for a
participant may be computed using a reasonable
estimation of the participant's compensation for a
plan year.
A. Disposition of Excess Amount. In the event the
limitations of this Article are exceeded because of
an allocation of forfeitures, a reasonable error in
estimating a participant's compensation or other
reasonable circumstances, the excess amount shall be
disposed of as follows :
1. First, any optional contributions that are
not eligible for company-matched contributions
and company-matched stock incentive contributions
will be returned to the participant to the extent
that the return would reduce the excess amount.
[This sub-section should be deleted effective 01-01-
97.]
1. First, any optional contributions will be
returned to the participant to the extent that
the return would reduce the excess amount.
[This sub-section becomes effective on 01-01-97.]
1. Second, any deferred compensation that are
not eligible for company-matched contributions
and company-matched stock incentive contributions
will be returned to the participant to the extent
that the return will reduce the excess amount.
1. Third, any company-matched contributions,
made on behalf of a participant under this plan
shall be reduced to the extent that the reduction
will reduce the excess amount. Such reduction in
company-matched contributions shall be treated as
a forfeiture in accordance with .
1. Fourth, any company-matched stock incentive
contributions, made on behalf of a participant
under this plan shall be reduced by the amount
needed to eliminate the excess amount. Such
reduction in company-matched stock incentive
contributions shall be treated as a forfeiture in
accordance with .
A. Aggregation of Plans of CG&E.
1. For purposes of applying the limitation of
this Article, all defined benefit plans (whether
or not terminated) of CG&E shall be treated as
one defined benefit plan and all defined
contribution plans (whether or not terminated)
shall be treated as one defined contribution
plan.
1. If an excess amount results from the
aggregation of annual additions under this plan
with annual additions under another defined
contribution plan:
a) the excess amount shall be first
attributable to this plan; and
a) such excess amount shall be treated in
accordance with .
1. Where a participant is a participant at any
time in both a defined contribution plan and a
defined benefit plan sponsored by CG&E, the sum
of the defined benefit fraction and the defined
contribution fraction for any plan year shall not
exceed 1.0. Should this limitation be exceeded
in any plan year, the participant's benefits
under the MRP shall be appropriately reduced so
that the defined benefit fraction is equal to the
difference between 1.0 and the defined
contribution fraction.
AMENDMENT AND TERMINATION OF THE PLAN
ARTICLE
I. : AMENDMENT AND TERMINATION OF THE PLAN
A. Amendment of the Plan.
1. Reservation of Right. CG&E expects to
continue the plan indefinitely, but as future
conditions cannot be foreseen, the board of
directors reserves the right to amend or
terminate the plan at any time.
1. Effect on Participants. No amendment shall
retroactively reduce the rights or benefits of
participants or permit the return to CG&E of
the CINergy stock, other securities, obligations,
deposits, or cash held by the trustee, or permit
their use or diversion for any purpose other than
for the exclusive benefits of the participants or
their beneficiaries. In addition, no amendment
shall eliminate an optional form of benefit or
eliminate or reduce an early retirement option
with respect to benefits attributable to service
before this amendment.
1. Discontinuance of Contributions. In the
event of a complete discontinuance of
company-matched contributions or company-matched
stock incentive contributions, the
company-matched sub-account will be immediately
vested.
A. Plan Termination.
If the plan is terminated all contributions will
cease. The Committee shall direct the trustee to
determine the value of each beneficial owner's
account as of the date of termination. The value of
any unallocated plan assets shall be allocated to the
beneficial owners. Each beneficial owner shall
become fully vested in the total value of his or her
account. Each beneficial owner's balance shall be
segregated by the trustee pending disposition.
Distribution shall be made, in a single payment, to
each beneficial owner as soon as practicable
following the date of plan termination. No
amendment shall deprive the beneficial owners of
their vested rights upon termination of the plan.
A. Partial Termination.
If the plan is partially terminated, all
contributions to the accounts of all affected
participants will cease. The Committee shall direct
the trustee to determine the value of each affected
beneficial owner's account as of the date of the
partial termination. The value of any unallocated
plan assets shall be allocated to beneficial owners.
Each
affected beneficial owner shall become fully vested
in his or her account. Distribution shall be made,
in a single payment, to each beneficial owner as soon
as practical following the date of partial plan
termination. However, no distribution from a
participant's deferred compensation contribution
sub-account shall be made at a time not otherwise
permitted under the plan. No amendment shall deprive
the affected beneficial owners of their vested rights
upon partial termination of the plan.
A. Liquidation of the Investment Funds.
The trust and the investment funds shall continue in
existence after the termination of the plan for such
period of time as may be required to complete the
liquidation thereof in accordance with the terms of
this Article.
TOP-HEAVY PROVISIONS
ARTICLE
I. : TOP-HEAVY PROVISIONS
A. General Rule.
For any plan year for which this plan is a "top-heavy
plan" the following provisions will supersede any
other conflicting provisions of the Plan:
1. The vesting provisions of or .
1. The minimum contribution provisions of .
1. The limitation on contributions set by .
A. Vesting Provisions.
1. Minimum Service Requirements. Participants
who have completed at least three years of
service and who have completed an hour of service
during any plan year in which the plan is
top-heavy, shall have a nonforfeitable right to
the benefit accrued under this plan.
1. Change from Top-Heavy Status. If the plan
ceases to be top-heavy, each participant's vested
accrued benefits shall be no less than his or her
account balance as of the last day of the last
plan year in which the plan was top-heavy. Each
participant with 5 or more years of service shall
have the right to elect to continue to vest in
accordance with the provisions of this Section.
Such election must be made in writing to the
Committee within 60 days of receipt of written
notice.
[This section should be deleted effective 01-01-96.]
A. Vesting Provisions.
a) Minimum Service Requirements. Participants
who are credited with an hour of service on or
after January 1, 1996 shall have a nonforfeitable
right to the benefit accrued under this plan.
b) Change from Top-Heavy Status. For
participants who are credited with an hour of
service on or after January 1, 1996, if the plan
ceases to be top-heavy, each participant's vested
accrued benefits shall be no less than his or her
account balance as of the last day of the last
plan year in which the plan was top-heavy.
[This section becomes effective on 01-01-96.]
A. Minimum Contribution Provisions.
1. Participants Entitled to Minimum
Contributions. Each participant who is a non-key
employee and who is also employed on the last day
of the plan year, even if s/he has failed to
complete 1,000 hours of service during the plan
year, or is an eligible employee who is excluded
from the plan under because of a break in
service, or for failing to commence
participation in the plan, shall be entitled to
have a combination of contributions and
forfeitures allocated to his or her account
totaling not less than three percent (the
"minimum contribution percentage") of his or her
compensation.
[This sub-section should be deleted effective 01-
01-96.]
1. Participants Entitled to Minimum
Contributions. Each participant who is credited
with an hour of service on or after January 1,
1996 and who is a non-key employee and who is
also employed on the last day of the plan year,
even if s/he has failed to complete 1,000 hours
of service during the plan year, or is an
eligible employee who is excluded from the plan
under for failing to commence participation in
the plan, shall be entitled to have a combination
of contributions and forfeitures allocated to his
or her account totaling not less than three
percent (the "minimum contribution percentage")
of his or her compensation.
[This sub-section becomes effective on 01-01-96.]
1. Reduction of Minimum Contribution
Percentage. The minimum contribution percentage
set forth above shall be reduced for any plan
year to the percentage at which contributions
(including forfeitures) are made (or required to
be made) under the plan for the plan year for the
key employee for whom such percentage is the
highest for such plan year.
1. Determining the Percentage of Key Employees.
For the purpose of above, the contribution
percentage of the key employee shall be
determined by dividing the company-matched
contributions, company-matched stock incentive
contributions and deferred compensation
contributions (including forfeitures) made for
the key employee by so much of his or her total
compensation for the plan year as does not exceed
the limitation on compensation. Contributions
taken into account under the preceding sentence
shall include company contributions under this
plan and/or the SIP. Contributions taken into
account under this sub-section shall not include
any contributions under the Social Security Act
or any other federal or state law.
A. Top-Heavy Plan Definition.
This plan is top-heavy if, as of the determination
date the aggregation group for a given plan year is a
top-heavy group. As used in this Article, these
terms have the following meanings:
1. Determination Date. For any plan year the
last day of the preceding plan year.
1. Present Value. The sum of (1) the account
balance determined as of the most recent
valuation date that is within the twelve-month
period ending on the determination date, (2) an
adjustment for contributions due as of the
determination date, and (3) for defined
contribution plans, the amount in dollar value of
the aggregate distributions made to any employee
under the applicable plan during the five year
period ending on the determination date unless
reflected in the value of the accrued benefit or
account balance as of the most recent valuation
date as defined in that plan.
1. Aggregation Group. An aggregation group is
the group of qualified plans, if any, that are
required to be aggregated in accordance with IRC
416.
1. Top-Heavy Group.
a) The aggregated group of plans is
top-heavy if, as of the applicable
determination date, the following ratio
exceeds 60%:
(1) The ratio of:
the sum of the present value of the
cumulative accrued benefits for key
employees under the MRP, plus the sum of
the account balances of key employees
under this plan and all other plans
included in the aggregation group
(1) To:
the sum of the present value of the
accrued benefits for all participants,
excluding former key employees, under the
MRP, plus the sum of account balances for
all participants, excluding former key
employees, under this plan and all other
plans included in the group.
a) In calculating the top-heavy ratio and
determining if it exceeds 60%, the MRP
Committee shall comply with the provisions of
IRC 416.
a) If the aggregation group is a top-heavy
group as of the determination date, each plan
in the group will be top-heavy. If the
aggregation group is not a top-heavy group as
of the determination date, no plan within
such group will be top-heavy.
1. Key Employee. An employee who, at any time
during the plan year or any of the 4 preceding
plan years, was:
a) an officer or former officer of CG&E
having annual compensation greater than 50
percent of the defined benefit limitation of
IRC 415(b)(1)(A). The IRC 415(b)(1)(A)
defined benefit limitation was $90,000 in
1986, and is adjusted annually; or
a) one of the 10 employees having annual
compensation of more than the limitation in
effect under IRC 415(c)(1)(A) and owning, or
considered as owning within the meaning of
IRC 318, both more than a 1/2% interest and
the largest interests in CG&E ; or
a) a 5% owner, or
a) a 1% owner with annual compensation of
more than $150,000.
1. 1% Owner. Any person who owns, or is
considered as owning within the meaning of IRC
318, more than 1% of the outstanding stock of
CG&E or stock possessing more than 1% of the
combined voting power of all stock of CG&E.
1. 5% Owner. Any person who owns, or is
considered as owning within the meaning of IRC
318, more than 5% of the outstanding stock of
CG&E or stock possessing more than 5% of the
combined voting power of all stock of CG&E.
A. Adjustments to IRC Section 415 for Top-Heavy
Plans.
In the event this plan is top-heavy and participants
also participate in the MRP, one of the two following
provisions shall apply:
1. If for the plan year this plan would not be
a "top-heavy plan" as defined in if "90%" were
substituted for "60%," then shall apply for
such plan year as if amended so that "four
percent" were substituted for "three percent".
1. If for the plan year this plan would
continue to be a "top-heavy plan" if "90%" were
substituted for "60 %," then the denominator of
both the defined contribution plan fraction and
the defined benefit plan fraction shall be
calculated as set forth in and for the
limitation year ending in such plan year by
substituting "1.0" for "1.25", except with
respect to any individual for whom there are no
deferred compensation contributions, or
company-matched contributions, company-matched
stock incentive contributions, forfeitures or
optional contributions allocated or any accruals
for such individuals under the defined benefit
plan.
A. Coordination with Other Plans.
In the event this plan is determined to be top-heavy,
the provisions of the MRP dealing with minimum
benefits and with limitations on benefits shall be
substituted for and of this plan.
CERTIFICATE
This plan has been approved and adopted by the Deferred
Compensation Investment Plan Committee on / /96,
subject to comments pursuant to the issuance of a
determination letter by the Internal Revenue Service.
_____________________________________
Richard L. Bond
Secretary of the
Deferred Compensation Investment Plan Committee
_____________________________________
Date
INDEX
This index references the root of hyphenated words as if
they were single words, e.g. "account" will also reference
the occurrence of "sub-account".
This index also references words and phrases in the text
and the endnotes. Endnote references reflect the text page
where the endnote occurs, not the page where the endnote
itself is printed.
THE CINCINNATI GAS &
ELECTRIC COMPANY
SAVINGS
INCENTIVE
PLAN
As Amended and Restated Effective January 1, 1995
TABLE OF CONTENTS
PAGE
ARTICLE 1: INTRODUCTION 1
ARTICLE 2: DEFINITIONS 3
ARTICLE 3: PARTICIPATION 6
ARTICLE 4: CONTRIBUTIONS 17
ARTICLE 5: INVESTMENTS 30
ARTICLE 6: ACCOUNTS 38
ARTICLE 7: VESTING AND FORFEITURES 41
ARTICLE 8: DISTRIBUTIONS 47
ARTICLE 9: WITHDRAWALS DURING EMPLOYMENT 65
ARTICLE 10: LOANS 76
ARTICLE 11: DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES
88
ARTICLE 12: FIDUCIARIES: AUTHORITY & RESPONSIBILITY 98
ARTICLE 13: ADMINISTRATIVE PROVISIONS 107
ARTICLE 14: MISCELLANEOUS PROVISIONS 117
ARTICLE 15: DISCRIMINATION TESTING 120
ARTICLE 16: LIMITATION ON ANNUAL ADDITIONS 135
ARTICLE 17: AMENDMENT AND TERMINATION OF THE PLAN 141
INDEX 144
INTRODUCTION
ARTICLE 1: INTRODUCTION
1.1 History. The Cincinnati Gas & Electric Company
(CG&E) instituted the Employee Incentive Thrift Plan in
1967. CG&E amended the plan on October 1, 1985 for weekly
and hourly paid employees to enable those employees to
delay the payment of some income taxes and to choose from
a wider variety of investment options. As a result of the
extensive amendments, the plan was renamed The Cincinnati
Gas & Electric Company Savings Incentive Plan.
1.2 Purpose. The plan is designed to provide retirement
income to the weekly and hourly paid employees of CG&E and
certain death benefits to their beneficiaries. The plan
is designed to supplement the participants' Retirement
Income Plan benefits which in turn are to be supplemented
by the benefits payable under the Social Security Act, and
their personal savings for retirement.
1.3 Plan Qualification. CG&E has designed this plan to
comply with the provisions of Internal Revenue Code
401(a), 401(k), and 501 as a qualified pension plan and
to conform to the provisions of the Employee Retirement
Income Security Act of 1974, as amended (ERISA). All plan
provisions are subject to change at any time to the extent
necessary to retain the qualified status of the plan or to
bring it into compliance with ERISA. The plan and trust
agreement shall be construed and interpreted in a manner
that gives effect to the intent of retaining the qualified
status of the plan.
1.4 Effective Date. Except as otherwise noted with
respect to a particular provision, the effective date of
the amendment and restatement of this plan is January 1,
1995. Earlier or later amendments to this plan become
effective on the date specifically designated in the plan
document.
ADMINISTRATIVE NOTES
DEFINITIONS
ARTICLE 2: DEFINITIONS
2.1 Scope of this Article. Definitions of terms relevant
to more than one article of the plan are generally
included in this Article. Definitions of terms which are
used primarily in a single article are defined in that
article.
2.2 List of Defined Terms. This section contains a
complete list of all defined terms used in this plan.
Each defined term is followed by a reference to the
section in which it is defined.
account 6.1a)
ACP 15.1a), 15.1b)
ADP 15.1c)
alternate payee 11.5
annual addition 16.1a)
base pay 4.1
beneficial owner 3.17
beneficiary 3.16
board of directors 2.3
break in service 3.10
CG&E 2.4
CINergy 2.5
Committee 12.4
company 16.1g)
company-matched contributions
4.2c), 4.3c), 4.3d)
company-matched stock incentive
contributions 4.2d), 4.3e), 4.3f)
company stock fund 5.3a)
compensation 15.1d), 16.1b)
DCIP 2.6
deferred compensation contributions
4.2a), 4.3a)
defined benefit fraction 16.1c)
defined benefit plan 16.1d)
defined contribution fraction 16.1e)
defined contribution plan 16.1f)
distribution 8.1
distribution valuation date 8.3
DRO 11.1
eligible employee 3.2a), 3.2b)
eligible retirement plan 8.12d)
employee 3.1
entry date 3.13, 3.14
ERISA 2.7
ESA&P 3.2c)6)
excess aggregate contribution 15.1e)
excess amount 16.1h)
excess contribution 15.1f)
Fidelity Equity-Income Fund 5.3c)
Fidelity Intermediate Bond Fund 5.3d)
Fidelity Magellan Fund 5.3b)
Fidelity Retirement Money Market Fund 5.3f)
fiduciary 12.1
forfeiture 7.6a), 7.6b)
hardship 9.9
hardship withdrawals 9.10, 9.11
highly compensated employee 15.1g), 15.1h)
hour of service 3.6
IBEW 3.25a)
IRC 2.8
IUU 3.25b)
loan fund 5.3g)
mandatory distribution year 8.6a), 8.7a)
military leaves 7.5b)
money market fund 5.3e), 5.3f)
non-eligible employee 3.2c)
optional contributions 4.2b), 4.3b)
parental leaves 7.5a)
participant 3.3
plan 2.9
plan participation forms 3.15
plan year 2.10
pooled investment funds 5.4
projected annual benefit 16.1i)
quarterly account statements 6.2
RIP 2.11
rollover contributions 4.3g)
sub-account 6.1b), 6.1c)
terminated participant 3.4
the PNC fund 5.3e)
trust 12.12, 12.13
trust agreement 12.14, 12.15
trustee 12.3
USWA 3.25c)
vesting 7.1
VIR Line 5.4
window cashouts 11.13
withdrawal 9.1
year of service 3.8, 3.9
year of vesting service 7.2
2.3 Board of Directors. The board of directors is the
board of directors of The Cincinnati Gas & Electric
Company.
2.4 CG&E. CG&E is The Cincinnati Gas & Electric Company,
the plan's sponsor, and any related company which has
adopted the plan and has employees participating in the
plan.
2.5 CINergy. CINergy is CINergy Corp., the name of the
parent holding company of CG&E.
2.6 DCIP. The DCIP is the CG&E Deferred Compensation and
Investment Plan.
2.7 ERISA. ERISA is the Employee Retirement Income
Security Act of 1974, as amended.
2.8 IRC. IRC is the Internal Revenue Code of 1986, as
amended.
2.9 Plan. The plan is the CG&E Savings Incentive Plan,
as set forth in this document.
2.10 Plan Year. The plan year is the calendar year.
2.11 RIP. The RIP is the CG&E Retirement Income Plan.
2.12 SIP. The SIP is the CG&E Savings Incentive Plan.
2.13 Related Company. A related company is any entity
which is:
a) A member of a controlled group of corporations, as
defined in IRC 1563(a), ignoring IRC 1563(e)(C)(3),
and, solely for the purpose of 2.4, modifying the IRC
1563 (a) phrase "at least 80%" to read "more than
50%", and
b) An unincorporated trade or business which is under
common control with The Cincinnati Gas & Electric
Company, as determined under IRC 414(c), and
c) A member of an affiliated service group as defined
in IRC 414(m), and
d) Any entity required to be aggregated with The
Cincinnati Gas & Electric Company under IRC 414(o),
and
e) Any other subsidiary or affiliate of The Cincinnati
Gas & Electric Company designated by its board of
directors to be a related company.
PARTICIPATION
ARTICLE 3: PARTICIPATION
3.1 Employee. An employee is any person earning a wage
or salary from CG&E, including leased employees.1
3.2 Participation.
a) Eligible Employee. An eligible employee is any
full-time employee on the CG&E weekly or hourly
payroll who has completed a year of service pursuant
to 3.8. The term eligible employee shall include
employees who have completed a year of service with a
related company. A year of service performed for a
related company prior to the date the relationship
with The Cincinnati Gas & Electric Company began is
included for the purpose of determining eligibility to
participate in this plan. The term eligible employee
shall include an individual who is a citizen of the
United States and is an employee of a related company,
if that company has entered into an agreement under
IRC 3121(l).
[This sub-section should be deleted effective 01-01-96.]
b) Eligible Employee. An eligible employee is any
full-time employee on the CG&E weekly or hourly
payroll. The term eligible employee shall include an
individual who is a citizen of the United States and
is an employee of a related company, if that company
has entered into an agreement under IRC 3121(l).
[This sub-section becomes effective on 01-01-96.]
c) Non-Eligible Employees. The following defined
classes of employees are excluded from plan
participation.
1) Co-op Employees. Co-op employees are students
working for CG&E through a recognized cooperative
education program.
2) Summer Employees. Summer employees are
students employed by CG&E during the
summer.
3) Temporary Employees. Temporary
employees are employees of an employment
agency who perform services for CG&E on
specific tasks and/or for a specified time
period. Generally, temporary employees are
directly supervised by CG&E employees.
4) Part-time Employees. Part-time
employees are employees whose regular work
schedule is limited to less than 1,000
hours in any given calendar2 year.
5) Leased Employees. Leased employees are
any persons who are not on CG&E's payroll
and who have performed services for CG&E
pursuant to an agreement between CG&E and
any other person on a substantially full
time basis for a period of at least one
year. The period for which these employees
are leased employees under the terms of
this plan is limited to the term of service
for which they are assigned to CG&E.
6) Executive, Supervisory, Administrative
and Professional Employees (ESA&P).
Executive, Supervisory, Administrative and
Professional (ESA&P) employees are full-
time employees paid on a monthly or semi-
monthly salaried basis. For convenience,
the semi-monthly and monthly payrolls are
collectively called the ESA&P payroll.
7) Weekly & Hourly Paid Employees. Those
weekly & hourly paid employees who have not
completed a year of service.
[This sub-section 7)
should be deleted
effective 01-01-96.]
8) Independent Contractors. Independent
contractors are persons or entities with
whom CG&E contracts to complete specific
tasks without supervision by CG&E
employees. Employees of entities which are
independent contractors regarding tasks
performed for CG&E may be classified as
leased employees if they fall within the
definition in 3.2c)5) above.
9) Participants in Other 401(k) Plans.
Employees who are eligible to participate
in a qualified plan which includes IRC
401(k) features sponsored by any related
company are not eligible to participate in
this plan.
d) Fail-Safe Provision. In the event that any
co-op employee, summer employee, or part-time
employee completes a year of service, that
employee shall be permitted to participate in
this plan.
3.3 Participant. A participant is any eligible
employee who has assets in the plan. (See also
3.4)
3.4 Terminated Participant. A terminated
participant is a participant who has terminated
employment with CG&E by reason of death,
disability, discharge, retirement, or resignation,
but who has assets remaining in the plan.
3.5 Determining Participation and Vesting. An
hour of service is the basic unit of measurement
used to determine an employee's participation and
vesting in the plan.
3.6 Hour of Service.
a) Current Pay. An employee earns an hour of
service for each hour for which s/he is
directly or indirectly paid or entitled to
payment by CG&E during the applicable
computation period. These hours are for either
the performance of duties or on account of a
period of time during which no duties are per-
formed (irrespective of whether the employment
relationship is terminated) due to vacation,
holiday, jury duty, personal days, incapacity
(including disability) and lay-off. In these
cases participants will be credited with 8
hours of service for each normally scheduled
working day during which no duties are
performed. An hour of service for which no
duties are performed shall be calculated
pursuant to 2530.200b-2 of the U.S. Department
of Labor regulations, which are incorporated
herein by reference.
b) Back Pay. A participant earns an hour of
service for each hour for which back pay,
irrespective of mitigation of damages, has been
either awarded or agreed to by CG&E. The same
hours of service shall not be credited under
both sub-section 3.6a) above and under this
sub-section. These hours will be credited to
the employee for the computation period or
periods to which the award or agreement
pertains, rather than the computation period in
which the award, agreement, or payment is made.
c) Effect of Leaves of Absence. Generally, an
employee will not earn hours of service while
s/he is on a leave of absence. However, hours
of service credited during certain military
leaves and parental leaves under the provisions
of 7.5 also apply for purposes of determining
eligibility to participate in the plan.
d) Consistent Personnel Practices. All leaves
of absence affecting accreditation of service
under this plan shall be authorized by CG&E in
accordance with standard personnel policies
applied in a nondiscriminatory manner to all
employees similarly situated.
3.7 Limitation Upon Earning Hours of Service.
Hours of service earned by CG&E employees generally
not eligible to participate in the plan shall be
credited, but only for determining the vesting
rights of these employees upon their change of
status to plan participants. The provisions of
3.19 and 3.20 governing transfers of participants
and plan assets to and from the DCIP are an
exception to the general rule.
3.8 Year of Service.3 A year of service is 12
consecutive months of employment with CG&E,
beginning with the first hour of service, during
which the employee completes at least 1,000 hours
of service. Eligible employees who do not complete
a year of service by the first anniversary of their
employment commencement date shall be credited with
a year of service if they complete at least 1,000
hours of service during a period of 12 consecutive
months beginning with the first, and, if necessary,
any subsequent anniversary of their employment
commencement date.
[This section should be deleted effective 01-01-96.]
3.9 Year of Service. A year of service is 12
consecutive months of employment with CG&E,
beginning with the first hour of service, during
which a co-op employee, summer employee, or part-
time employee completes at least 1,000 hours of
service. Co-op employees, summer employees or
part-time employees who do not complete a year of
service by the first anniversary of their
employment commencement date shall be credited with
a year of service if they complete at least 1,000
hours of service during a period of 12 consecutive
months beginning with the first, and, if necessary,
any subsequent anniversary of their employment
commencement date.
[This section becomes effective on 01-01-96.]
3.10 Break in Service. A break in service is any
period of 12 consecutive months beginning on the
employee's employment commencement date, and on any
subsequent anniversary of that date, during which
the employee completes less than 501 hours of
service.
3.11 Commencement of Participation.4 Except with
respect to company-matched stock incentive
contributions (see 4.2d)), an eligible employee
must file a completed set of plan participation
forms5 with the Committee6 to become a participant.
See also 3.20.
[This section should be deleted effective 01-01-96.]
3.12 Commencement of Participation. An eligible
employee must notify the Committee of his or her
intent to participate in the plan, except with
respect to the company-matched stock incentive
contributions (see 4.3e) and 4.3f)), through the
use of the voice or other electronic response
system or other media authorized by CG&E.
[This section becomes effective on 01-01-96.]
3.13 Entry Date. The entry date is the date an
eligible employee becomes a participant in the
plan. The entry date is the first weekly pay date
of the month that is at least 30 days following the
date the Committee receives the plan participation
forms from the eligible employee.
[This section should be deleted effective 01-01-96.]
3.14 Entry Date. The entry date is the date an
eligible employee becomes a participant in the
plan. The entry date is the date an eligible
employee first completes an hour of service.
[This section becomes effective on 01-01-96.]
3.15 Plan Participation Forms. Plan participation
forms are the set of documents which the eligible
employee must file with the Committee in order to
participate in the plan, except with respect to the
company-matched stock incentive contributions. (See
4.2d)). The forms are:
a) The plan participation agreement, and 7
b) The beneficiary designation form.8
[This section should be deleted effective 01-01-96.]
3.16 Beneficiary. The beneficiary is the person
or entity designated in writing by a participant to
receive plan benefits after the participant's
death. (See 8.14 and 11.14)
3.17 Beneficial Owner. The beneficial owner is
the owner or beneficiary of an account with the
plan. A beneficial owner may be a participant, a
terminated participant, a participant's spouse, or
an alternate payee.
3.18 Beneficiary Designation. A participant must
designate a beneficiary. Married participants must
designate their spouse as beneficiary, unless the
participant's spouse consents to someone else
being named as beneficiary. The consent must be in
writing on the form9 approved by the Committee and
the spouse's signature must be notarized. The form
must be filed with the Committee to become
effective.10 A consenting spouse may withdraw
consent by written notice to the Committee,
notarized in the same manner as the consent. Once
the retraction of consent has been filed with and
accepted by11 the Committee, the spouse is
reinstated by plan operation as the participant's
beneficiary.
3.19 Transfer to the ESA&P Payroll. A participant
who transfers to the ESA&P payroll is no longer
eligible to participate in the plan. All of the
participant's contributions to the plan shall
cease, effective with his or her last pay date as
an employee on the weekly or hourly payroll.
3.20 Transfers From The ESA&P Payroll.
a) Transfers of DCIP Accounts. The trustee
shall transfer to this plan the DCIP account of
any employee who becomes eligible for
participation.12 The transfer shall be made as
soon as possible following the date that the
employee becomes eligible. The transferred
account shall be allocated to the sub-accounts
and the investment funds in the manner most
similar to the participant's DCIP sub-accounts.
b) Continuing Contributions. The contribution
percentages and investment directions of any
DCIP participant who becomes eligible for
participation in this plan will continue as
contributions and investment directions to this
plan.
3.21 Participatory Restrictions on the Activities
of Terminated Participants. Subject to the
limitations of 8.5a), 8.5e) and 8.6 of this
plan, a terminated participant's account will
remain in this plan until s/he takes a
distribution. A terminated participant may not
contribute to the plan, withdraw from an optional
sub-account, or obtain hardship withdrawals or
loans. A terminated participant may not reallocate
past contributions except in conjunction with a
distribution.13
[This section should be deleted effective 08-01-95.]
3.22 Participatory Restrictions on the Activities
of Terminated Participants. Subject to the
limitations of 8.5a), 8.5b), 8.5e), 8.5f), 8.6
and 8.7 of this plan, a terminated participant's
account will remain in this plan until s/he takes a
distribution. A terminated participant may not
contribute to the plan, withdraw from an optional
sub-account, or obtain hardship withdrawals or
loans.
[This section becomes effective on 08-01-95.]
3.23 Participation of Rehired Participants.
a) Non-Vested Participants.
1) 5 or Fewer Breaks in Service. Any
terminated participant in this plan or in
the DCIP, who is not yet vested in
company-matched contributions or company-
matched stock incentive contributions under
this plan or the DCIP and who is
subsequently rehired on the weekly or
hourly payroll before the completion of
5 consecutive breaks in service, becomes an
eligible employee on his or her date of
rehire. See 7.6 regarding restoration of
the company-matched sub-account.
2) More than 5 Breaks in Service. If the
individual described in sub-section
3.23a)1) above is rehired after incurring 5
consecutive breaks in service, eligibility
will be subject to the requirements of
3.2a) of this plan, beginning with the date
of rehire.
b) Vested Participants. Any terminated
participant in this plan or in the DCIP, who is
vested in company-matched contributions or
company-matched stock incentive contributions
under this plan or the DCIP and who is
subsequently rehired on the weekly or hourly
payroll becomes an eligible employee on his or
her reemployment date.14
[This section should be deleted effective 01-01-96.]
3.24 Participation of Rehired Participants. Any
terminated participant in this plan or the DCIP who
is subsequently rehired on or after January 1,
1996, on the weekly or hourly payroll is an
eligible employee on his or her reemployment date.
[This section becomes effective on 01-01-96.]
3.25 Union Representation. Eligible employees are
represented or have their benefits under this plan
bargained for by one of three labor-unions. The
union representation of eligible employees is
either under the IBEW, the IUU or the USWA.
a) IBEW. The IBEW is the International
Brotherhood of Electrical Workers. IBEW is
used in the plan as an adjective to describe
those workers bargained for by this union.
b) IUU. The IUU is the Independent Utilities
Union. IUU is used in the plan as an adjective
to describe those workers bargained for by this
union.
c) USWA. The USWA is the United Steelworkers
of America. USWA is used in the plan as an
adjective to describe those workers bargained
for by this union.
CONTRIBUTIONS
ARTICLE 4: CONTRIBUTIONS
4.1 Base Pay.
a) Definition. Base pay is the amount of straight
time wages paid to an eligible employee by CG&E on a
weekly or hourly basis for services, up to and
including a maximum of 40 hours per week.1 Base pay
excludes bonuses, shift differentials, overtime,
incentive pay, moving allowances, living2 and similar
allowances, and imputed income. Base pay includes the
amount of all elective contributions made by CG&E on
behalf of the participant pursuant to salary reduction
agreements, if the amount is not included in the gross
income of the participant under IRC 125. Base pay
includes deferred compensation contributions made
under this plan.
[This sub-section should be deleted effective 01-01-97.]
b) Definition. Base pay is the amount of straight
time wages paid to an eligible employee by CG&E on a
weekly or hourly basis for services, up to and
including a maximum of 40 hours per week.3 Base pay
excludes shift differentials, incentive pay, moving
allowances, living and similar allowances, and imputed
income. Base pay includes the amount of all elective
contributions made by CG&E on behalf of the
participant pursuant to salary reduction agreements,
if the amount is not included in the gross income of
the participant under IRC 125. Base pay includes
deferred compensation contributions made under this
plan. For purposes of determining deferred
compensation and optional contributions, base pay
includes overtime and bonuses. For purposes of
determining company-matched contributions and company-
matched stock incentive contributions, base pay
excludes overtime, but includes bonuses.
[This sub-section becomes effective on 01-01-97.]
c) Use of Base Pay. Base pay shall be taken
into account only while an employee is a
participant in the plan.
d) Limitation on Base Pay. Base pay taken into
account for determining contributions under the
plan shall not exceed $150,000, as adjusted4 by
the Commissioner of the Internal Revenue
Service for increases in the cost of living in
accordance with IRC 401(a)(17)(B).
e) Use of Base Pay Limitation. In determining
the base pay of a participant for the purpose
of determining the participant's accruals under
this plan, the rules of IRC 414(q)(6) shall
generally apply. However, the term "family"
shall include only the spouse of the
participant and any lineal descendants of the
participant who have not attained age 19 prior
to the close of the plan year. If, as a result
of this application, the adjusted $150,000
limitation is exceeded, then the limitation
shall be prorated among the affected
individuals in proportion to each such
individual's base pay prior to the application
of the limitation.
[This sub-section should be deleted effective 01-
01-97.]
4.2 Contributions. The plan will accept four
types of contributions:
a) Deferred Compensation Contributions. A
deferred compensation contribution is the
amount by which a participant directs CG&E to
reduce his or her base pay and which CG&E is
obligated to contribute to the plan.
Participants may elect to have their base pay
reduced by executing a plan participation
agreement. CG&E will then make a contribution
to the plan in an amount equal to the
participant's selected reduction each pay
period. The amount reduced, expressed in 1/2%
increments, shall not exceed 15% of the
participant's base pay.
b) Optional Contributions. An optional
contribution is the participant's voluntary
contribution made to the plan through payroll
deduction after taxes have been withheld.
Participants may choose to make contributions
to the plan each pay period through payroll
deduction. These optional contributions,
expressed in 1/2% increments, are deducted
after taxes have been withheld. The amount of
the optional contribution together with the
deferred compensation contribution, shall not
exceed 15%5 of the participant's base pay.
c) Company-Matched Contributions. The company-
matched contribution is the amount contributed
by CG&E to the participant's plan account from
its earnings based upon the participant's
deferred compensation contributions and/or
optional contributions, as applicable. For
each pay period of the participant, CG&E will
contribute out of its accumulated earnings an
amount, together with forfeitures, equal to 55%
of each participant's deferred compensation and
optional contributions up to and including 5%
of the participant's base pay. Participants'
contributions exceeding 5% of base pay will not
be matched.
d) Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy
stock equal in value to between $0.10 and $0.30
for each dollar of a participant's deferred
compensation and optional contributions up to
and including 4% of the participant's base pay
for that year. Participants' contributions
exceeding 4% of base pay will not be matched.
If a participant did not make any deferred
compensation or optional contributions during
the year, s/he may still receive a company-
matched stock incentive contribution based on
the hypothetical assumption that s/he made
deferred compensation or optional contributions
of 1% of his or her base pay for that year.
[This section should be deleted effective 01-01-96.]
4.3 Contributions. The plan will accept five types
of contributions:
a) Deferred Compensation Contributions. A
deferred compensation contribution is the
amount by which a participant directs CG&E to
reduce his or her base pay and which CG&E is
obligated to contribute to the plan.
Participants may elect to have their base pay
reduced by informing the Committee through the
voice or electronic response system or other
media authorized by CG&E. CG&E will then make
a contribution to the plan in an amount equal
to the participant's selected reduction each
pay period. The amount reduced, expressed in
1/2% increments, shall not exceed 15% of the
participant's base pay.
b) Optional Contributions. An optional
contribution is the participant's voluntary
contribution made to the plan through payroll
deduction after taxes have been withheld.
Participants may choose to make contributions
to the plan each pay period through payroll
deduction. These optional contributions,
expressed in 1/2% increments, are deducted
after taxes have been withheld. The amount of
the optional contribution together with the
deferred compensation contribution, shall not
exceed 15%6 of the participant's base pay.
c) Company-Matched Contributions. The company-
matched contribution is the amount contributed
by CG&E to the participant's plan account from
its earnings based upon the participant's
deferred compensation contributions and/or
optional contributions, as applicable. For
each pay period of the participant, CG&E will
contribute out of its accumulated earnings an
amount, together with forfeitures, equal to 55%
of each participant's deferred compensation and
optional contributions up to and including 5%
of the participant's base pay. Participants'
contributions exceeding 5% of base pay will not
be matched.
[This sub-section should be deleted effective 01-
01-97.]
d) Company-Matched Contributions. The company-
matched contribution is the amount contributed
by CG&E to the participant's plan account from
its earnings based upon the participant's
deferred compensation contributions. For each
pay period of the participant, CG&E will
contribute out of its accumulated earnings an
amount, together with forfeitures, equal to 60%
of each participant's deferred compensation
contributions up to and including 5% of the
participant's base pay. Participants'
contributions exceeding 5% of base pay will not
be matched.
[This sub-section becomes effective on 01-01-97.]
e) Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy
stock between $0.10 and $0.30 for each dollar
of a participant's deferred compensation and
optional contributions up to and including 4%
of the participant's base pay for that year.
Participants' contributions exceeding 4% of
base pay will not be matched. If a participant
did not make any deferred compensation or
optional contributions during the year, s/he
may still receive a company-matched stock
incentive contribution based on the
hypothetical assumption that s/he made deferred
compensation or optional contributions of 1% of
his or her base pay for that year.
[This sub-section should be deleted effective 01-
01-97.]
f) Company-Matched Stock Incentive
Contributions. The company-matched stock
incentive contribution is the amount of CINergy
stock contributed by CG&E in addition to the
company-matched contribution. Depending on the
performance of CINergy for the year, CG&E will
contribute, if at all, an amount of CINergy
stock between $0.20 and $0.40 for each dollar
of a participant's deferred compensation
contributions up to and including 5% of the
participant's base pay for that year.
Participants' deferred compensation
contributions exceeding 5% of base pay will not
be matched. If a participant did not make any
deferred compensation contributions during the
year, s/he may still receive a company-matched
stock incentive contribution based on the
hypothetical assumption that s/he made deferred
compensation contributions of 1% of his or her
base pay for that year.
[This sub-section becomes effective on 01-01-97.]
g) Rollover Contributions. A rollover
contribution is the amount contributed by a
participant to his or her plan account
attributable to a distribution from a
retirement plan of a former employer. A
participant must make a written request to the
Committee to make a rollover contribution. The
request must include a statement detailing the
type of property to be rolled over and that
such property is an eligible rollover
contribution.7 If the Committee so permits,
the participant may transfer the amount of the
rollover contribution to the trustee.
[This section becomes effective on 01-01-96.]
4.4 Contributions Due to Military Leave.
Notwithstanding any provision of this plan to the
contrary, contributions with respect to qualified
military service will be provided in accordance
with IRC 414(u).
4.5 Contributions from Sources other than Base
Pay.
a) Settlement of Disputes. Prior to the time a
participant becomes entitled to receive a lump
sum payment of wages in settlement of a dispute
with CG&E, the participant may direct
contributions to this plan from the lump sum
payment in the same percentages and allocation
to funds as are in effect at the time when the
lump sum amount is paid. CG&E may also make
company-matched contributions and/or company-
matched stock incentive contributions on the
settlement amount.
b) Lump Sum Payment in Lieu of Salary. If a
class of participants is designated by CG&E to
receive certain pay in the form of a lump sum,
the determination of whether that special pay
may be used as base pay for making
contributions to this plan shall be determined
by CG&E. CG&E may also make a determination
whether it will make company-matched
contributions and/or company-matched stock
incentive contributions for each payment of a
special lump sum. In the event that the
special pay is permitted to be used as base pay
for plan contributions, those contributions
must be in the same percentages designated by
the participant and in effect at the time when
the lump sum amount is paid.
4.6 Changing the Percentage of Contributions.
a) Participants. A participant may change the
percentage of deferred compensation
contributions or optional contributions four
times per year.8
[This sub-section should be deleted effective 01-
01-96.]
b) Participants. A participant may change the
percentage of deferred compensation
contributions and/or optional contributions at
anytime through the voice or other electronic
response system or other media authorized by
CG&E.
[This sub-section becomes effective on 01-01-96.]
c) Other Beneficial Owners. Terminated
participants, beneficiaries and alternate
payees may not contribute to this plan.
4.7 Limitation on Deferred Compensation
Contributions.
a) Maximum Amount. A participant's deferred
compensation contributions shall not exceed the
maximum deferred amount in effect for that tax
year pursuant to IRC 402(g)9. The maximum
amount for 1995 is $9,24010 and is adjusted
annually as announced by the Internal Revenue
Service.
b) Reaching Maximum Amount. At the time the
IRC 402(g) limit is reached for the amount
being deferred by a participant, his or her
deferred compensation contribution shall cease
for the remainder of that year.
c) Excess Deferred Compensation Contributions.
If a participant files a plan participation
agreement which causes CG&E to inadvertently
defer more than is permitted in 4.7a) above,
the excess deferred compensation contribution
shall be returned to the participant.11
[This sub-section should be deleted effective 01-
01-96.]
d) Excess Deferred Compensation Contributions.
If a participant informs the Committee through
the voice or other electronic response system
or other media authorized by CG&E which causes
CG&E to inadvertently defer more than is
permitted in 4.7a) above, the excess deferred
compensation contribution shall be returned to
the participant.12
[This sub-section becomes effective on 01-01-96.]
4.8 Voluntary Suspension of Contributions.
a) General Rule. Participants may suspend
either their deferred compensation or optional
contributions, or both by filing13 an
application to suspend contributions14 with the
Committee.
b) Effective Date. Voluntary suspensions shall
become effective on a pay date no later than 30
days after the application to suspend
contributions was filed with the Committee.
c) Period of Suspension. Participants may not
make the suspended type of contributions to the
plan for at least 12 months from the effective
date of the suspension.
d) Makeup of Contributions. Participants may
not make up suspended contributions.
[This section should be deleted effective 01-01-96.]
4.9 Involuntary Suspension of Contributions.
a) Hardship Withdrawals. Participants who have
obtained a hardship withdrawal shall be
automatically suspended from making deferred or
optional contributions for a period of 12
months beginning from the date of the
distribution of the hardship withdrawal.
b) Leaves of Absence. Contributions to the
plan are automatically suspended during a
participant's leave of absence, because the
participant earns no base pay from which to
contribute. When the participant returns to
work for CG&E, contributions shall automati-
cally resume with the first pay check in
accordance with the terms of the most recent
plan participation agreement.
[This sub-section should be deleted effective 01-
01-96.]
c) Leaves of Absence. Contributions to the
plan are automatically suspended during a
participant's leave of absence, because the
participant earns no base pay from which to
contribute. When the participant returns to
work for CG&E, contributions shall automati-
cally resume with the first pay check in
accordance with the terms most recently
provided by the participant on the voice or
other electronic response system or other media
authorized by CG&E.
[This sub-section becomes effective on 01-01-96.]
4.10 Resumption of Contributions. Upon the
expiration of the required period of suspension,
participants may resume making contributions to the
plan by filing a resumption of contributions form15
with the Committee. The resumption will be
effective on the first pay date of the month no
later than 30 days after the date the resumption of
contributions form was filed with the Committee.
Contributions will resume at the same percentages
of base pay as were in effect at suspension. If
the resumption of contributions form was filed
during the period of suspension, it will become
effective on the first pay date of the month
following the period of suspension.
[This section should be deleted effective 01-01-96.]
4.11 Resumption of Contributions. Upon the
expiration of the required period of suspension,
participants may resume making contributions to the
plan by informing the Committee through the voice
or other electronic response system or other media
authorized by CG&E. The resumption will be
effective on the first pay date of the month no
later than 30 days after the date the participant
informs the Committee of his or her intent to
resume contributions. Contributions will resume at
the same percentages of base pay as were in effect
at suspension. If the participant informs the
Committee during his or her suspension, the
resumption of contributions will become effective
on the first pay date of the month following the
period of suspension.
[This section becomes effective on 01-01-96.]
4.12 Remittance of Contributions. CG&E will
generally forward all deferred compensation,
optional, and company-matched contributions to the
trustee on the pay date for which the contributions
are effective. In any event, CG&E must transmit
these contributions promptly after the end of the
month in which the contributions are taken.
4.13 Return of Company-Matched Contributions and
Company-Matched Stock Incentive Contributions.
a) General Rule. Except as provided in 7.6,
15.9c)2), 15.9c)3), 16.4d) and 16.4e), and in
this section, the assets of the plan shall
never revert to or be used by CG&E.
1) Mistaken Contributions. Company-matched
contributions and company-matched stock
incentive contributions made to the trust
by reason of a mistake of fact may be
returned to CG&E within one year after the
payment of the contribution.
2) Non-deductible Contributions.
Company-matched contributions and company-
matched stock incentive contributions made
to the plan which are deemed non-deductible
pursuant to IRC 404 shall be returned to
CG&E within one year after the disallowance
of the deduction. If any portion of the
non-deductible amount is from a
participant's deferred compensation
contribution, that amount shall be returned
to the participant
INVESTMENTS
ARTICLE 5: INVESTMENTS
5.1 Principles of Investment Fund Selection. The
Committee will establish and direct the trustee to
maintain in the trust at least three investment funds,
which collectively are intended to comply with ERISA 404
c) and the regulations thereunder1.
5.2 Selection of Investment Funds. One of the investment
funds will be the company stock fund. The Committee will
select the other investment funds, following the
principles of 5.1. If a fund is added or deleted,
beneficial owners will be given the opportunity to
reallocate their past contributions and redirect their
sub-accounts among the authorized investment funds.
5.3 Investment Funds in the Plan. The following are the
investment funds2 maintained in the plan trust:
a) Company Stock Fund. The company stock fund is a
unitized fund which consists largely of shares of
CINergy common stock, and a proportionately small
amount of cash. It has been available (formerly with
CG&E common stock) since the plan was established on
October 1, 1985. The stock will be purchased at fair
market value on the open market or from CINergy
through the issuance of authorized but previously
unissued shares at the option of CINergy. The stock
may also be obtained through the exercise of stock
rights. Stock received by the trustee as a stock
dividend distribution or right is reflected by an
increase in the unit value.
b) Fidelity Magellan Fund.3 The Fidelity Magellan
Fund seeks capital appreciation by investing primarily
in common stock and securities convertible into common
stock.4 It was added as an additional investment
option on 10-01-92.
c) Fidelity Equity-Income Fund. The Fidelity Equity-
Income Fund seeks reasonable income by investing
primarily in income-producing equity securities.5 It
has been available since the plan was established on
October 1, 1985.
d) Fidelity Intermediate Bond Fund. The Fidelity
Intermediate Bond Fund seeks to obtain a high
level of current income by investing primarily in
high and upper-medium grade fixed-income obligations.6
It has been available since the plan was established
on October 1, 1985.
e) The PNC Fund (Sower Money Market Fund - Money
Market Portfolio).7 The investment objective of this
portfolio is to provide as high a level of current
interest income as is consistent with maintaining
liquidity and stability of principal.8 This fund is
called the money market fund throughout this plan. A
money market fund, but not necessarily this particular
fund, has been available since the plan was
established on October 1, 1985.
[This sub-section should be deleted effective 01-01-96.]
f) Fidelity Retirement Money Market Fund. The
investment objective of this portfolio is to provide
as high a level of current interest income as is
consistent with maintaining liquidity and stability of
principal. This fund is called the money market fund
throughout this plan. A money market fund, but not
necessarily this particular fund, has been available
since the plan was established on October 1, 1985.
[This sub-section becomes effective on 01-01-96.]
g) Loan Fund. The loan fund consists of all promis-
sory notes securing plan loans to participants. The
loan fund is administered as described in Article 10.
5.4 Vested Interest Response Line (VIR Line). The vested
interest response line is the telephone line established
and maintained by the trustee for use by participants to
access their account information and to effectuate certain
transactions affecting their accounts. The Vested
Interest Response Line is referred to as the VIR Line
throughout this plan.
5.5 Participant Investment Elections. A participant
selects investment funds for his or her future
contributions by using the investment election menu on the
VIR Line. Investments must be made in whole percentage
increments.9
5.6 Investment of Contributions. The trustee shall
invest the participants' contributions from CG&E in the
participants' current designated investment selections.
If the trustee has no record of a current investment
selection for a participant's contribution, it shall
invest the contribution in the money market fund. The
trustee shall invest all company-matched contributions and
company-matched stock incentive contributions in the
company stock fund.10
[This section should be deleted effective 01-01-96.]
5.7 Investment of Contributions. The trustee shall invest
the participants' contributions from CG&E in the
participants' current designated investment selections.
If the trustee has no record of a current investment
selection for a participant's contribution, it shall
invest the contribution in the money market fund. The
trustee shall invest all company-matched contributions and
company-matched stock incentive contributions in the
company stock fund.11 However, a participant who has
reached age 50 may elect to invest his or her company-
matched contributions and company-matched stock incentive
contributions in any one or more of the investment funds
as s/he directs by informing the Committee through the
voice or other electronic response system or other media
authorized by CG&E. Allocations must be made in whole
percentages.
[This section becomes effective on 01-01-96.]
5.8 Initial Allocation of Deferred and Optional
Contributions. A participant's deferred compensation
and/or optional contributions will be allocated to any one
or more of the investment funds as s/he directs by filing
an allocation of future contributions form with the
Committee.12. Allocations must be made in any whole
percentage. Allocations will apply to all contributions
made on or after the entry date (see 3.13). Participant-
s' contributions will be invested in the investment funds
as of the valuation date coinciding with or next following
the date on which they are received by the trustee. If
the allocation form is not yet received by the trustee
when it must allocate contributions, the contributions
will be invested in the money market fund, until the
directions for allocations are filed with the Committee.13
[This section should be deleted effective 01-01-96.]
5.9 Initial Allocation of Deferred and Optional
Contributions. A participant's deferred compensation
and/or optional contributions, collectively, will be
allocated to any one or more of the investment funds as
s/he directs by informing the Committee through the voice
or other electronic response system or other media
authorized by CG&E. Allocations must be made in any whole
percentage. Allocations will apply to all contributions
made on or after the entry date (see 3.14). Participant-
s' contributions will be invested in the investment funds
as of the valuation date coinciding with or next following
the date on which they are received by the trustee. If
the trustee has not yet received the participant's
investment directions when it must allocate contributions,
the contributions will be invested in the money market
fund, until the directions for allocations are provided by
the participant to the Committee.
[This section becomes effective on 01-01-96.]
5.10 Investment Fund Transfers of Current Balances. A
participant can select reallocation of his or her current
account balance in different investment funds and/or
different percentages of allocation by using the fund
transfers menu on the VIR Line.14 Investments must be
made in whole percentage increments. A participant may
elect or change investment funds and/or the percentages in
which contributions will be allocated once per quarter.
[This section should be deleted effective 08-01-95.]
5.11 Investment Fund Transfers of Current Balances.
Except for participants or terminated participants whose
accounts are frozen due to pending domestic relations
orders, any participant or terminated participant with an
account balance under the plan can select reallocation of
his or her current account balance in different investment
funds and/or different percentages of allocation by using
the fund transfers menu on the VIR Line.15 Investments
must be made in whole percentage increments. A
participant or terminated participant may elect or change
investment funds and/or the percentages in which
allocation will be allocated once per quarter.
[This section becomes effective on 08-01-95 and should be deleted
effective 01-01-96.]
5.12 Investment Fund Transfers of Current Balances.
Except for participants or terminated participants whose
accounts are frozen due to pending domestic relations
orders, any participant or terminated participant with an
account balance under the plan can select reallocation of
his or her current account balance in different investment
funds and/or different percentages of allocation by using
the fund transfers menu on the VIR Line.16 Investments
must be made in whole percentage increments. A
participant or terminated participant may elect or change
investment funds and/or the percentages in which
allocations will be allocated at anytime.
[This section becomes effective on 01-01-96.]
5.13 Risk of Loss. The participant (or terminated
participant) bears the effect for all gain or loss in
market value of the investments selected for his or her
plan assets. The participant (or terminated participant)
also bears the effect of any market fluctuations which
occur between the time his or her instructions are
delivered to the Committee or the trustee and the time
that the instructions are effectuated. The trustee, the
Committee, the individual Committee members, and CG&E will
not be responsible or liable to participants (or
terminated participant) for the negative or positive
effect of market fluctuations or reasonable delay in
processing transactions upon their accounts.
5.14 Voting CINergy Stock.
a) Participation Instructions. The trustee shall vote
the shares of CINergy stock credited to the accounts
of beneficial owners in accordance with the
instructions given by the beneficial owner. If the
instructions are not received by the trustee by a date
the trustee designates prior to any meeting of
shareholders of CINergy, the trustee shall vote such
uninstructed shares at its discretion.
b) Trustee Discretion. The trustee shall vote at its
discretion the CINergy stock held in the company stock
fund which have not been allocated to beneficial
owners' accounts as of the record date of any meeting
of shareholders of CINergy.
ACCOUNTS
ARTICLE 6: ACCOUNTS
6.1 Accounts and Sub-accounts.
a) Account. Each beneficial owner's total assets in
the plan shall be maintained in a separate account.
The account shall reflect all transactions regarding
the beneficial owner's assets. The assets in an
account shall be allocated among sub-accounts.
b) Sub-account. Each account must include one or more
of the following sub-accounts:
1) a deferred compensation sub-account1;
2) an optional sub-account; and
3) a company-matched sub-account.
[This sub-section should be deleted effective 01-01-96.]
c) Sub-account. Each account must include one or more
of the following sub accounts:
1) a deferred compensation sub-account;
2) an optional sub-account;
3) a company-matched sub-account; and
4) a rollover sub-account.
[This sub-section becomes effective on 01-01-96.]
d) Account Value. Each participant's account is
valued daily.2 The value of an account reflects the
number of units of each investment fund owned by the
participant and is based upon the unit price of each
fund. Both the units owned and the price reflect a
close of business valuation.3
e) Investment Ownership. The trustee owns4 all plan
assets as a fiduciary on behalf of the beneficial
owners.5
6.2 Quarterly Statements. The trustee shall prepare an
individual statement of account for each beneficial owner
on a quarterly basis.6 The statements will reflect the
status of the account and sub-accounts of the beneficial
owner. The trustee shall mail the statements to the
beneficial owners as soon as practical after each quarter
end.
VESTING AND FORFEITURES
ARTICLE 7: VESTING AND FORFEITURES
7.1 Vesting. The process by which an employee becomes
entitled to a nonforfeitable benefit under this plan.
7.2 Year of Vesting Service. Each period of 12
consecutive months of employment, beginning with the date
on which the employee first performed an hour of service
for CG&E or any related company, during which he or she
completes at least 1,000 hours of service. The
calculation period begins on the date (and subsequent
anniversaries of that date) the employee first performed
an hour of service for CG&E or a related company. Hours
of service prior to the date on which the relationship to
the Cincinnati Gas & Electric Company began are not
included for the purpose of vesting under this plan. The
hours of service of non-participating employees, leased
employees and co-ops are included in determining their
years of vesting service.
[This section should be deleted effective 01-01-96.]
7.3 Vested Benefits.
a) Vested Accrued Benefit. The portion of a
participant's account available for distribution to
the participant upon termination of employment with
CG&E.
b) Deferred Compensation Sub-account and Optional
Sub-account. Participants are immediately vested in
their deferred compensation sub-accounts and optional
sub-accounts.
[This sub-section should be deleted effective 01-01-96.]
c) Deferred Compensation Sub-account, Optional Sub-
account and Rollover Sub-account. Participants are
immediately vested in their deferred compensation sub-
accounts, optional sub-accounts and rollover sub-
accounts.
[This sub-section becomes effective on 01-01-96.]
d) Company-Matched Sub-account. Participants are
vested in their company-matched sub-accounts upon
occurrence of any of the following:
1) termination of this plan,
2) partial termination of this plan with respect
to affected participants,
3) the participant attains 5 years of vesting
service,1
4) the participant dies,
5) the participant becomes disabled,
6) the participant retires under the RIP,
7) the participant is permanently laid off for
lack of work,
8) the participant attains age 65.2
[This sub-section should be deleted effective 01-01-96.]
e) Company-Matched Sub-account. Participants who are
credited with one hour of service on or after
January 1, 1996 are immediately vested in their
company-matched sub-accounts.
[This sub-section becomes effective on 01-01-96.]
7.4 Vesting of Former Employees.
a) Impact of Breaks in Service. Non-vested former
employees who resume employment will be credited for
vesting purposes with their prior years of service so
long as the number of consecutive breaks in service
(see 3.10) incurred by the employees do not exceed
five.
[This sub-section should be deleted effective 01-01-2001.]
b) Impact of Breaks in Service. Terminated
participants who are credited with an hour of service
on or after January 1, 1996 are not subject to the
break in service rules provided in 3.10.
[This sub-section becomes effective on 01-01-96.]
c) Immediate Vesting. Former employees or partici-
pants who were vested in SIP or DCIP prior to termina-
tion of employment will retain or immediately obtain
vested status in this plan.
7.5 Special Vesting Rules.
a) Parental Leaves. For the purpose of determining a
participant's years of vesting service, a non-vested
participant who is granted a leave of absence for the
purpose of giving birth to and/or nurturing a newborn,
or adopting a child, will be granted credit for 190
hours of vesting service per month, not to exceed a
total of 501 hours, during that leave of absence.
Hours of vesting service will be granted in the year
in which the absence commences to the extent necessary
to prevent the employee from incurring a break in
service for vesting purposes. To the extent the hours
of vesting service are not needed to prevent a break
in vesting service, the employee will be credited with
the hours of vesting service in the immediately
following year to prevent the occurrence of a break in
vesting service during that year.
b) Military Leaves. Notwithstanding any provision of
this plan to the contrary, credit for vesting service
with respect to qualified military service will be
provided in accordance with IRC 414(u)3.
7.6 Forfeitures and Restorations.
a) Forfeiture. A participant who terminates
employment with CG&E and is not vested in his or her
company-matched sub-account will forfeit the amount in
the company-matched sub-account. The participant
shall be deemed to have received a distribution of
zero for the company-matched account. The forfeiture
will occur upon the participant's termination of
employment with CG&E. This forfeiture may be restored
in accordance with 7.6d) below.
[This sub-section should be deleted effective 01-01-2001.]
b) Forfeiture. A participant's benefit will be
forfeited only in accordance with 13.15 if the
participant is credited with an hour of service on or
after January 1, 1996.
[This sub-section becomes effective on 01-01-96.]
c) Use of Forfeitures. Forfeitures shall be used to
reduce the company-matched contributions which are to
be made in accordance with 4.2c), 4.3c) and 4.3d).
d) Restoration of Forfeitures. A terminated
participant, described in 7.6a) above, who resumes
employment with CG&E before incurring 5 consecutive
breaks in service shall have his or her
company-matched sub-account restored, without
dividends earned in the interim.
[This sub-section should be deleted effective 01-01-96.]
e) Restoration of Forfeitures. A terminated
participant who is credited with an hour of service on
or after January 1, 1996, shall have his or her
benefit restored in accordance with 13.15.
[This sub-section becomes effective on 01-01-96.]
f) Source of Restorations. Restorations of the
company-matched sub-account shall be made from
forfeitures during the plan year of the restoration.
If there are insufficient forfeitures to cover
restorations in any given plan year, CG&E shall make
additional contributions to cover the deficit.
DISTRIBUTIONS
ARTICLE 8: DISTRIBUTIONS
8.1 Distribution. A distribution is the delivery of all
of the vested assets in a plan account to its beneficial
owner.1
8.2 Eligibility for Distribution.
a) Termination. Terminated participants are eligible
to receive distribution upon termination of employment
for any reason2.
b) Disability. Participants and terminated
participants are eligible to receive distribution as
of the dates on which they become eligible to receive
disability benefits under the RIP if they:
1) have been granted disability benefits by the
Social Security Administration, or
2) are determined to be disabled by CG&E's medical
director.3
[This sub-section should be deleted effective 01-01-97.]
c) Death. Beneficiaries are eligible to receive
distribution upon the death of the participant from
whom their interests are derived.
d) Acceptance of a DRO. An alternate payee under a
DRO which has been accepted by the plan is given a
window opportunity to elect distribution. See 11.13.
e) Plan Termination. The Committee shall make a
distribution to all participants if the plan is
terminated without the establishment of a successor
plan.
[This sub-section should be deleted effective 01-01-96.]
f) Plan Termination. The Benefits Manager shall make
a distribution to all participants if the plan is
terminated without the establishment of a successor
plan.
[This sub-section becomes effective on 01-01-96.]
g) Sale of CG&E. The Committee shall make a
distribution to all participants if substantially all
of CG&E's assets are sold.
[This sub-section should be deleted effective 01-01-96.]
h) Sale of CG&E. The Benefits Manager shall make a
distribution to all participants if substantially all
of CG&E's assets are sold.
[This sub-section becomes effective on 01-01-96.]
i) Sale of a Subsidiary. The Committee shall make a
distribution to participants who are employed by a
CG&E subsidiary if the subsidiary is sold and the
participants are no longer employed by CG&E. If CG&E
sells a subsidiary, but retains the employees who
formerly worked for that subsidiary, those employees
will not qualify for a distribution as a result of the
sale.
[This sub-section should be deleted effective 01-01-96.]
j) Sale of a Subsidiary. The Benefits Manager shall
make a distribution to participants who are employed
by a CG&E subsidiary if the subsidiary is sold and the
participants are no longer employed by CG&E. If CG&E
sells a subsidiary, but retains the employees who
formerly worked for that subsidiary, those employees
will not qualify for a distribution as a result of the
sale.
[This sub-section becomes effective on 01-01-96.]
8.3 Distribution Valuation Date. The distribution
valuation date for a beneficial owner is the business day
on which the beneficial owner's units in the funds are
sold for the purpose of disbursing funds for a loan, a
withdrawal or a distribution.4
8.4 Valuing a Distribution. The value of an account for
the purpose of distribution shall be based upon the value
of the units in the CINergy stock funds and the mutual
funds, determined as of the distribution valuation date5.
8.5 Events Triggering Distribution. As used in this
Article, an event consists of a participant's termination,
retirement, permanent layoff for lack of work, disability,
or death.
a) Vested Benefit of $3,500 or Less. If the vested
benefit is $3,500 or less, the Committee shall make a
distribution in a lump sum.
[This sub-section should be deleted effective 01-01-96.]
b) Vested Benefit of $3,500 or Less. If the vested
benefit is $3,500 or less, the Benefits Manager shall
make a distribution in a lump sum.
[This sub-section becomes effective on 01-01-96.]
c) Vested Benefit Over $3,500.6 If the vested benefit
is over $3,500, the participant or beneficiary shall
elect to receive or delay the distribution. The
election7 must be filed with the Committee within 60
days of the event. A participant or beneficiary who
has elected to delay8 the distribution can elect a
distribution at a later time by filing an application
for distribution9 with the Committee.
[This sub-section should be deleted effective 01-01-96.]
d) Vested Benefit Over $3,500.10 If the vested bene-
fit is over $3,500, the participant or beneficiary
shall elect to receive or delay the distribution. The
election must be received by the Benefits Manager
within 60 days of the event. A participant or
beneficiary who has elected to delay11 the
distribution can elect a distribution at a later time
by informing the Benefits Manager through the voice or
other electronic response system or other media
authorized by CG&E.
[This sub-section becomes effective on 01-01-96.]
e) Mandatory Distribution After an Event. The
Committee shall disburse a distribution no later than
the 60th day after the close of the calendar year in
which the terminated participant who has been affected
by an event attains or would have attained age 65. If
the terminated employee is age 65 or older on the date
of the event, the distribution shall be made within 60
days of the year end during which the event occurred.
[This sub-section should be deleted effective 01-01-96.]
f) Mandatory Distribution After an Event. The
Benefits Manager shall disburse a distribution no
later than the 60th day after the close of the
calendar year in which the terminated participant who
has been affected by an event attains or would have
attained age 65. If the terminated employee is age 65
or older on the date of the event, the distribution
shall be made within 60 days of the year end during
which the event occurred.
[This sub-section becomes effective on 01-01-96.]
8.6 Participant's Mandatory Distribution Year. The
following rules shall apply regardless of any other
distribution provision in the plan.12
a) Definition. A participant's mandatory distribution
year is the year in which s/he attains age 70 1/2.
b) Lump Sum Distribution. The Committee shall make a
distribution of all vested benefits accrued as of the
September 30 of a participant's mandatory distribution
year. The distribution shall be in a lump sum. The
distribution shall be disbursed by April 1 following
the end of the participant's mandatory distribution
year.13
[This sub-section should be deleted effective 01-01-96.]
c) Lump Sum Distribution. The Benefits Manager shall
make a distribution of all vested benefits accrued as
of the September 30 of a participant's mandatory
distribution year. The distribution shall be in a
lump sum. The distribution shall be disbursed by
April 1 following the end of the participant's
mandatory distribution year.14
[This sub-section becomes effective on 01-01-96.]
d) Subsequent Annual Distributions. If the partici-
pant has assets in the plan after the mandatory
distribution year, the Committee shall distribute all
vested benefits accrued as of September 30 each
subsequent year, by December 31st of that year.
[This sub-section should be deleted effective 01-01-96.]
e) Subsequent Annual Distributions. If the partici-
pant has assets in the plan after the mandatory
distribution year, the Benefits Manager shall
distribute all vested benefits accrued as of September
30 each subsequent year, by December 31st of that
year.
[This sub-section becomes effective on 01-01-96.]
f) Continuing Contributions. Participants may
continue to contribute to the plan after their
mandatory distribution year.
[This section should be deleted effective 01-01-97 for all
participants, except 5% owners.]
8.7 Participant's (Other than 5% Owner's) Mandatory
Distribution Year. The following rules shall apply
regardless of any other distribution provision in the
plan.15
a) Definition. A participant's (other than a 5%
owner's) mandatory distribution year is the later of
the year in which s/he attains age 70 1/2 or retires.
A 5% owner's mandatory distribution year is the year
in which s/he attains age 70 1/2. See 8.6 above for
details.
b) Lump Sum Distribution. The Benefits Manager shall
make a distribution of all vested benefits accrued as
of the September 30 of a participant's (other than a
5% owner's) mandatory distribution year. The
distribution shall be in a lump sum. The distribution
shall be disbursed by April 1 following the end of the
participant's (other than a 5% owner's) mandatory
distribution year.16
c) Subsequent Annual Distributions. If the partici-
pant (other than a 5% owner) has assets in the plan
after the mandatory distribution year, the Benefits
Manager shall distribute all vested benefits accrued
as of September 30 each subsequent year, by December
31st of that year.
[This section becomes effective on 01-01-97 for all participants,
except 5% owners.]
8.8 Filing Forms for Distribution or Delay.
a) General Rule. A beneficial owner generally must
file an application for distribution17 90 days in
advance of disbursement of a distribution from the
plan.
[This sub-section should be deleted effective 01-01-96.]
b) General Rule. A beneficial owner generally must
apply for distribution by the voice or other
electronic response system or other media authorized
by CG&E 90 days in advance of disbursement of a
distribution from the plan.
[This sub-section becomes effective on 01-01-96.]
c) Timing A Distribution. A beneficial owner must
file an application for distribution with the
Committee at least 15 business days before
disbursement of a distribution from the plan.
[This sub-section should be deleted effective 01-01-96.]
d) Timing A Distribution. A beneficial owner must
apply for distribution with the Benefits Manager
through the voice or other electronic response system
or other media authorized by CG&E at least 15 business
days before disbursement of a distribution from the
plan.
[This sub-section becomes effective on 01-01-96.]
e) Required Elections. If a beneficial owner fails to
make a required election to immediately receive
distribution or to delay distribution, the plan may
process an election to delay distribution filed by the
Committee on behalf of the beneficial owner.
[This sub-section should be deleted effective 01-01-96.]
f) Required Elections. If a beneficial owner fails to
make a required election to immediately receive
distribution or to delay distribution, the plan may
process an election to delay distribution as requested
by the Benefits Manager on behalf of the beneficial
owner.
[This sub-section becomes effective on 01-01-96.]
g) Mandatory Distributions. Any mandatory
distribution required by the plan or the Internal
Revenue Code may be made under the authority of an
application for distribution filed by the Committee18
on behalf of the beneficial owner.
[This sub-section should be deleted effective 01-01-96.]
h) Mandatory Distributions. Any mandatory
distribution required by the plan or the Internal
Revenue Code may be made under the authority of a
request for distribution made by the Benefits
Manager19 on behalf of the beneficial owner.
[This sub-section becomes effective on 01-01-96.]
8.9 Timing of Distributions. The Committee will disburse
distributions as a lump sum or in 5 annual installments.
a) Lump Sum Distributions. The trustee shall mail a
lump sum payment to the beneficial owner approximately
15 business days following the day on which the
application for distribution was filed with the
Committee.
b) Five Annual Installments. A participant whose
employment is terminated by reason of retirement under
the terms of the RIP, disability, or permanent layoff
for lack of work, may irrevocably elect to receive his
or her account in five annual installments.20
Installment distributions are not available to
beneficiaries or to participants terminated for other
reasons.21
c) Timing of Installments. The eligible participant
may elect to receive the first installment as soon as
practical after the end of the month that the event
occurs, or as soon as practical after the end of the
year in which the event occurs. The trustee shall
disburse the first installment no later than March 122
following the calendar year when the event occurred
which triggered the distribution.
1) Amount of Each Installment. Those who have
elected 5 annual installments shall receive their
accounts as follows: 1/5 of the account in the
first installment, 1/4 of the account at the time
of the second installment, 1/3 of the account at
the time of the third installment, 1/2 of the
account at the time of the fourth installment, and
the balance of the account at the time of the last
installment.
2) Subsequent Installments. The payment date for
each subsequent installment shall be as soon as is
practicable within each plan year following the
anniversary date of the initial payment. The
balance of the account shall be revalued in
accordance with 8.4 and any CINergy stock will
continue to be voted by such a participant in
accordance with 5.14. If a participant dies
prior to receiving all installments, the remainder
in his or her account will be paid in a lump sum
to the beneficiary or, if none, in accordance with
8.14.
[This section should be deleted effective 01-01-96.]
8.10 Timing of Distributions. The Benefits Manager will
disburse distributions as a lump sum or in 5 annual
installments.
a) Lump Sum Distributions. The trustee shall mail a
lump sum payment to the beneficial owner approximately
15 business days following the day on which the
Benefits Manager was informed of the participant's
request for distribution through the voice or other
electronic response system or other media authorized
by CG&E.
b) Five Annual Installments. A participant whose
employment is terminated by reason of retirement under
the terms of the RIP, disability, or permanent layoff
for lack of work, may irrevocably elect to receive his
or her account in five annual installments.23
Installment distributions are not available to
beneficiaries or to participants terminated for other
reasons.24
c) Timing of Installments. The eligible participant
may elect to receive the first installment as soon as
practical after the end of the month that the event
occurs, or as soon as practical after the end of the
year in which the event occurs. The trustee shall
disburse the first installment no later than March 125
following the calendar year when the event occurred
which triggered the distribution.
1) Amount of Each Installment. Those who have
elected 5 annual installments shall receive their
accounts as follows: 1/5 of the account in the
first installment, 1/4 of the account at the time
of the second installment, 1/3 of the account at
the time of the third installment, 1/2 of the
account at the time of the fourth installment, and
the balance of the account at the time of the last
installment.
2) Subsequent Installments. The payment date for
each subsequent installment shall be as soon as is
practicable within each plan year following the
anniversary date of the initial payment. The
balance of the account shall be revalued in
accordance with 8.4 and any CINergy stock will
continue to be voted by such a participant in
accordance with 5.14. If a participant dies
prior to receiving all installments, the remainder
in his or her account will be paid in a lump sum
to the beneficiary or, if none, in accordance with
8.14.
[This section becomes effective on 01-01-96.]
8.11 In Kind Distribution.
a) General Rule. Distributions generally consist of a
CINergy stock certificate reflecting the value of the
units of the CINergy stock fund in the account as of
the distribution valuation date, plus cash from the
sale of all other plan investments and incidental cash
from the CINergy stock fund.
b) Company Stock Fund. To the extent that a
beneficial owner's account includes units of the
CINergy stock fund as of the distribution valuation
date, s/he may elect to receive cash in lieu of a
CINergy stock certificate.26
c) Fidelity Funds. The beneficial owner can direct
the trustee to transfer his or her Fidelity Equity
Income, Intermediate Bond and/or Magellan funds, upon
distribution, to an individual account27 at Fidelity
by submitting an application to the Committee.
[This sub-section should be deleted effective 01-01-96.]
d) Fidelity Funds. The beneficial owner can direct
the trustee to transfer his or her Fidelity Equity
Income, Intermediate Bond and/or Magellan funds, upon
distribution, to an individual account28 at Fidelity
by informing the Benefits Manager through the voice or
other electronic response system or other media
authorized by CG&E.
[This sub-section becomes effective on 01-01-96.]
8.12 Direct Rollovers to Other Plans.
a) Election.
1) Who May Elect. Participants, terminated
participants, their beneficiaries who are
surviving spouses, and alternate payees who are
former spouses of participants, may elect to have
any portion of an eligible rollover distribution
paid directly to their designated eligible
retirement plan.29 Those making this election
must be entitled to distribution or withdrawal of
their plan assets, under the terms of this plan.
The only plan assets subject to direct rollover
are those acquired by reason of being a
participant, a surviving spouse or a former spouse
alternate payee.
2) Manner of Election. This election must be made
at the time and in the manner prescribed by the
Committee.30
b) Distributions Eligible for Rollover. An eligible
rollover distribution is any distribution or
withdrawal, except as stated in 8.12c) below, of all
or any portion of the account of one of the persons
listed in 8.12a) above.
c) Distributions Not Eligible for Rollover.
1) Portions of Mandatory Distributions. The
portion of a mandatory distribution under 8.6
which is required to be distributed under IRC
401(a)(9) is not eligible for direct rollover.
[This sub-section should be deleted effective 01-01-97
for all participants, except 5% owners.]
2) Portions of Mandatory Distributions. The
portion of a mandatory distribution under 8.7
which is required to be distributed under IRC
401(a)(9) is not eligible for direct rollover.
[This sub-section becomes effective on 01-01-97 for
all participants, except 5% owners.]
3) Portions Excluded from Gross Income. The
portion of any distribution which is not able to
be included in the gross income of the beneficial
owner is not eligible for direct rollover. For
this purpose, gross income can include any
unrealized appreciation of CINergy stock.31
4) Optional Contributions. Optional contributions
are not eligible for direct rollover. However,
interest and earnings attributable to optional
contributions are eligible for direct rollover.
5) Deemed Distributions. A deemed distribution
which has occurred because of a participant's
failure to make one or more loan payments is not
eligible for direct rollover.32
6) Loan Offsets. The portion of a distribution
due to termination of the participant's employment
with CG&E which offsets the unpaid portion of a
plan loan will not be eligible for direct
rollover.33
7) Periodic Distributions.34 Any distribution
that is one of a series of substantially equal
periodic payments, made at least annually, to be
paid over the life of the beneficial owner or the
joint lives of the beneficial owner and his or her
designated beneficiary, or to be paid for a
specified period of at least 10 years is not
eligible for direct rollover.
8) Other. Returns of elective deferrals and
corrective distributions of excess contributions
and attributable net income are not eligible for
direct rollover.35 Returns of deferrals in excess
of the IRC 402(g) limits or in excess of the 415
limits are not eligible for direct rollover.
d) Eligible Retirement Plan. The definition of an
eligible retirement plan for the purpose of accepting
direct rollovers varies with the class of the person
electing the direct rollover. The eligible retirement
plan must be willing to accept the rollover
distribution.36
1) Participants and Former Spouse Alternate
Payees. Participants and former spouse alternate
payees may direct rollovers to an individual
retirement account37, an individual retirement
annuity38, an annuity plan39 or a qualified trust.40
2) Surviving Spouses. Surviving spouses may
direct rollovers only to an individual retirement
account, or an individual retirement annuity.41
8.13 Settlement Statement. The trustee shall furnish a
settlement statement42 with every distribution.43
8.14 Distribution Upon Death of a Participant or
Beneficiary. In the event that the participant dies with
assets remaining in the plan, the assets will be
distributed to the participant's beneficiary. If there is
no beneficiary, the assets will be distributed to the
participant's surviving spouse. If the participant has no
beneficiary or surviving spouse at the time of the
participant's death, assets will be distributed to the
participant's estate. If the beneficiary of a deceased
participant dies while assets remain in the plan, the
assets will be distributed to the estate of the
beneficiary. In the event an alternate payee dies with
assets remaining in the plan, the assets will be paid to
the estate of the alternate payee. In each case, the
assets will be distributed no later than the close of the
plan year which contains the fifth anniversary of the
participant's death. If the spouse of a participant or
terminated participant is the beneficiary of the plan
account, the spouse may delay distribution until the end
of the calendar year in which the participant or
terminated participant would have attained age 65. See
Section 8.5e) and 8.5f).44
8.15 Plan Hierchary for Distributions. Any sale of a
participant's plan assets, which is necessary to generate
cash for the purpose of disbursing cash in the amount of
after-tax contributions, will be made using the plan
hierarchy.
WITHDRAWALS DURING EMPLOYMENT
ARTICLE 9: WITHDRAWALS DURING EMPLOYMENT
9.1 Withdrawal.1 A withdrawal is disbursement of any
part of the vested assets of a participant to that
participant. Distribution installments are not
withdrawals. Only participants are eligible to take
withdrawals. All other beneficial owners are eligible
only for distributions.
9.2 Withdrawals from Company-Matched Sub-Accounts. A
participant may not withdraw from the company-matched
sub-account during the period s/he is employed2 by CG&E.
9.3 Withdrawals from Optional Sub-Accounts. Participants
may withdraw from their optional sub-accounts plan by
filing an application for withdrawal3 with the Committee.
The trustee will disburse the withdrawal directly to the
participant,4 or to another plan if the participant elects
and the withdrawal qualifies for direct rollover. See
8.12.
[This section should be deleted effective 01-01-96.]
9.4 Withdrawals from Optional Sub-Accounts. Participants
may withdraw from their optional sub-accounts by the voice
or other electronic response system or other media
authorized by CG&E. The trustee will disburse the
withdrawal directly to the participant5, or to another
plan if the participant elects and the withdrawal
qualifies for direct rollover. See 8.12.
[This section becomes effective on 01-01-96.]
9.5 Amount Available for Optional Withdrawal.
Participants may withdraw either a specific whole dollar
amount or the entire balance from their optional
sub-accounts. If the participant withdraws less than 100%
of his or her optional sub-account balance and requests a
second withdrawal within a 12 month period, s/he will be
required to withdraw the remaining balance.
9.6 Plan Hierarchy For Withdrawals. If the portion of
the participant's account which is to be withdrawn is
invested in more than one fund, the withdrawal amount will
be deducted from the investment funds using the plan
hierarchy.6 Each fund will be exhausted before the
withdrawal draws upon the next fund in the hierarchy.
9.7 Form of Withdrawals. Withdrawals generally consist
of a CINergy stock certificate for the units of the
CINergy stock fund in the sub-account as of the
distribution valuation date, plus cash from the sale of
all other plan investments and incidental cash from the
CINergy stock fund.
9.8 Cash In Lieu of Stock. A participant may elect to
receive cash in lieu of a CINergy stock certificate for
his or her assets in the company stock fund.7
9.9 Hardship. A hardship is an immediate and heavy
financial need of a participant which cannot be met except
through a withdrawal from the participant's deferred
compensation sub-account in the plan.
9.10 Hardship Withdrawals. A participant may apply to
the Committee for a withdrawal of all or a portion of his
or her deferred compensation sub-account. The Committee
shall not grant the request unless it qualifies under the
criteria listed in 9.13.
[This section should be deleted effective 01-01-96.]
9.11 Hardship Withdrawals. A participant may apply to
the Benefits Manager for a withdrawal of all or a portion
of his or her deferred compensation sub-account. The
Benefits Manager shall not grant the request unless it
qualifies under the criteria listed in 9.14.
[This section becomes effective on 01-01-96.]
9.12 Amount Available for Hardship Withdrawals. The
amount available for a hardship withdrawal includes all
deferred compensation contributions made in years prior to
1989, including any earnings and losses thereon, and de-
ferred compensation contributions made on or after
01-01-89, excluding earnings and losses thereon. Hardship
withdrawals are limited to the actual amount in the
participant's account.
9.13 Criteria for Granting a Hardship Withdrawal.8 The
Committee shall use the following criteria9 when
considering an application for a hardship withdrawal:
a) Immediate and Heavy Financial Need.10 The request
must be to satisfy an immediate and heavy financial
need for one of the following reasons:
1) Medical Expenses. Unreimbursed medical
expenses, as described in IRC 213(d), incurred by
the participant, the participant's spouse, or any
dependents of the participant, as defined in IRC
152, or necessary for those persons to obtain
medical care as described in IRC 213(d).
2) Purchase of a Principal Residence. Purchase,
excluding mortgage payments, of a principal
residence of the participant.
3) Tuition. Payment of tuition, related
educational fees, and room and board for the next
12 months11 of post-secondary education for the
participant, the participant's spouse, children,
or dependents.
4) Prevention of Foreclosure. Prevention of
eviction from, or foreclosure of the mortgage
upon, the principal residence of the participant.
5) Funeral Expenses. Payment of the funeral
expenses of the participant's spouse, children or
dependents.
6) Other Expenses. Any other expense identified
by the Internal Revenue Commissioner12 as an
immediate and heavy financial need.
b) Amount Necessary to Satisfy the Need. The hardship
withdrawal is limited to the amount necessary to
satisfy the need, plus any amounts necessary to pay
federal, state or local income taxes or penalties
reasonably anticipated to result from the hardship
withdrawal. The participant must submit reasonable
documentation of the existence and amount of the need.
There must be no other resources reasonably available
to satisfy the need. The participant must first take
all available non-hardship distributions/loans from
all of CG&E's other plans: RIP, DCIP, MRP13. This
includes a withdrawal of available funds from the
optional sub-account. If a plan loan is either
unavailable to the participant, or the available loan
is insufficient to meet the need of a participant, and
the other criteria of this section are met, the
Committee may grant a hardship withdrawal.
[This section should be deleted effective 01-01-96.]
9.14 Criteria for Granting a Hardship Withdrawal.14 The
Benefits Manager shall use the following criteria15 when
considering a request for a hardship withdrawal:
a) Immediate and Heavy Financial Need.16 The request
must be to satisfy an immediate and heavy financial
need for one of the following reasons:
1) Medical Expenses. Unreimbursed medical
expenses, as described in IRC 213(d), incurred by
the participant, the participant's spouse, or any
dependents of the participant, as defined in IRC
152, or necessary for those persons to obtain
medical care as described in IRC 213(d).
2) Purchase of a Principal Residence. Purchase,
excluding mortgage payments, of a principal
residence of the participant.
3) Tuition. Payment of tuition, related
educational fees, and room and board for the next
12 months17 of post-secondary education for the
participant, the participant's spouse, children,
or dependents.
4) Prevention of Foreclosure. Prevention of
eviction from, or foreclosure of the mortgage
upon, the principal residence of the participant.
5) Funeral Expenses. Payment of the funeral
expenses of the participant's spouse, children or
dependents.
6) Other Expenses. Any other expense identified
by the Internal Revenue Commissioner18 as an
immediate and heavy financial need.
b) Amount Necessary to Satisfy the Need. The hardship
withdrawal is limited to the amount necessary to
satisfy the need, plus any amounts necessary to pay
federal, state or local income taxes or penalties
reasonably anticipated to result from the hardship
withdrawal. The participant must submit reasonable
documentation of the existence and amount of the need.
There must be no other resources reasonably available
to satisfy the need. The participant must first take
all available non-hardship distributions/loans from
all of CG&E's other plans: RIP, SIP, MRP19. This
includes a withdrawal of available funds from the
optional sub-account. If a plan loan is either
unavailable to the participant, or the available loan
is insufficient to meet the need of a participant, and
the other criteria of this section are met, the
Benefits Manager may grant a hardship withdrawal.
[This section becomes effective on 01-01-96.]
9.15 Required Documentation for Hardship Withdrawals.
The participant must file the following documents with the
Committee20 for consideration of a hardship withdrawal:
a) Application. The participant must complete an
application for hardship withdrawal, including the
spouse's signature acknowledging notice of the
application, if the participant is married.
b) Documentation. The participant must attach
photocopies of all papers which document the existence
and the amount of the need.
c) Written Explanation. The participant must provide
a clear and concise explanation, in his or her own
words, of how the funds are to be used.
d) Quarterly Statement. The Committee21 will provide
a copy of the participant's most recent quarterly
statement indicating the amount of funds that are
available to the participant.
e) Personal Financial Statement. A personal financial
statement of the participant's assets and liabilities,
including the spouse's notarized signature, if the
participant is married.
[This section should be deleted effective 01-01-96.]
9.16 Required Substantiation for Hardship Withdrawals.
The participant must provide the following information to
the Benefits Manager for consideration of a hardship
withdrawal:
a) Request. The participant must make a request to
the Benefits Manager for a hardship withdrawal through
the voice or other electronic response system or other
media authorized by CG&E. If the participant is
married, the participant must furnish the Benefits
Manager with the signature of the participant's spouse
acknowledging notice by the spouse of the request.
b) Documentation. The participant must furnish
photocopies of all papers which document the existence
and the amount of the need.
c) Explanation. The participant must provide a clear
and concise explanation, in his or her own words, of
how the funds are to be used through the voice or
other electronic response system or other media
authorized by CG&E.
d) Quarterly Statement. The Benefits Manager will
provide a copy of the participant's most recent
quarterly statement indicating the amount of funds
that are available to the participant.
e) Personal Financial Statement. A personal financial
statement of the participant's assets and liabilities,
including the spouse's notarized signature, if the
participant is married.
[This section becomes effective on 01-01-96.]
9.17 Disbursement of Hardship Withdrawals.22 The trustee
will disburse23 a hardship withdrawal which has been
accepted by the Committee directly to the participant.
[This section should be deleted effective 01-01-96.]
9.18 Disbursement of Hardship Withdrawals.24 The trustee
will disburse25 a hardship withdrawal which has been
accepted by the Benefits Manager directly to the
participant.
[This section becomes effective on 01-01-96.]
9.19 Settlement Statement. The trustee shall furnish a
settlement statement26 with every distribution.27
9.20 Suspension Following Withdrawal.
a) Optional Sub-Account Withdrawal. Participants who
have withdrawn from their optional sub-accounts will
not be permitted to make optional contributions to the
plan until at least 12 months from the date of
disbursement of the withdrawal.
b) Hardship Withdrawal. A participant who is granted
a hardship withdrawal shall not be permitted to make
deferred compensation or optional contributions28 to
the plan until at least 12 months from the date of the
hardship withdrawal disbursement. The IRC 402(g)
limit on a participant's deferred compensation
contributions for the taxable year of the participant
following the taxable year in which the hardship
withdrawal occurred shall be reduced by the amount of
the participant's deferred compensation contributions
during the taxable year in which the hardship
withdrawal occurred.
LOANS
ARTICLE 10: LOANS
10.1 Eligibility for Loans1. Participants currently
receiving pay from CG&E may apply for and receive a loan
from their deferred compensation sub-accounts. No other
beneficial owners are eligible for loans. Specifically,
participants on leaves of absence,2 terminated
participants, beneficiaries and alternate payees are not
eligible to receive loans.3
10.2 Loan Requests. Participants may request loans
through the current process established by the Committee.4
The participant must complete and return the promissory
note to the trustee. Upon receipt of the completed
promissory note, the trustee will send a check for the
loan amount to the participant.
[This section should be deleted effective 01-01-96.]
10.3 Loan Requests. Participants may request loans
through the current process established by the Committee.5
The participant must execute the promissory note. The
promissory note, at the sole discretion of the Committee,
may be provided on the back of the check which is issued
to the participant for the loan amount. The promissory
note will be properly executed and legally enforceable
once the participant endorses the back of the check. The
participant's endorsement evidences that s/he agrees to
the repayment terms.
[This section becomes effective on 01-01-96.]
10.4 Limitation of Two Loans at any Given Time. A
participant may apply for and obtain a second loan while
the first loan remains outstanding. The second loan will
be granted at the then prevailing rate of interest and for
an entirely separate term of five years or less. The
outstanding balance in the participant's loan account will
reflect the total of the two loans, although the loans
will remain separate and distinct on the trustee's
records. The dollar limitation imposed by the plan for
one loan will apply to the total outstanding balance for
two loans for any given participant. A participant is
limited to two outstanding loans at any given time.
10.5 Granting Loans. Loans will be granted from the plan
for any reason.
10.6 Loan Amount.6
a) 50% of Vested Account Limited by Deferred
Compensation Sub-Account. The loaned amount cannot
exceed the lesser of $50,000 or 50% of the balance of
the participant's vested accrued benefit
(company-matched, deferred compensation and optional
sub-accounts) and will be further limited by the
actual amount in the deferred compensation
contribution sub-account on the distribution valuation
date for the loan.
[This sub-section should be deleted effective 01-01-96.]
b) 50% of Vested Account Limited by Deferred
Compensation Sub-Account and Rollover Sub-Account.
The loaned amount cannot exceed the lesser of $50,000
or 50% of the balance of the participant's vested
accrued benefit (company-matched, deferred
compensation, optional and rollover sub-accounts) and
will be further limited by the actual amount in the
deferred compensation contribution sub-account and
rollover sub-account on the distribution valuation
date for the loan.
[This sub-section becomes effective on 01-01-96.]
c) Reduction of $50,000 Maximum.7 The $50,000 maximum
loan amount is reduced by the excess (if any) of the
highest outstanding balance of loans to that
participant during the one-year period ending on the
day before the date the loan is made, over the
outstanding balances of loans to that participant made
under all qualified plans sponsored by CG&E on the
date the loan is made.
10.7 Denial of Loans. The trustee shall not loan funds to
a participant if granting the loan would result in a
violation of any federal or state8 statute or regulation
regarding loans.
10.8 Plan Hierarchy For Loans. If the participant's
deferred compensation sub-account is invested in more than
one fund, the loan amount will be deducted from the
investments funds using the plan hierarchy.9 Each fund
will be exhausted before the loan draws upon the next fund
in the hierarchy.
[This section should be deleted effective 01-01-96.]
10.9 Pro-rata Liquidation for Loans. The trustee shall
liquidate the participant's deferred compensation
sub-account investments and rollover sub-account
investments in the same proportion that each investment
bears to the entire deferred compensation contribution
sub-account and rollover sub-account except for the loan
fund. The trustee will disburse the cash produced to the
participant minus any administrative fee.
[This section becomes effective on 01-01-96.]
10.10 Valuing an Account For A Loan. The trustee shall
use the value of the account as of the opening of the
business day on which it writes the check for the loan to
the participant to determine the amount available for the
loan.
10.11 Collateral for Loans.
a) Assignment and Restriction of Withdrawals. The
participant shall assign 50% of his or her vested
accrued account, and shall sign a promissory note for
the amount of the loan, including interest, payable to
the order of the trustee. No collateral other than
the participant's interest in the plan will be
accepted as security for a plan loan. If a
participant's optional sub-account becomes collateral
for his or her loan, s/he will only be able to
withdraw from the optional sub-account the difference
between its total value and the portion of the balance
of the optional sub-account necessary as collateral
for the unpaid loan balance.
b) Effect of a DRO Upon Loan Collateral. If there are
insufficient assets10 in the deferred compensation
sub-account of a participant to satisfy the terms of a
DRO because of one or more outstanding loans, the
trustee will first take additional assets from the
participant's optional sub-account, second from the
company-matched sub-account, and finally from the loan
account portion of the deferred compensation sub-
account, in order to satisfy the DRO.
[This sub-section should be deleted effective 01-01-96.]
c) Effect of a DRO Upon Loan Collateral. If there are
insufficient assets11 in the deferred compensation
sub-account, or next in the rollover sub-account, if
any, of a participant to satisfy the terms of a DRO
because of one or more outstanding loans, the trustee
will first take additional assets from the
participant's optional sub-account, second from the
company-matched sub-account, third, from the loan
account portion of the deferred compensation sub-
account, and finally from the loan account portion of
the rollover sub-account, if any, in order to satisfy
the DRO.
[This sub-section becomes effective on 01-01-96.]
10.12 Interest Rate for Loans. The rate of interest
charged on loans will be 1/2 of 1%12 above the prime rate
charged by the trustee in its banking business on the
first business day of the month during which the
application is received by the trustee.13
[This section should be deleted effective 01-01-96.]
10.13 Interest Rate for Loans. The rate of interest
charged on loans will be a reasonable rate based on
commercial standards in the lending industry.
[This section becomes effective on 01-01-96.]
10.14 Payment of Loans. A participant who applies for a
loan must authorize CG&E to deduct loan payments from his
or her pay.14 CG&E will remit loan deductions to the
trustee concurrent with disbursements of the payroll.
10.15 Minimum and Maximum Term of Loans. The participant
shall specify the number of months for payment of the
loan, with 12 months being the minimum term, and 60 months
the maximum term.15
[This section should be deleted effective 01-01-96.]
10.16 Minimum and Maximum Term of Loans. The participant
shall specify the number of months for payment of the
loan, with 12 months being the minimum term, and 54 months
the maximum term.16
[This section becomes effective on 01-01-96.]
10.17 Investment of Loan Payments. The trustee will
direct loan payments to the investment funds according to
the participant's most recent allocation of future
contributions form that is on file.
[This section should be deleted effective 01-01-96.]
10.18 Investment of Loan Payments. The trustee will
direct loan payments to the investment funds according to
the most recently provided directions given by the
participant through the voice or other electronic response
system or other media authorized by CG&E.
[This section becomes effective on 01-01-96.]
10.19 Outstanding Loans for Terminated Participants. Upon
termination of employment, any outstanding loan of a
terminated participant is due immediately or the
outstanding amount of the loan will be in default pursuant
to 10.22 or 10.23 and reclassified as a partial
distribution.
[This section becomes effective on 01-01-96.]
10.20 Outstanding Loans for Participants on Military
Leave. Subject to the Committee's approval of such a
policy, loan repayments will be suspended under this plan
as permitted under IRC 414(u)(4).
10.21 Prepayment of Loans. A participant may pay the
remaining loan balance at any time without any pre-payment
penalties by check or money order made payable to the
trustee. The prepayment should be sent or delivered to the
Committee.17
10.22 Loan Default. A participant's loan will go into
default upon failure to make one or more payments during a
calendar year, violation of any term of the promissory
note signed by the participant, or upon declaration of the
Committee at its discretion18 under the terms of the
promissory note.
[This section should be deleted effective .]
10.23 Loan Default. A participant's loan will go into
default upon failure to timely make any payment during a
calendar year or violation of any term of the promissory
note signed by the participant.19
[This section becomes effective on __________.]
10.24 Tax Effects of Loan Default. The participant shall
pay the tax incurred for any events which arise out of any
loan transaction with the plan or any failure20 to make
payments under plan and promissory note requirements.
10.25 Curing Loan Default. A participant who has missed
one or more loan payments during a plan year may make
those payments up by direct payment to the Committee with
a check or money order made payable to the order of the
trustee in the amount of the payment, plus interest, on or
before the final valuation date of the plan year to cure
the default without tax or recharacterization
consequences.21
[This section should be deleted effective ____________.]
10.26 Curing Loan Default. A participant who misses any
loan payment may make up the missed payment by direct
payment to the Committee with a check or money order made
payable to the order of the trustee in the amount of the
payment, plus interest, on or before the last day of the
calendar quarter following the calendar quarter in which
the required payment was due to cure the default without
tax consequences.22
[This section becomes effective on __________.]
10.27 Reamortization of Loans. A participant may
reamortize a loan so long as the total time for repayment
of the loan does not exceed 60 months. Loan
reamortizations will be under the plan terms and
conditions in effect at the time of the reamortization.
[This section should be deleted effective 01-01-96.]
10.28 Reamortization of Loans. A participant who is on a
leave of absence (other than military leave) for not
longer than one year may reamortize a loan so long as the
total time for repayment of the loan does not exceed 54
months and the loan payments due after the leave expires
(or, if earlier, after the first year of the leave) are
not less than those required under the original terms of
the loan. Loan reamortizations will be under the plan
terms and conditions in effect at the time of the
reamortization.23
[This section becomes effective on 01-01-96.]
10.29 Recharacterization of Sub-accounts24. Effective as
of the final valuation date of each plan year, the trustee
shall recharacterize all or any portion of the optional
and/or company-matched sub-accounts of a participant who
has failed to make any loan payment(s) during the year, if
those missed payments are still outstanding at the final
valuation date. The amount recharacterized shall be
limited to the amount of the missed payments. The amount
recharacterized will be credited to the participant's
deferred compensation sub-account as a loan payment. The
trustee will notify the participant of the taxable amount
of the distribution. The Committee does not waive its
ability to determine that a loan is in default, or to
foreclose upon a loan, by exercising its right to
recharacterize the participant's sub-accounts under this
provision.
[This section should be deleted effective ___________.]
10.30 Loan Fund Administration
a) Single Loans. The promissory notes securing
payment of loans from plan assets will be reflected on
participants' quarterly statements under the loan fund
assets. When participants receive plan loans, their
investment allocations will reflect credits to their
loan funds in an amount equal to the principal amount
of the loan. Their other sub-accounts will reflect a
total reduction in value equivalent to the principal
amount of the loan. As participants make loan
payments, the value of the participants' loan funds
will be reduced by the amount of the payments
attributable to the principal of the loans. Principal
and interest, as they are paid, will be allocated to
investments per the most recent directions given by
the participant. Once the loan is completely repaid,
the participant's quarterly statement will reflect no
investment in the loan fund.
b) Multiple Loans. The trustee shall maintain
separate records of principal, interest, and payment
schedule for each loan that a participant has
outstanding at any given time. The participant's
statement will not reflect each separate loan. The
loan fund segment of the quarterly statements
distributed to participants will reflect the total of
all current loans outstanding to the participant.
c) Loans and DROs. The trustee will allocate as much
of the participant's loan fund to the alternate payee
as is necessary to satisfy the terms of the DRO if
there are insufficient other assets in the
participant's account due to the amount of the
participant's assets on loan. To the extent possible,
loans extended prior to the Committee's receipt of the
DRO will be allocated to the alternate payee.
However, loans extended after receipt of the DRO will
be allocated, if necessary to meet the terms of the
DRO. The participant will remain solely responsible
for loan payments, even if some portion of a loan or
loans has been allocated to an alternate payee to
satisfy the terms of a DRO.
DOMESTIC RELATIONS ORDERS
AND ALTERNATE PAYEES
ARTICLE 11: DOMESTIC RELATIONS ORDERS AND ALTERNATE PAYEES
11.1 Domestic Relations Order (DRO). A domestic relations
order is any judgment, decree or order, made pursuant to a
state domestic relations law, which provides that child
support, alimony, maintenance payments or marital property
allocation will be made from the plan assets of a
participant. A domestic relations order is referred to as
a DRO throughout the plan.
11.2 General Rule. The benefits due or to become due to
any participant are subject to a domestic relations order
accepted by the Committee.
11.3 Qualification and Acceptance of a DRO.
a) Initial Order. The DRO must meet the requirements
of IRC 414(p) and use the sample DRO language that
has been approved by the Committee1 to be considered
as qualified and to be accepted by the plan. The
Committee2 shall determine whether or not a DRO is
qualified. A court order which contains language
presuming that it is qualified shall not be binding
upon the plan.
b) Amended Orders. A DRO which modifies the terms of
a previously qualified DRO may be accepted by the
Committee. The amended DRO must meet the
qualifications of 11.3a) above, and must be filed with
the Committee before any irrevocable action has been
taken on execution of the initial DRO. Irrevocable
actions include executed cash-outs and any transaction
which the Committee decides is impossible or
impractical to attempt to reverse.
11.4 Special Conditions Applicable to DROs.
a) Prohibition of Allocating Identical Assets Multiple
Times. No DRO may allocate benefits which have been
allocated by a previously qualified and accepted DRO.
However, an amended DRO which is accepted by the plan
may reallocate benefits previously allocated without
violating this provision.
b) Applicable Plan(s). The nature of benefits
allocated to an alternate payee will be determined in
accord with the terms of the plan in effect on the
date the DRO is entered onto the records of the
issuing court.
11.5 Alternate Payee. An alternate payee is a
participant's child, spouse, former spouse or other
dependent who is designated to receive benefits under the
plan by a DRO. The Committee may rely upon the
determination of the court which issues the DRO that the
designated alternate payee in the order is entitled, under
the law of the appropriate state, to be so named.
11.6 Acknowledgment and Acceptance or Rejection of a DRO.
As soon as practical after the Committee receives a DRO,
it will send the participant and designated alternate
payee an acknowledgment of receipt, notice of acceptance
or rejection and a copy of the plan procedures for
acceptance or rejection of DROs.3 The Committee will send
a copy of the DRO and notice of acceptance or rejection to
the trustee. The Committee shall accept or reject a DRO
within 18 months of receiving it.
11.7 Division of Assets By the Trustee.
a) On Receipt of a DRO. The trustee shall freeze the
account of the participant upon receiving notice from
any plan agent that an Order purporting to be a DRO
has been received. Participants with frozen accounts
may not obtain loans or withdrawals from the plan, and
may not reallocate among funds. Distributions on
frozen accounts are subject to delay, pending
acceptance of a DRO.
b) On Rejection of a DRO. If the order is rejected,
the trustee shall keep the account of the participant
frozen for a reasonable period of time, pending
receipt of an amended DRO which is accepted by the
Committee, or direction from the Committee that the
participant's account may become active.
c) On Acceptance of a DRO. The trustee shall
segregate the plan assets into two or more accounts as
directed by the order as soon as it receives
notification that an order is accepted. The trustee
shall set up new accounts in the name of each
alternate payee under the order.4 The assets in the
sub-accounts of the alternate payees shall be
allocated among the investment funds in the same
proportions as allocated in the sub-accounts of the
participant from which they originated.
d) Participant with Outstanding Loans. If a
participant has one or more loans outstanding and
insufficient liquid deferred compensation sub-account
assets to satisfy the terms of an accepted DRO, the
trustee shall avoid allocating loan investment assets
if possible. The trustee shall first take the
necessary additional assets from the optional
sub-account until it is exhausted. Second, the trustee
shall take the necessary additional assets from the
company-matched sub-account until it is exhausted.
Finally, the trustee shall allocate the remaining
funds necessary to satisfy the DRO from the loan
investment portion of the deferred sub-account. (See
10.11b)).
[This sub-section should be deleted effective 01-01-96.]
e) Participant with Outstanding Loans. If a
participant has one or more loans outstanding and
insufficient liquid deferred compensation sub-account
assets, or next rollover sub-account assets, if any,
to satisfy the terms of an accepted DRO, the trustee
shall avoid allocating loan investment assets if
possible. The trustee shall first take the necessary
additional assets from the optional sub-account until
it is exhausted. Second, the trustee shall take the
necessary additional assets from the company-matched
sub-account until it is exhausted. Third, the trustee
shall take the necessary additional assets from the
loan investment portion of the deferred sub-account.
Finally, the trustee shall allocate the remaining
funds necessary to satisfy the DRO from the loan
investment portion of the rollover sub-account. (See
10.11c)).
[This sub-section becomes effective on 01-01-96.]
f) Denial of DRO within 18 Months. If within 18
months of the original receipt of a DRO it, or a
successor DRO, is determined to be not qualified, and
no amended DRO acceptable to the plan has been
submitted to the Committee, the assets in the
alternate payees' sub-accounts will be restored to the
sub-accounts of the participant. The trustee shall
restore the participant's account to active status.
11.8 Participatory Functions of Alternate Payees.
Alternate payees may not withdraw from any sub-account,
contribute to any sub-account, apply for loans, apply for
hardship withdrawals, or elect an installment
distribution. An alternate payee may not change his or
her investment direction of sub-accounts, except in
conjunction with a distribution. The rights of an
alternate payee are limited to: receipt of a quarterly
statement of his or her account, receipt of the account
proceeds in accord with the terms of the DRO or the plan,
a change in the allocation of past contributions in
conjunction with a distribution5, the right to all claims
procedures mandated by ERISA and the right to obtain
copies of the plan document and summary plan description
as mandated by ERISA. None of these rights under the plan
will be in effect until the Committee certifies the
pertinent DRO as qualified and so notifies the alternate
payee.
11.9 Distribution of Assets Valued at $3,500 or Less. The
Committee shall distribute any alternate payee's account
assets valued at $3,500 or less at any valuation date.
Upon the determination of the value of the account, the
alternate payee must file an application for distribution.
The Committee shall file an application for distribution
on behalf of the alternate payee if s/he does not do so
within 60 days of the determination of the value of the
account pursuant to 8.5a)6. If insufficient cash assets
are available to distribute because of loans allocated to
the account of the alternate payee, this mandatory
distribution will be delayed until there are sufficient
cash assets in the account.
[This section should be deleted effective 01-01-96.]
11.10 Distribution of Assets Valued at $3,500 or Less.
The Benefits Manager shall distribute any alternate
payee's account assets valued at $3,500 or less at any
valuation date. Upon the determination of the value of
the account, the alternate payee must apply for
distribution through the voice or other electronic
response system or other media authorized by CG&E. The
Benefits Manager shall apply for distribution on behalf of
the alternate payee if s/he does not do so within 60 days
of the determination of the value of the account pursuant
to 8.5b)7. If insufficient cash assets are available to
distribute because of loans allocated to the account of
the alternate payee, this mandatory distribution will be
delayed until there are sufficient cash assets in the
account.
[This section becomes effective on 01-01-96.]
11.11 Distribution of Assets Valued Over $3,500. If an
alternate payee's assets in the plan are valued over
$3,500, s/he is not eligible to receive a lump sum
distribution8 until the participant from whom the account
was derived reaches age 50,9 terminates employment, or
dies. An alternate payee who becomes eligible for a
distribution must file an application for a lump sum
distribution with the Committee no later than the 90 days
before the end of the year in which the participant from
whom the account was derived becomes age 65. If the
alternate payee does not file the application for
distribution in a timely manner, the Committee shall file
the application on his or her behalf pursuant to 8.5c).
[This section should be deleted effective 01-01-96.]
11.12 Distribution of Assets Valued Over $3,500. If an
alternate payee's assets in the plan are valued over
$3,500, s/he is not eligible to receive a lump sum
distribution10 until the participant from whom the account
was derived reaches age 50,11 terminates employment, or
dies. An alternate payee who becomes eligible for a
distribution must apply for a lump sum distribution with
the Benefits Manager through the voice or other electronic
response system or other media authorized by CG&E no later
than the 90 days before the end of the year in which the
participant from whom the account was derived becomes age
65. If the alternate payee does not apply for
distribution in a timely manner, the Benefits Manager
shall apply on his or her behalf pursuant to 8.5d).
[This section becomes effective on 01-01-96.]
11.13 Window Cashouts for Alternate Payees.
a) Effective Date. Alternate payees who have been
awarded benefits from this plan shall be given a
one-time opportunity to receive a lump sum payment of
all their plan interest, regardless of the amount of
the present value of the benefit.12
b) Retroactivity of Provision. Alternate payees who
had been awarded plan benefits prior to the effective
date of this provision (April 1, 1991) shall also be
given this one-time opportunity to receive their total
plan benefit.
c) Notification to Alternate Payees. Notification to
the alternate payee of this offer shall allow a
minimum of 30 days and a maximum of 90 days to make
the irrevocable election to receive the lump sum
benefit.
d) Timing of Notification. The Committee shall notify
the alternate payee of the availability of the window
cashout as soon as practical after the assets have
been allocated to the account of the alternate payee.
Notice of the window distribution shall be sent to
alternate payee with an account containing loan fund
assets, but shall indicate the delay in availability.
See 11.16.
e) Effect of Failure to Elect Window Cashout. The
plan assets of an alternate payee who does not elect a
cashout under this section shall be governed by the
other plan rules regarding distributions to alternate
payees.
11.14 Death. In the event of an alternate payee's death,
his or her remaining plan assets will be distributed to
his or her estate.
11.15 Alternate Payees' Responsibilities. Alternate
payees must notify the Committee in writing of any address
changes, or the name and address of a designated
representative. The notification should be signed and
dated by the alternate payee and should reference this
plan, and the name of the participant from whom the
account derives.
11.16 Limitation on Distribution to Alternate Payees. An
alternate payee may not receive any mandatory or elective
distribution until the alternate payee's account no longer
includes loan fund assets,13 unless the mandatory
distribution is required by the IRC or ERISA. An
alternate payee may not receive any elective distribution
until all assets allocated to the account of the alternate
payee have become vested.
FIDUCIARIES:
AUTHORITY & RESPONSIBILITY
ARTICLE 12: FIDUCIARIES: AUTHORITY & RESPONSIBILITY
12.1 Fiduciary. Any person who exercises any
discretionary authority or discretionary control
respecting management or administration of the plan or the
trust pursuant to the provisions of ERISA.
12.2 Fiduciaries. The following are named as fiduciaries:
a) the members of the Committee, and
b) the trustee.
12.3 Trustee.
a) Appointment. The board of directors shall appoint
a trustee for the plan. All assets of the plan shall
be held for use in accordance with the plan in
providing the benefits payable under the plan and for
such investment expenses as may properly be incurred
by the trustee.
b) Amendment. The trust agreement may be amended and
the trustee changed in the manner provided in the
trust agreement.
c) Responsibility. The responsibility for the reten-
tion of the trust shall lie with the trustee and not
with the Committee.
d) Voting. The trustee shall vote the shares of
CINergy stock credited to the accounts of beneficial
owners in accordance with the instructions given by
the beneficial owner. If the instructions are not
received by the trustee by the date it has designated
prior to any annual or special meeting of shareholders
of CINergy, the trustee shall vote the uninstructed
shares at its discretion. The trustee shall also vote
at its discretion the shares of CINergy stock held in
the company stock fund that have not been allocated to
participants' accounts as of the record date of any
annual or special meeting of shareholders of CINergy.
12.4 Establishment of the Committee. The Committee is the
plan administrator, commonly referred to as the SIP
Committee other than in this plan document. The Committee
shall consist of not more than five nor less than three
members, who shall be appointed by, and serve at the
pleasure of, the board of directors. Members of the
Committee may resign by delivering written resignation to
the board of directors. Resignations shall become
effective at delivery or at any later date specified
within the written statement.
12.5 Organization of the Committee. The Committee shall
elect a chairperson from their number, and a secretary and
such other officers as the Committee may designate, who
may, but need not, be members of the Committee, to serve
at the pleasure of the Committee. No member of the
Committee who is also an employee shall receive any
compensation for services as such member.
12.6 Powers of the Committee. The powers of the Committee
shall include, but not be limited to, the following:
a) Appoint Committees. The Committee may appoint
committees with any powers it deems necessary,
including an executive committee to exercise all
powers of the Committee between meetings of the
Committee.1
b) Set Meetings. The Committee may determine the
times and places for holding meetings of the
Committee, and the notice to be given of the meetings.
c) Establish a Quorum. The Committee shall determine
the number of members of the Committee necessary to
constitute a quorum for the transaction of business.
A quorum must be at least a majority of the committee
members.
d) Engage Assistants. The Committee may engage agents
and assistants, counsel, clerical, medical,
vocational, and accounting services as required to
carry out the provisions of the plan.
e) Establish an Agent. The Committee may authorize
one or more of their members or any employee as its
agent to make any payment, or to execute or deliver
any instrument on behalf of the Committee or to
perform any other function of the Committee.
[This sub-section should be deleted effective 01-01-96.]
f) Establish an Agent. The Committee may authorize
one or more of their members or any employee as its
agent to make any payment, or to execute or deliver
any instrument on behalf of the Committee or to
perform any other function of the Committee. The
Benefits Manager and the General Manager of Human
Resources Services shall serve as agents of the
Committee with respect to the duties assigned to these
persons under the plan.
[This sub-section becomes effective on 01-01-96.]
g) Select Investment Funds. The Committee shall
establish, and change as appropriate, an overall plan
for providing a diversified group of investments for
the trust assets. The Committee shall also select,
and change as appropriate, the various investment
funds.
h) Litigate on Behalf of the Plan. The Committee
shall commence or defend litigation on behalf of the
plan and represent the plan in all such proceedings
before any court or other tribunal.
i) Interpret the Plan. The Committee shall interpret
the plan, resolve any ambiguities in the plan and
establish provisions for any circumstances not
provided for in the plan, in a manner fair to plan
participants in similar circumstances and consistent
with other plan provisions.
j) Determine Eligibility for Benefits. The Committee
shall determine eligibility for benefits under the
plan, including claims to determine a participant's
rights to benefits under any former plan provision.
[This sub-section should be deleted effective 01-01-96.]
k) Determine Eligibility for Benefits. The Benefits
Manager, the General Manager of Human Resources
Services and the Committee shall determine eligibility
for benefits under the plan, including claims to
determine a participant's rights to benefits under any
former plan provision.
[This sub-section becomes effective on 01-01-96.]
l) Approve or Deny Requests for Hardship Withdrawals.
The Committee shall approve or deny requests for
hardship withdrawals, subject to the availability of
monies, under the provisions of the plan.
[This sub-section should be deleted effective 10-17-95.]
m) Approve or Deny Requests for Hardship Withdrawals.
The Senior Manager of Human Resource Strategy shall
approve or deny requests for hardship withdrawals,
subject to the availability of monies, under the
provisions of the plan.
[This sub-section becomes effective on 10-17-95 and should
be deleted effective 01-01-96.]
n) Approve or Deny Requests for Hardship Withdrawals.
The Benefits Manager shall approve or deny requests
for hardship withdrawals, subject to the availability
of monies, under the provisions of the plan. If a
request for a hardship withdrawal is denied or a
participant does not receive a response within 30 days
from the day the request was made to the Benefits
Manager, then the participant may make a request to
the General Manager of Human Resources Services for a
hardship withdrawal. If a participant's request is
denied by the General Manager of Human Resources
Services, or a participant does not receive a response
within 60 days from the day the request was made to
the General Manager of Human Resources Services, then
the participant may petition the Committee to receive
a hardship withdrawal. The Committee's decision as to
a participant's hardship withdrawal request shall be
final. See 13.3.
[This sub-section becomes effective on 01-01-96.]
o) Accept or Reject DROs2. The Committee shall
determine if a DRO which directs allocation of plan
benefits to one or more alternate payees is
qualified.3
p) Adopt Procedures. The Committee may establish
rules, regulations and procedures4 necessary for the
administration of the plan and the transaction of its
business.
q) Amend the Plan. The Committee may adopt any
amendment to ensure the continued qualification of the
plan and trust under IRC 401(a) and 501(a), to
comply with the provisions of any federal statute5 or
regulation impacting pension plans, to enhance the
delivery of benefits to participants and beneficia-
ries, to ease plan administration, or to respond to
the withdrawal of CG&E or any of its subsidiaries from
the plan. No amendment shall substantially increase
the cost of the plan without the consent of the board
of directors.
r) Require Accounting. The Committee may request
accounting and other information from the trustee.
s) Direct the Trustee. The Committee may direct the
trustee, by written instrument, to take action
consistent with plan administration and the trust
agreement.
t) Approve or Deny Requests for Rollover
Contributions. The Committee shall approve or deny
requests for rollover contributions to the plan.
[This sub-section becomes effective on 01-01-96.]
12.7 Committee Actions. All resolutions or other actions
taken by the Committee at any meeting shall be by the vote
of a majority of the members of the Committee attending
the meeting. Any decision or determination reduced to
writing and signed by a majority of the members of the
Committee shall be as fully effective as if it had been
made by a majority vote at a meeting.
12.8 Accounts and Reports. The Committee shall maintain
records of its actions and other data necessary for the
administration of the plan. The Committee shall prepare
and file any reports required by ERISA or the IRC. A copy
of these reports shall be maintained in the office of the
secretary of the Committee.
12.9 Action Taken in Good Faith. CG&E, the board of
directors, officers and employees of CG&E shall be
entitled to rely upon all information furnished by the
accountant, trustee, and all opinions given by legal
counsel. CG&E, the board of directors, officers and
employees of CG&E, and any person acting as a fiduciary
under the plan shall be fully protected from liability for
any action taken, or permitted by them in good faith, in
reliance upon any such information furnished by the
accountant, trustee, or legal counsel.
12.10 Decisions Final and Binding. The decisions of the
Committee on any matter within its authority shall be made
in the sole discretion of the Committee and shall be final
and binding on all parties, including, but not limited to,
CG&E, participants, terminated participants, beneficiaries
and alternate payees.
12.11 Insurance. CG&E may purchase insurance to cover
liability of one or more persons who serve in a fiduciary
capacity with regard to this plan.
12.12 Trust. The fund established under the trust
agreement to which all deferred contributions, optional
contributions, company-matched contributions, and
company-matched stock incentive contributions are made and
from which benefits are solely paid under the terms of the
plan. Neither CG&E nor its subsidiaries shall be required
to make direct payment of any benefit under the plan.
[This section should be deleted effective 01-01-96.]
12.13 Trust. The fund established under the trust
agreement to which all deferred contributions, optional
contributions, company-matched contributions, company-
matched stock incentive contributions, and rollover
contributions are made and from which benefits are solely
paid under the terms of the plan. Neither CG&E nor its
subsidiaries shall be required to make direct payment of
any benefit under the plan.
[This section becomes effective on 01-01-96.]
12.14 Trust Agreement. The trust agreement is the
contract between CG&E's board of directors and the trustee
governing the duties and rights of the trustee with regard
to plan funds. In accordance with the trust agreement,
the trustee shall invest all deferred contributions,
optional contributions, company-matched contributions, and
company-matched stock incentive contributions, and
earnings thereon, in the various investment funds.
[This section should be deleted effective 01-01-96.]
12.15 Trust Agreement. The trust agreement is the
contract between CG&E's board of directors and the trustee
governing the duties and rights of the trustee with regard
to plan funds. In accordance with the trust agreement,
the trustee shall invest all deferred contributions,
optional contributions, company-matched contributions,
company-matched stock incentive contributions, and
rollover contributions, and earnings thereon, in the
various investment funds.
[This section becomes effective on 01-01-96.]
12.16 Plan and Employer Identification Numbers. The
three-digit plan identification number is 002. CG&E's
employer identification number is 31-0240030. The
Committee's employer identification number is 31-0910812.
ADMINISTRATIVE PROVISIONS
ARTICLE 13: ADMINISTRATIVE PROVISIONS
13.1 Filing Documents with the Plan.
a) Filing Date. Generally, documents addressed to
the Committee or forms prepared for use by plan
participants will be considered to be filed with the
Committee or the plan on the day when they are
received by any employee benefits coordinator within
CG&E's Human Resources Department or the monthly
payroll administrator.
b) DROs. On the day a DRO is received by CG&E's Legal
Department, Human Resources Department, or the
secretary of the Committee, it will be considered to
be filed with the Committee.
c) Forms. Forms prepared under the aegis of the DCIP
Committee or the Committee for the plan will be
accepted for use under the plan unless the particular
form is inappropriate for use under this plan or has
been supplanted by a revised form.
13.2 Benefit Claims Process.
a) Written Request. Any person who claims a benefit
under this plan must file the request in writing with
the Committee.
b) Denial of a Claim. If the Committee denies the
benefit in full or in part, it will send a detailed
written reply to the claimant within 90 days after the
claim was filed. The written reply will include the
following:
1) the specific reason(s) for the denial,
referencing any specific plan provisions upon
which the decision depends; and
2) a request for any additional information
available to the claimant in support of his or her
position and an explanation, if any, of why it
would be of assistance in resolving the claim; and
3) the procedures available for a further review
of the claim.
c) Automatic Denial. If the Committee has not
responded in writing to the participant within 90 days
of the filing of the benefit claim, the participant
may consider the claim to have been denied and pursue
the request for reconsideration.
d) Acceptance of a Claim. If the Committee grants the
claim, payment will commence within 90 days of receipt
of the claim, or a notice of acceptance will be sent
to the claimant if commencement of payment is not
feasible within that time frame.
e) Reconsideration of Denial. The claimant may apply
in writing to the Committee for reconsideration of the
claim. The claimant must file for reconsideration
within 60 days of receiving the notice of denial. The
claimant or his or her authorized representative may
request the opportunity to review pertinent plan
documents and submit a written statement of issues and
comments, in conjunction with the request for
reconsideration.
f) Time-frame for Reconsideration. The Committee will
render a decision within 60 days after it receives the
request for reconsideration. If special circumstances
require extension of time for processing the request,
the decision by the Committee will be issued within
120 days after it receives the request for
reconsideration.
g) Claimant's Representative. A claimant for plan
benefits may act on his or her own behalf, or may use
a representative who is authorized to act on behalf of
the claimant, throughout the administrative claim
process.
h) Exhaustion of Administrative Remedies. If the
claim for benefits is denied or ignored in full or in
part, the claimant may file suit in federal court to
pursue the claim.
[This section should be deleted effective 01-01-96.]
13.3 Benefit Claims Process.
a) Written Request. Any person who claims a
benefit under this plan must file the request in
writing with the Benefits Manager.
b) Denial of a Claim or Failure to Respond by
Benefits Manager. If the Benefits Manager denies
the benefit in full or in part or fails to respond
within 30 days from the day a claimant files his
or her written request, then the claimant may
petition the General Manager of Human Resources
Services to review the claim.
c) Denial of a Claim by the General Manager of
Human Resources Services. If the General Manager
of Human Resources Services denies the benefit in
full or in part, he or she will send a detailed
written reply to the claimant within 60 days after
the claim was filed with the General Manager of
Human Resources Services. The written reply will
include the following:
1) the specific reason(s) for the denial,
referencing any specific plan provisions upon
which the decision depends; and
2) a request for any additional information
available to the claimant in support of his or
her position and an explanation, if any, of
why it would be of assistance in resolving the
claim; and
3) the procedures available for a further
review of the claim by the Committee.
d) Automatic Denial. If the General Manager of
Human Resources Services has not responded in
writing to the claimant within 60 days of the
filing of the benefit claim with the General
Manager of Human Resources Services, the claimant
may consider the claim to have been denied and
pursue the request for reconsideration with the
Committee.
e) Acceptance of a Claim. If the General Manager
of Human Resources Services grants the claim,
payment will commence within 60 days of receipt of
the claim by the General Manager of Human
Resources Services, or a notice of acceptance will
be sent to the claimant if commencement of payment
is not feasible within that time frame.
f) Reconsideration of Denial by the Committee.
The claimant may apply in writing to the Committee
for reconsideration of the claim. The claimant
must file for reconsideration within 60 days of
receiving the notice of denial from the General
Manager of Human Resources Services. The claimant
or his or her authorized representative may
request the opportunity to review pertinent plan
documents and submit a written statement of issues
and comments, in conjunction with the request for
reconsideration.
g) Time-frame for Reconsideration. The Committee
will render a decision within 60 days after it re-
ceives the request for reconsideration. If
special circumstances require extension of time
for processing the request, the decision by the
Committee will be issued within 120 days after it
receives the request for reconsideration.
h) Claimant's Representative. A claimant for plan
benefits may act on his or her own behalf, or may
use a representative who is authorized to act on
behalf of the claimant, throughout the
administrative claim process.
i) Exhaustion of Administrative Remedies. If the
claim for benefits is denied or ignored in full or
in part upon reconsideration by the Committee, the
claimant may file suit in federal court to pursue
the claim.
[This section becomes effective on 01-01-96.]
13.4 Uniform Administration. Decisions or actions of the
Committee with respect to the eligibility for or nature of
benefits to be provided under this plan shall be uniformly
applied to all persons similarly situated.
[This section should be deleted effective 01-01-96.]
13.5 Uniform Administration. Decisions or actions of the
Benefits Manager, the General Manager of Human Resources
Services, and the Committee with respect to the
eligibility for or nature of benefits to be provided under
this plan shall be uniformly applied to all persons
similarly situated.
[This section becomes effective on 01-01-96.]
13.6 Statutory Construction. The plan shall be construed,
enforced, and administered according to the laws of the
State of Ohio as to any matter not preempted by ERISA. In
any case that a provision of the plan is held illegal or
invalid for any reason, it shall not affect the remaining
provisions of the plan. However, the plan shall be
construed, enforced, and administered as if the illegal
provision had not been included in the plan.
13.7 Limitation of Rights of the Employee. The plan is
strictly a voluntary undertaking on the part of CG&E. The
plan is not a contract between CG&E and any employee. The
plan does not constitute consideration for, or an
inducement or condition of, the employment of any
employee. Nothing contained in the plan gives any
employee the right to be retained in the service of CG&E
or to interfere with the right of CG&E to discharge any
employee at any time. A participant does not have any
right or claim to a benefit under the plan except upon
fulfilling all of the conditions of eligibility and
qualification. The participant's right to receive the
benefit must have become fixed under the terms of the plan
and there must be funds available in the trust sufficient
to pay the benefit.
13.8 Alienation of Benefits. Benefits under the plan
shall not be subject in any manner to alienation or
assignment. Any attempt to assign or alienate plan
benefits shall be void, whether such sums remain with the
trustee or are in the course of transmission to the person
entitled to them. However, benefits are subject to DROs
accepted by the Committee.
13.9 Response to Attempted Alienation. If any
participant, pensioner, beneficiary, or alternate payee
under the plan becomes bankrupt or attempts to alienate or
assign any benefit under the plan, except as specifically
provided in the plan or by law, then his or her benefit
shall terminate. In that event the Committee shall hold
the assets of the affected participant, pensioner,
beneficiary, or alternate payee for his or her benefit.
13.10 Correction of Inadvertent Error. The Committee may,
in its discretion, recoup any benefit payment, or correct
any loan, withdrawal, or other error made in contravention
of any plan provision, whether by mistake, inadvertence or
misrepresentation. Recovery of overpayment may be
accomplished by withholding from future benefits due the
individual who was enriched by the overpayment, or may be
pursued by any other feasible and appropriate manner of
collection. Other corrections shall be made in the manner
deemed most feasible by the Committee.
13.11 Information from Beneficial Owners.
a) Each beneficial owner shall be required to furnish
the Committee, in the form prescribed by it, such
personal data, affidavits, authorization to obtain
information, and other information as the Committee
may deem appropriate for the proper operation and
administration of the plan.
b) Misrepresentations of fact by a beneficial owner to
the extent that affects their participation or
benefits hereunder shall be handled in accordance with
the rules of the Committee. In no event shall CG&E,
the Committee, or the trustee have an obligation to
provide such a beneficial owner with benefits in
excess of those which would have been provided under
the plan if there had been no misstatement or
misrepresentation.
13.12 Facility of Payment. If the Committee determines
from evidence that a claimant entitled to receive benefits
under this plan is (at the time the benefit is payable)
physically, mentally, or legally incompetent to receive
such benefit and give valid receipt therefore, and that
another person or an institution is then maintaining or
has custody of such incompetent individual, and that no
guardian, custodian or other representative of the estate
of such incompetent individual has been appointed, the
Committee may cause payment to be made to that person or
institution having custody or maintaining the participant,
former participant or beneficiary. The payment, to the
extent made, shall operate as a complete discharge of the
Committee, CG&E, and the trustee.
[This section should be deleted effective 01-01-96.]
13.13 Facility of Payment. If the Benefits Manager
determines from evidence that a claimant entitled to
receive benefits under this plan is (at the time the
benefit is payable) physically, mentally, or legally
incompetent to receive such benefit and give valid receipt
therefore, and that another person or an institution is
then maintaining or has custody of such incompetent
individual, and that no guardian, custodian or other
representative of the estate of such incompetent
individual has been appointed, the Benefits Manager may
cause payment to be made to that person or institution
having custody or maintaining the participant, former
participant or beneficiary. The payment, to the extent
made, shall operate as a complete discharge of the
Committee, CG&E, and the trustee.
[This section becomes effective on 01-01-96.]
13.14 Lost Beneficial Owner. Any benefit payment under
the plan shall be forfeited if the Committee, after
reasonable effort, is unable to locate the person to whom
payment is due. However, any forfeited benefit shall be
restored if a valid claim is made for the forfeited
benefit; first from forfeitures, and then from
company-matched contributions and company-matched stock
incentive contributions.
[This section should be deleted effective 01-01-96.]
13.15 Lost Beneficial Owner. Any benefit payment under
the plan shall be forfeited if the Benefits Manager, after
reasonable effort, is unable to locate the person to whom
payment is due. However, any forfeited benefit shall be
restored if a valid claim is made for the forfeited
benefit; first from forfeitures, and then from
company-matched contributions and company-matched stock
incentive contributions.
[This section becomes effective on 01-01-96.]
13.16 Vested Right. No person shall have any vested
rights under the plan except to the extent that vested
rights may accrue to him or her as provided under the
plan. Furthermore, any person with vested rights under
the plan shall look solely to the assets of the plan for
satisfaction of his or her vested rights.
13.17 Satisfaction of Claims. Any payment to any
beneficial owner in accordance with the terms of the plan
shall, to the extent thereof, be in full satisfaction of
all claims hereunder, whether they be against CG&E, the
Committee, or the trustee, any of whom may require the
beneficial owner or his or her legal representative, as a
condition precedent to any payment, to execute a release
and receipt therefore.
13.18 Plan Amendment Procedure.1 This plan may be amended
from time to time as necessary for compliance with laws or
regulations, as negotiated with one or more unions, or to
meet the needs of covered employees or the plan sponsor.
The board of directors, Committee members, human resources
personnel, trustee and/or record keeper personnel, plan
accountants, actuaries and attorneys, and plan
participants or beneficial owners may propose or recommend
amendments. Proposed amendments will be discussed and
adopted or rejected at Committee meetings. Those
proposing amendments are not entitled to attend the
meetings when the amendments are considered. In general
the Committee has the authority to adopt amendments, but
the board of directors reserves the authority to adopt
amendments which have a significant effect upon the
funding or cost of the plan. Amendments adopted will be
reflected in the appropriate meeting minutes. Plan
attorneys will incorporate adopted amendments into the
plan document. Material modifications will be included in
the summary of material modifications sent to participants
periodically for attachment to the summary plan
description of this plan, and eventually incorporated into
the summary plan description itself.
MISCELLANEOUS PROVISIONS
ARTICLE 14: MISCELLANEOUS PROVISIONS
14.1 Expenses. The operating expenses of the plan,
including fees paid to a servicing organization and fees
for professional services and technical or clerical
assistance, are generally paid by CG&E with some charges
specifically allocated to participants by plan terms.
CG&E reserves the right to shift some or all of the
expenses it pays to the investment funds and/or to the
individual beneficial owners.
14.2 Number. Any use of the singular shall be interpreted
to include the plural and the plural the singular.
14.3 Plan Procedures.
a) Conflicts between Plan and Procedures. Procedures
must be in accordance with the plan as it is then
being administered. Any conflict between written
procedures and written plan terms, or plan terms
required by law, adopted by the board of directors, or
the Committee pursuant to the authority delegated to
it, shall be resolved in favor of the plan terms, as
administered.
b) Sunset Provision. Any procedure, if not examined
and re-authorized by the Committee, shall automatical-
ly expire on the date 5 years from its date of
publication.
c) Expired Procedures. Any expired procedure may be
consulted for its historical value in relation to plan
administration, but it shall not be dispositive of the
administrative decision.
14.4 Titles and Headings. The names of articles, table of
contents, section and sub-section headings, and the index
of the plan have been inserted for convenience of
reference. In the event of any conflict, the text of the
plan, rather than titles, headings, etc., shall control.
14.5 Merger, Consolidation, and Transfer of Assets.
Before this plan can be merged or consolidated with any
other plan, or its assets or liabilities transferred to
another plan, each participant in the plan must be
entitled to receive a benefit immediately after the
merger, transfer, or consolidation (as if the plan had
then terminated) which is equal to or greater than the
benefit he/she would have been entitled to receive
immediately before the merger, consolidation or transfer
(as if the plan had then terminated). This plan will
accept the transfer of funds from the DCIP in accordance
with 3.20a). As a general rule, this plan will not
accept a transfer of assets from any other plan for any
reason, including rollovers and mergers.
[This section should be deleted effective 01-01-96.]
14.6 Merger, Consolidation, and Transfer of Assets.
Before this plan can be merged or consolidated with any
other plan, or its assets or liabilities transferred to
another plan, each participant in the plan must be
entitled to receive a benefit immediately after the
merger, transfer, or consolidation (as if the plan had
then terminated) which is equal to or greater than the
benefit he/she would have been entitled to receive
immediately before the merger, consolidation or transfer
(as if the plan had then terminated). This plan will
accept the transfer of funds from the DCIP in accordance
with 3.20a). This plan will accept rollovers from other
qualified retirement plans.
[This section becomes effective on 01-01-96.]
14.7 Transfer of ESOP Funds. The plan will accept a
one-time transfer of assets, at the election of partici-
pants in the CG&E Employee Stock Ownership Plan (ESOP),
from the terminated ESOP at the time the ESOP assets are
disbursed directly from the ESOP Plan Trustee to the
Trustee of this plan.
14.8 Service of Process. The secretary of the Committee
shall be the designated agent of the plan for the service
of process in connection with all matters affecting the
plan.
14.9 Warranties. Neither CG&E nor the Committee nor the
trustee warrant against any loss or diminution in the
value of accounts.
14.10 Adoption of the Plan by Subsidiaries. Any
subsidiary of CG&E may participate in the plan by
indicating its intention to that effect in writing and
delivering a copy of the instrument to the board of
directors and the trustee for acceptance in writing. Upon
acceptance by the board and the trustee, the subsidiary
will be bound by the terms of the plan and the trust
agreement, and all subsequent plan amendments. Plan
amendments are not subject to review or approval by any
subsidiary which has elected to participate in the plan.
A subsidiary may withdraw from plan participation at any
time by delivery of its written intent to withdraw at
least 60 days in advance of the effective date of the
withdrawal.
DISCRIMINATION TESTING
ARTICLE 15: DISCRIMINATION TESTING
15.1 Definitions. The following terms are defined for the
purpose of this Article only.
a) Average Contribution Percentage (ACP). The ACP is
the average of the ratios, calculated separately for
each eligible employee [see 3.2a)and 3.2b)], of the
sum of1 the eligible employee's optional
contributions, company-matched contributions, company-
matched stock incentive contributions which are fully
vested or are for participants who actually make
deferred compensation or optional contributions for
the plan year, and any recharacterized deferred
compensation contributions, to the eligible employee's
compensation for the plan year.
[This sub-section should be deleted effective 01-01-97.]
b) Average Contribution Percentage (ACP). The ACP is
the average of the ratios, calculated separately for
each eligible employee [see 3.2a)and 3.2b)], of the
sum of2 the eligible employee's optional
contributions, company-matched contributions, company-
matched stock incentive contributions which are fully
vested or are for participants who actually make
deferred compensation contributions for the plan year,
and any recharacterized deferred compensation
contributions, to the eligible employee's compensation
for the plan year.
[This sub-section becomes effective on 01-01-97.]
c) Actual Deferral Percentage (ADP). The ADP is the
average of the ratios, calculated separately for each
eligible employee, of the amount of3 deferred
compensation contributions made on behalf of the
eligible employee for the plan year, to the eligible
employee's compensation for that plan year.
d) Compensation. Compensation is the total wages
earned and other compensation including amounts paid
for sick pay, moving expense payments and
reimbursements that are not deductible under IRC
217.4 Compensation also includes employer
contributions under this plan and Code Section 125
plans which are not currently taxable to the employee.
Premiums for group term life insurance that exceed
the IRC 79(a) limits are also included in
compensation.5 Compensation is limited to $150,000 as
adjusted6 by the Internal Revenue Commissioner for
increases in the cost of living in accordance with IRC
401(a)(17)(B) in the same manner as base pay is
limited.
e) Excess Aggregate Contributions. A participant's
excess aggregate contribution for any year is the
excess of
1) The total amount of the 7contributions8 taken
into account in computing the numerator of the ACP
for a plan year for that participant over
2) the maximum amount of that participant's
contributions permitted by the ACP test.
f) Excess Contributions. A participant's excess
contribution for any year is the excess of
1) The total amount of his or her contributions
taken into account in computing the numerator of
the ADP for a plan year over
2) the maximum amount of his or her contributions
permitted by the ADP test.
g) Highly Compensated Employee.9
1) A highly compensated employee is any employee
who, during the plan year or the preceding plan
year, (A) was at any time a 5% owner, (B) received
compensation in excess of $75,000 (or such larger
amount as may be determined by the Secretary of
Treasury pursuant to IRC 415(d)), (C) received
compensation in excess of $50,000 (or such larger
amount as may be determined by the Secretary of
Treasury pursuant to IRC 415(d) and was in the
top-paid group of employees for such plan year, or
(D) was at any time an officer and received
compensation greater than 50% of the amount in
effect under IRC 415(b)(1)(A) for such plan year.
Provided, sub-sections (B) through (D) shall
apply to an employee meeting such criteria in the
plan year only if such employee is also one of the
100 employees who received the most compensation
from CG&E during the plan year. For purposes of
this sub-section 15.1g)1), "compensation" shall
include compensation from CG&E and any employer
required to be aggregated with CG&E under
IRC 414(b), (c), (m) or (o).
2) A highly compensated employee is any employee
who (A) separated from service with CG&E, or is
deemed to have separated from service, prior to
the plan year, (B) performs no service for CG&E
during the plan year, and was a highly compensated
employee during either the plan year in which such
separation from service occurred or in any plan
year ending on or after the employee's 55th
birthday.
3) The maximum number of officers which will be
considered highly compensated employees for a plan
year or preceding plan year pursuant to 1)D) above
is the lesser of (A) 50 or (B) the greater of
three employees or 10% of CG&E's employees. If no
officer of CG&E received compensation greater than
50% of the amount in effect under IRC
415(b)(1)(A) for the plan year or the preceding
plan year, the highest paid officer for such plan
year shall be treated as a highly compensated
employee.
4) For purposes of 15.1g)1)(C) above, an employee
shall be considered a member of the "top paid
group" for any year if such employee is in the
group consisting of the top 20% of the employees
of CG&E when ranked on the basis of compensation
paid during the year, pursuant to IRC 414(q)(4).
5) If an employee is a "family member" of a highly
compensated employee who is a 5% owner (or an
employee who was a highly compensated employee by
reason of being a 5% owner during the plan year in
which the employee separated from service with
CG&E or any plan year ending on or after the
employee's 55th birthday) during the plan year or
the preceding plan year, or a family member of one
of the 10 most highly compensated employees of
CG&E ranked on the basis of compensation paid by
CG&E during the plan year, then the family member
and the highly compensated employee shall be
aggregated. In such case, the family member and
highly compensated employee shall be treated as a
single employee receiving compensation and
contributions equal to the sum of the compensation
and contributions of the family member and highly
compensated employee. For purposes of 15.1g),
the term "family member" shall include the spouse,
lineal ascendants and descendants of an employee
or former employee and the spouses of such lineal
ascendants and descendants.
6) For purposes of determining whether an employee
is a highly compensated employee, the provisions
of IRC 414(q), and the regulations thereunder,
shall apply.
[This sub-section should be deleted effective 01-01-97.]
h) Highly Compensated Employee.10
1) A highly compensated employee is any employee
who (A) was at any time a 5% owner during the plan
year or the preceding plan year, or (B) received
compensation for the preceding plan year in excess
of $80,000 (or such larger amount as may be deter-
mined by the Secretary of Treasury pursuant to IRC
415(d)) and if CG&E elects, was in the top-paid
group of employees for such preceding plan year.
2) A highly compensated employee is any employee
who (A) separated from service with CG&E, or is
deemed to have separated from service, prior to
the plan year, (B) performs no service for CG&E
during the plan year, and was a highly compensated
employee during either the plan year in which such
separation from service occurred or in any plan
year ending on or after the employee's 55th
birthday.
3) For purposes of 15.1h)1)(B) above, an employee
shall be considered a member of the "top paid
group" for any year if such employee is in the
group consisting of the top 20% of the employees
of CG&E when ranked on the basis of compensation
paid during the preceding plan year, pursuant to
IRC 414(q)(4).
4) For purposes of determining whether an employee
is a highly compensated employee, the provisions
of IRC 414(q), and the regulations thereunder,
shall apply.
[This sub-section becomes effective on 01-01-97.]
15.2 ADP Testing. The ADP for highly compensated eligible
employees for each plan year must satisfy one of the
following tests11:
a) The ADP Test. The ADP for highly compensated
eligible employees for the plan year shall not exceed
the ADP for non-highly compensated eligible employees
for the plan year, multiplied by 1.25.
b) The ADP Alternative Limitation Test. The ADP for
highly compensated eligible employees for the plan
year shall not exceed the lesser of
1) 2 times the ADP for non-highly compensated
eligible employees for the plan year or,
2) 2 percentage points, plus the ADP, for
non-highly compensated eligible employees.
[This section should be deleted effective 01-01-97.]
15.3 ADP Testing. The ADP for highly compensated eligible
employees for each plan year must satisfy one of the
following tests12:
a) The ADP Test. The ADP for highly compensated
eligible employees for the plan year shall not exceed
the ADP for non-highly compensated eligible employees
for the preceding plan year (unless CG&E elects to use
current plan year percentages), multiplied by 1.25.
b) The ADP Alternative Limitation Test. The ADP for
highly compensated eligible employees for the plan
year shall not exceed the lesser of
1) 2 times the ADP for non-highly compensated
eligible employees for the preceding plan year
(unless CG&E elects to use current plan year
percentages) or,
2) 2 percentage points, plus the ADP, for
non-highly compensated eligible employees for the
preceding plan year (unless CG&E elects to use
current plan year percentages).
[This section becomes effective on 01-01-97.]
15.4 ACP Testing. The ACP test will be performed
following any recharacterization of deferred contributions
required by 15.6. The ACP for highly compensated
eligible employees for each plan year must satisfy one of
the following tests13:
a) The ACP Test. The ACP for highly compensated
eligible employees for the plan year shall not exceed
the ACP for non-highly compensated eligible employees
for the plan year, multiplied by 1.25.
b) The ACP Alternative Limitation Test. The ACP for
highly compensated eligible employees for the plan
year shall not exceed the lesser of
1) 2 times the ACP for non-highly compensated
eligible employees for the plan year or,
2) 2 percentage points, plus the ACP, for
non-highly compensated eligible employees.
[This section should be deleted effective 01-01-97.]
15.5 ACP Testing. The ACP test will be performed
following any recharacterization of deferred contributions
required by 15.7. The ACP for highly compensated
eligible employees for each plan year must satisfy one of
the following tests14:
a) The ACP Test. The ACP for highly compensated
eligible employees for the plan year shall not exceed
the ACP for non-highly compensated eligible employees
for the preceding plan year (unless CG&E elects to use
current plan year percentages), multiplied by 1.25.
b) The ACP Alternative Limitation Test. The ACP for
highly compensated eligible employees for the plan
year shall not exceed the lesser of
1) 2 times the ACP for non-highly compensated
eligible employees for the preceding plan year
(unless CG&E elects to use current plan year
percentages) or,
2) 2 percentage points, plus the ACP, for
non-highly compensated eligible employees for the
preceding plan year (unless CG&E elects to use
current plan percentages).
[This section becomes effective on 01-01-97.]
15.6 Multiple Use of Alternative Limitation. If neither
the ADP nor the ACP for highly compensated employees meets
the tests in 15.2a) and 15.4a)15, the multiple use test
of the alternative limitation must be satisfied for the
plan year. In order to satisfy the multiple use test of
the alternative limitation, the sum of the ACP for highly
compensated employees and the ADP for highly compensated
employees may not exceed the greater of the following16:
a) the sum of:
1) 1.25 times the greater of the ADP or the ACP
for non-highly compensated eligible employees, and
2) the lesser of:
A) 2 percentage points plus the lesser of the
ADP or ACP for the non-highly compensated
eligible employees, or
B) 2 times the lesser of the ADP or ACP of the
non-highly compensated eligible employees; or
b) the sum of:
1) 1.25 times the lesser of the ADP or the ACP for
non-highly compensated eligible employees, and
2) the lesser of:
A) 2 percentage points plus the greater of the
ADP or ACP of non-highly compensated eligible
employees, or
B) 2 times the greater of the ADP or ACP of
non-highly compensated eligible employees.
[This section should be deleted effective 01-01-97.]
15.7 Multiple Use of Alternative Limitation. If neither
the ADP nor the ACP for highly compensated employees meets
the tests in 15.3a) and 15.5a)17, the multiple use test
of the alternative limitation must be satisfied for the
plan year. In order to satisfy the multiple use test of
the alternative limitation, the sum of the ACP for highly
compensated employees and the ADP for highly compensated
employees may not exceed the greater of the following18:
a) the sum of:
1) 1.25 times the greater of the ADP or the ACP
for non-highly compensated eligible employees for
the preceding plan year (unless CG&E elects to use
current plan year percentages), and
2) the lesser of:
A) 2 percentage points plus the lesser of the
ADP or ACP for the non-highly compensated
eligible employees for the preceding plan year
(unless CG&E elects to use current plan year
percentages), or
B) 2 times the lesser of the ADP or ACP of the
non-highly compensated eligible employees for
the preceding plan year (unless CG&E elects to
use current plan year percentages); or
b) the sum of:
1) 1.25 times the lesser of the ADP or the ACP for
non-highly compensated eligible employees for the
preceding plan year (unless CG&E elects to use
current plan year percentages), and
2) the lesser of:
A) 2 percentage points plus the greater of the
ADP or ACP of non-highly compensated eligible
employees for the preceding plan year (unless
CG&E elects to use current plan year
percentages), or
B) 2 times the greater of the ADP or ACP of
non-highly compensated eligible employees for
the preceding plan year (unless CG&E elects to
use current plan year percentages).
[This section becomes effective on 01-01-97.]
15.8 Corrective Procedure If ADP Limitation Exceeded. If
the plan fails the ADP test provided for in this Article,
the following procedure will be followed:
a) Reduction of Highly Compensated Participants' ADP.
The ADP for highly compensated participants shall be
reduced to the maximum acceptable level determined by
the ADP test. In determining the amount of excess
contributions for each highly compensated participant,
the highest ratio will be reduced to the next highest
ratio until the maximum allowed percentage is
reached19.
[This sub-section should be deleted effective 01-01-97.]
b) Reduction of Highly Compensated Participants' ADP.
The ADP for highly compensated participants shall be
reduced to the maximum acceptable level determined by
the ADP test. Excess contributions will be returned
to the highly compensated participants who contributed
the largest dollar amounts until the maximum allowed
percentage is reached20.
[This sub-section becomes effective on 01-01-97.]
c) Recharacterization of Excess Contributions. The
amount resulting from a reduction in a participant's
deferred compensation contributions in 15.8a) or
15.8b) above shall be recharacterized as optional
contributions and treated as taxable income to the
participant in the tax year in which the participant
would have received them if he or she had originally
elected to receive them in cash. This
recharacterization normally will be made within 2 1/2
months after the close of the plan year21.
15.9 Corrective Procedure if ACP Limitation Exceeded. If
the plan fails the ACP test, the following procedure will
be followed, after recharacterizing any deferred
compensation contributions required under 15.6 or 15.7:
a) Reduction of Highly Compensated Participants' ACP.
The ACP for highly compensated participants shall be
reduced to the maximum acceptable level determined by
the ACP test. In determining the amount of excess
aggregate contributions for each highly compensated
participant, the highest ratio will be reduced to the
next highest ratio until the maximum allowed
percentage is reached.
[This sub-section should be deleted effective 01-01-97.]
b) Reduction of Highly Compensated Participants' ACP.
The ACP for highly compensated participants shall be
reduced to the maximum acceptable level determined by
the ACP test. Excess aggregate contributions will be
returned to the highly compensated participants who
contributed the largest dollar amounts until the
maximum allowed percentage is reached.
[This sub-section becomes effective on 01-01-97.]
c) Disposition of Excess Aggregate Contributions. The
aggregate excess contributions resulting from a
reduction in a highly compensated participant's ACP
ratio in 15.9a) or 15.9b) shall be disposed of as
follows:
1) Excess Optional Contributions. Any excess
optional contributions, plus the net of any income
or loss attributable to optional contributions as
of the last day of the plan year,22 normally will
be distributed to the participant within 2 1/2
months after the end of the plan year.23 However,
if distributions are not made by that time,
distributions shall be made within 12 months after
the close of the plan year.24
2) Excess Company-Matched Contributions. Any
excess company-matched contributions which are not
vested will be treated as forfeitures under
7.6c). Any excess vested company-matched
contributions25 plus the net of any income or loss
attributable to the excess company-matched
contributions as of the end of the plan year,26
shall normally be distributed to the participant
within 2 1/2 months after the end of the plan
year.27 However, if distributions are not made by
that time, distributions shall be made within 12
months after the close of the plan year.28
3) Excess Company-Matched Stock Incentive
Contributions. Any excess company-matched stock
incentive contributions which are not vested will
be treated as forfeitures under 7.6c). Any
excess vested company-matched stock incentive
contributions29 plus the net of any income or loss
attributable to the excess company-matched stock
incentive contributions as of the end of the plan
year,30 shall normally be distributed to the
participant within 2 1/2 months after the end of
the plan year.31 However, if distributions are
not made by that time, distributions shall be made
within 12 months after the close of the plan
year.32
15.10 Corrective Procedure if the Test for the Multiple
Use of Alternative Limitation is Exceeded.
If the plan fails the test for the multiple use of the
alternative limitation, the following procedure will be
followed:
a) Simultaneous Reduction of the ADP and ACP of Highly
Compensated Participants. After determining the
amount of excess contributions and excess aggregate
contributions for each highly compensated participant,
the participants with the highest individual ADP and
ACP ratios will have their ratios reduced to the next
highest ADP and ACP ratio, until the maximum multiple
use limit is reached.
[This sub-section should be deleted effective 01-01-97.]
b) Simultaneous Reduction of the ADP and ACP of Highly
Compensated Participants. After determining the
amount of excess contributions and excess aggregate
contributions for each highly compensated participant,
the participants who contributed the largest dollar
amounts will have their contributions returned, until
the maximum multiple use limit is reached.
[This sub-section becomes effective on 01-01-97.]
c) Disposition of Excess Contributions and Excess
Optional Contributions and Excess Vested
Company-Matched Contributions and Excess Vested
Company-Matched Stock Incentive Contributions. Any
excess contributions, optional contributions, vested
company-matched contributions, and vested company-
matched stock incentive contributions which are
determined by the application of 15.10a) or 15.10b),
plus the net of any income or loss attributable to the
excess contributions, optional contributions, vested
company-matched contributions, and vested company-
matched stock incentive contributions as of the last
day of the plan year, shall normally be distributed to
the participant within 2 1/2 months after the end of
the plan year.33 However, if distributions are not
made by that time, distributions shall be made within
12 months after the close of the plan year.34
LIMITATION ON ANNUAL ADDITIONS
ARTICLE 16: LIMITATION ON ANNUAL ADDITIONS
16.1 Definitions.
The following terms are defined solely for purposes of
this Article:
a) Annual Addition.1 A participant's annual addition
is the sum of the following amounts credited to the
participant's account for a plan year:
1) deferred compensation contributions;
2) company-matched contributions;
3) company-matched stock incentive contributions;
4) optional contributions; and
5) forfeitures.
b) Compensation.2 A participant's compensation for
any plan year consists of his or her total wages
earned and other compensation including amounts paid
for sick pay, moving expense payments and
reimbursements that are not deductible under IRC 217,
and premiums for group term life insurance that exceed
IRC 79(a) limits. Compensation also includes any
distribution from any non-qualified deferred
compensation plan paid to the participant while s/he
remains employed. Compensation does not include
employer contributions under this plan or any IRC 125
plan which are not currently taxable to the employee
or any distributions from a qualified deferred
compensation plan, regardless of whether such amounts
are includable in the employee's gross income when
distributed.3
c) Defined Benefit Fraction.4 The defined benefit
plan fraction applicable to a participant for any plan
year is a fraction: 1) the numerator of which is the
participant's projected annual benefit5 (determined as
of the close of the plan year) under the RIP; and 2)
the denominator of which is the lesser of 1.25
multiplied by the dollar limitation under IRC 415 for
defined benefit plans for such year, or 1.4 multiplied
by the participant's average compensation for the 3
consecutive calendar years aggregating the greatest
compensation from CG&E during which s/he participated
in the plan.
d) Defined Benefit Plan. A qualified plan as defined
in IRC 414(j).
e) Defined Contribution Fraction6. The defined
contribution fraction applicable to a participant for
any plan year is a fraction: 1) the numerator of
which is the sum of annual additions to the
participant's account under the plan as of the close
of the limitation year; and 2) the denominator of
which is the sum of the lesser of the following
amounts determined for such year and for each prior
year of service with CG&E:
1) the product of 1.25 multiplied by the dollar
limitation under IRC 415(c)(1)(A) for defined
contribution plans for such year,7 or
2) the product of 1.4 multiplied by 25% of the
participant's compensation for such year.
f) Defined Contribution Plan. A qualified plan as
defined in IRC 414(i).
g) Company. The employer that adopts this plan, and
all members of a controlled group of corporations, all
commonly controlled trades or businesses or affiliated
service groups of which the adopting employer is a
part, and any other entity required to be aggregated
with the employer pursuant to IRC 414(o)
regulations.8
h) Excess Amount. The excess of the participant's
annual additions for the plan year over the maximum
annual additions permitted under this Article for the
plan year.
i) Projected Annual Benefit.9 A participant's
projected annual benefit is an amount equal to the
annual benefit that the participant would be entitled
to receive under the terms of the defined benefit plan
in which he is a participant, assuming that:
1) the participant continues employment until his
or her normal retirement age;
2) that his or her compensation continues at the
same rate as in effect in the plan year under
consideration; and
3) that all relevant factors used to determine
benefits under such plan remain constant.
Projected annual benefit is a benefit expressed in the
form of a single life annuity disregarding any
ancillary benefits or benefits attributable to a
rollover contribution.
16.2 General Limitations. Notwithstanding any other
provisions of this plan, the maximum annual addition
credited to the account of a participant for any plan
year10 shall not exceed the lesser of:
a) $30,000, or
b) 25% of the participant's compensation for that plan
year.
16.3 Estimation of Compensation. Prior to the
determination of a participant's actual compensation for a
plan year, the maximum annual addition for a participant
may be computed using a reasonable estimation of the
participant's compensation for a plan year.
16.4 Disposition of Excess Amount. In the event the
limitations of this Article are exceeded because of an
allocation of forfeitures, a reasonable error in
estimating a participant's compensation or other
reasonable circumstances, the excess amount shall be
disposed of as follows11:
a) First, any optional contributions that are not
eligible for company-matched contributions and
company-matched stock incentive contributions will be
returned to the participant to the extent that the
return would reduce the excess amount.
[This sub-section should be deleted effective 01-01-97.]
b) First, any optional contributions will be returned
to the participant to the extent that the return would
reduce the excess amount.
[This sub-section becomes effective on 01-01-97.]
c) Second, any deferred compensation that are not
eligible for company-matched contributions and
company-matched stock incentive contributions will be
returned to the participant to the extent that the
return will reduce the excess amount.
d) Third, any company-matched contributions, made on
behalf of a participant under this plan shall be
reduced to the extent that the reduction will reduce
the excess amount. Such reduction in company-matched
contributions shall be treated as a forfeiture in
accordance with 7.6.12
e) Fourth, any company-matched stock incentive
contributions, made on behalf of a participant under
this plan shall be reduced by the amount needed to
eliminate the excess amount. Such reduction in
company-matched stock incentive contributions shall be
treated as a forfeiture in accordance with 7.6.13
16.5 Aggregation of Plans of CG&E.
a) For purposes of applying the limitation of this
Article, all defined benefit plans (whether or not
terminated) of CG&E shall be treated as one defined
benefit plan and all defined contribution plans
(whether or not terminated) shall be treated as one
defined contribution plan.14
b) If an excess amount results from the aggregation of
annual additions under this plan with annual additions
under another defined contribution plan:
1) the excess amount shall be first attributable
to this plan; and
2) such excess amount shall be treated in
accordance with 16.1h).
c) Where a participant is a participant at any time in
both a defined contribution plan and a defined benefit
plan sponsored by CG&E, the sum of the defined benefit
fraction and the defined contribution fraction for any
plan year shall not exceed 1.0. Should this limita-
tion be exceeded in any plan year, the participant's
benefits under the RIP shall be appropriately reduced
so that the defined benefit fraction is equal to the
difference between 1.0 and the defined contribution
fraction.
AMENDMENT AND TERMINATION OF THE PLAN
ARTICLE 17: AMENDMENT AND TERMINATION OF THE PLAN
17.1 Amendment of the Plan.
a) Reservation of Right. CG&E expects to continue the
plan indefinitely, but as future conditions cannot be
foreseen, the board of directors reserves the right to
amend or terminate the plan at any time.
b) Effect on Participants. No amendment shall
retroactively reduce the rights or benefits of
participants1 or permit the return to CG&E of the
CINergy stock, other securities, obligations,
deposits, or cash held by the trustee, or permit their
use or diversion for any purpose other than for the
exclusive benefits of the participants or their bene-
ficiaries. In addition, no amendment shall eliminate
an optional form of benefit or eliminate or reduce an
early retirement option with respect to benefits
attributable to service before this amendment.
c) Discontinuance of Contributions. In the event of a
complete discontinuance of company-matched
contributions or company-matched stock incentive
contributions, the company-matched sub-account will be
immediately vested.
17.2 Plan Termination.
If the plan is terminated all contributions will cease.
The Committee shall direct the trustee to determine the
value of each beneficial owner's account as of the date of
termination. The value of any unallocated plan assets
shall be allocated to the beneficial owners. Each
beneficial owner shall become fully vested in the total
value of his or her account. Each beneficial owner's
balance shall be segregated by the trustee pending
disposition. Distribution shall be made, in a single
payment, to each beneficial owner as soon as practicable
following the date of plan termination.2 No amendment
shall deprive the beneficial owners of their vested rights
upon termination of the plan.
17.3 Partial Termination.
If the plan is partially terminated, all contributions to
the accounts of all affected participants will cease. The
Committee shall direct the trustee to determine the value
of each affected beneficial owner's account as of the date
of the partial termination. The value of any unallocated
plan assets shall be allocated to beneficial owners. Each
affected beneficial owner shall become fully vested in his
or her account. Distribution shall be made, in a single
payment, to each beneficial owner as soon as practical
following the date of partial plan termination. However,
no distribution from a participant's deferred compensation
contribution sub-account shall be made at a time not
otherwise permitted under the plan. No amendment shall
deprive the affected beneficial owners of their vested
rights upon partial termination of the plan.
17.4 Liquidation of the Investment Funds.
The trust and the investment funds shall continue in
existence after the termination of the plan for such
period of time as may be required to complete the
liquidation thereof in accordance with the terms of this
Article.
INDEX
This index references the root of hyphenated words as if they
were single words, e.g. "account" will also reference the
occurrence of "sub-account".
This index also references words and phrases in the text and the
endnotes. Endnote references reflect the text page where the
endnote occurs, not the page where the endnote itself is printed.
Adopted by the Cinergy Corp.
Board of Directors on January 25, 1996
JANUARY 1, 1996 AMENDMENT TO THE
CINERGY CORP. ANNUAL INCENTIVE PLAN
The Cinergy Corp. Annual Incentive Plan, as adopted
effective October 24, 1994, is hereby amended, effective as
of January 1, 1996, with respect to certain provisions of
the Plan pertaining to distribution of awards and the
maximum amount of award available to executive officers.
(1) Explanation of Amendment.
On January 25, 1996, the Compensation Committee of the
board of directors of Cinergy Corp. recommended that the
board adopt the Cinergy Corp. Nonqualified Deferred
Compensation Plan which will permit the Compensation
Committee to allow participants to defer the receipt of
awards otherwise payable under Cinergy Corp.'s various
incentive compensation plans, including its Annual Incentive
Plan. The proposed amendment to Article 9 of the Plan
provides that, unless the Participant defers receipt of an
award under the Plan in accordance with the provisions of
the Cinergy Corp. Nonqualified Deferred Compensation Plan,
the award will be payable to the Participant on the first
business day of March of the year following the year in
which the award was earned. The proposed amendment to
Article 1 defines the Cinergy Corp. Nonqualified Deferred
Compensation Plan.
On December 20, 1995, the Internal Revenue Service
promulgated final regulations relating to the disallowance
of deductions for employee remuneration in excess of one
million dollars. Consistent with the final regulations, the
proposed amendment to Article 20 states as to objective
corporate and objective individual goals the maximum dollar
amount of compensation that can be paid to a "covered
employee" under the Plan. Previously, the maximum award was
expressed as a percentage of annual base salary. The term
"covered employee" includes the chief executive officer and
the four highest compensated officers for the applicable
year.
(2) Article 9, As Amended.
Article 9, as hereby amended, reads as follows:
"Article 9
Distribution
After the determination and approval have been made
under Article 7 (Annual Performance Award) as to the amount
of Annual Performance Award to which a Participant is
entitled at the end of an Employer's Performance Period, the
resulting Annual Performance Award shall be paid to the
Participant in cash in one lump sum on the first business
day of March following the end of the Performance Period for
which the Annual Performance Award was made unless the
Participant has previously elected in writing to defer the
receipt of all or a portion of the award in accordance with
the provisions of the Cinergy Nonqualified Deferred
Compensation Plan."
(3) Section 1.30, As Added.
Section 1.30, as added, hereby reads as follows:
"Nonqualified Deferred Compensation Plan" means the
nonqualified deferred compensation arrangement known as the
`Cinergy Corp. Nonqualified Deferred Compensation Plan,' as
amended from time to time, and any successor plan thereto."
(4) Article 20, As Amended.
Article 20, as hereby amended, reads as follows:
"ARTICLE 20
EXECUTIVE OFFICERS
Notwithstanding any provision of the Plan to the contrary,
this Article will govern the terms of the Annual Performance
Awards granted to Executive Officers. This Article is designed
to comply with Code Subsection 162(m) to the extent applicable.
All provisions in this Article, and any other applicable
provision of the Plan shall be construed in a manner to so
comply.
(a) With respect to Executive Officers, the Plan shall be
administered by a committee (the "AIP Committee") consisting of
two or more persons each of whom is an "outside director" for
purposes of Code Subsection 162(m). The AIP Committee and
CINergy's Committee may be the same committee provided that the
membership of CINergy's Committee satisfies the conditions set
forth in the preceding sentence.
(b) With respect to Participants who are Executive
Officers as of the beginning of a Performance Period, the AIP
Committee shall establish the Corporate Target Goals and
Individual Goals for each Performance Period within the time
necessary to satisfy the requirements of Code Subsection 162(m).
Corporate Target Goals shall be based on objective performance
criteria pertaining to an Employer's performance, efficiency, or
profitability including, but without limitation, stock price,
total shareholder return, market share, sales, earnings per
share, costs, net operating incomes, cash flow, fuel cost per
million BTU, costs per kilowatt hour, retained earnings, or
return on equity. Individual Goals shall be based on objective
or, with respect to separate awards under the Plan, subjective
performance criteria pertaining to an Executive Officer's
individual effort as to enhancement of either individual
performance or achievement or attainment of Corporate Target
Goals or other Individual Goals. Further, in the case of
Participants who are Covered Employees as of the end of the
Performance Period, unless otherwise determined by the AIP
Committee, or unless otherwise designated as separate awards
based on subjective performance criteria, payments shall be made
only after achievement of the applicable performance goals has
been certified by the AIP Committee. In no event shall payment
in respect of Annual Performance Awards based on Corporate
Target Goals and objective Individual Goals granted for a
Performance Period be made to a Participant who is a Covered
Employee as of the end of a Performance Period in an amount that
exceeds one million dollars."
IN WITNESS WHEREOF, Cinergy Corp. has caused this document
to be executed and approved by its duly authorized officers,
effective as of January 1, 1996.
CINERGY CORP.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman, President and
Chief Executive Officer
Dated: October 25, 1996
Approved:
By: JEROME A. VENNEMANN
Jerome A. Vennemann
Associate General Counsel and
Assistant Corporate Secretary
Dated: October 25, 1996
CINERGY CORP. 401(k) EXCESS PLAN
ARTICLE I
NATURE AND PURPOSE OF PLAN
1.1 Type of Plan. The name of this Plan is the Cinergy
Corp. 401(k) Excess Plan, effective January 1, 1997. The
Plan is maintained by the Company as an unfunded, non-
qualified deferred compensation plan for a select group of
the Employer's management or highly-compensated employees.
1.2 Purpose of Plan. The purpose of the Plan is to provide
a means for the payment of deferred compensation to a select
group of key senior management employees of the Employer, in
recognition of their substantial contributions to the
operation of the Employer, and to provide those individuals
with additional financial security as an inducement to them
to remain in employment with the Employer.
ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. As used in the Plan, the following words
and phrases, when capitalized, have the following meanings
except when used in a context that plainly requires a
different meaning:
(a) "Account" means the record of a Participant's
total interest in the Plan.
(b) "Beneficiary" means, with respect to a
Participant, the person or persons designated pursuant
to Section 5.5 (Designation of Beneficiary) to receive
benefits under the Plan in the event of the
Participant's death.
(c) "Board of Directors" means the duly constituted
board of directors of the Company on the applicable
date.
(d) "Change in Control" means an event described in
Subsection 5.2(b) (Distribution Upon a Change in
Control).
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and interpretive rules and
regulations.
(f) "Committee" means a committee composed of those
members of the Compensation Committee of the Board of
Directors who are not Participants in the Plan.
(g) "Company" means Cinergy Corp., a Delaware
Corporation, and any corporation that shall succeed to
its business and adopt the Plan.
(h) "Compensation" means, with respect to a
Participant for a Plan Year, the annual base salary
paid to the Participant by the Employer for services,
including elective contributions made by the Employer
on behalf of the Employee during the Plan Year that are
not includable in gross income under Code Section 125,
Paragraph 402(a)(8), Subsection 402(h) or Subsection
403(b). "Compensation" does not include amounts
deferred under other deferral arrangements, bonuses,
annual or long-term incentive pay, moving allowances,
living and similar allowances and imputed income.
(i) "Deferral Account" means, with respect to a
Participant, the bookkeeping account that serves as a
record of the deferrals and earnings and losses on
those deferrals credited to the Participant under the
terms of this Plan.
(j) "Deferral Agreement" means the written agreement
entered into between an Eligible Employee and the
Employer pursuant to which the Eligible Employee elects
to make deferrals under the Plan.
(k) "Effective Date" means January 1, 1997.
(l) "Eligible Employee" means a key management
Employee who is selected by the Committee as an
individual who has the opportunity to impact
significantly the annual operating success of the
Employer.
(m) "Employee" means any person employed by the
Employer on a full-time salaried basis, including
officers of the Company or a Related Employer.
(n) "Employer" means the Company and any Related Employer.
(o) "Employer Base Matching Contribution" means, with
respect to a Participant, the contribution made by the
Employer on behalf of a Participant pursuant to Section
3.3 (Employer Base Matching Contributions).
(p) "Employer Incentive Matching Contribution" means,
with respect to a Participant, the contribution made by
the Employer on behalf of a Participant pursuant to
Section 3.4 (Employer Incentive Matching
Contributions).
(q) "401(k) Plan" means The Cincinnati Gas & Electric
Company Deferred Compensation and Investment Plan or
the PSI Energy, Inc. Employees' 401(k) Savings Plan,
whichever is applicable to a Participant.
(r) "Insolvent" means, with respect to the Company,
the Company being unable to pay its debts as they are
due, or the Company being subject to a pending
proceeding as a debtor under the United States
Bankruptcy Code.
(s) "Investment Options" means, with respect to any
Plan Year, the investment options that the Committee
makes available to Participants under the Plan from
among the investment options available under the 401(k)
Plan as of the first day of the Plan Year.
(t) "Matching Account" means, with respect to a
Participant, the bookkeeping account that serves as a
record of the Employer Base Matching Contributions, the
Employer Incentive Matching Contributions and earnings
and losses on those contributions credited to the
Participant under the terms of this Plan.
(u) "Participant" means an Eligible Employee or former
Eligible Employee who has an interest in the Plan
pursuant to Section 3.2 (Election to Defer), 3.3
(Employer Base Matching Contributions) or 3.4 (Employer
Incentive Matching Contributions).
(v) "Plan" means this instrument, as amended from time
to time, and the non-qualified deferred compensation
plan so established.
(w) "Plan Year" means a calendar year commencing on or
after January 1, 1997.
(x) "Rabbi Trust" means the grantor trust that the
Company, in its sole discretion, may establish pursuant
to Subsection 4.4(b) (Accounts Unfunded) for the
deposit of funds to be used for the exclusive purpose
of paying benefits accrued under the Plan, subject to
the claims of the Company's general creditors in the
event the Company becomes Insolvent.
(y) "Related Employer" means any Employer that,
together with the Company, is under common control or a
member of an affiliated service group, as determined
under Code Subsections 414(b), (c), (m), and (o).
(z) "Termination of Employment" means, with respect to
a Participant, the cessation of the relationship of
Employer and Employee between the Participant and the
Employer for any reason other than the Participant's
death. A Participant shall not be treated as having
incurred a Termination of Employment until the
employment relationship between the Participant and all
Related Employers has terminated.
(aa) "Trustee" means the trustee of the Rabbi Trust
that the Company, in its sole discretion, may establish
pursuant to Subsection 4.4(b) (Accounts Unfunded).
(bb) "Unforeseeable Emergency" means, for the purpose of
Subsection 3.2(d) (Suspension or Cessation of
Deferrals) and Section 5.3 (Distribution Upon Financial
Emergency), with respect to a Participant or
Beneficiary, a severe financial hardship to the
Participant or Beneficiary resulting from a sudden and
unexpected illness or accident of the Participant,
Beneficiary, or his or her dependents; loss of the
Participant's or Beneficiary's property due to
casualty; or other similar extraordinary and
unforeseeable circumstances arising as a result of
events beyond the Participant's or Beneficiary's
control.
2.2 Rules of Construction. The following rules of
construction shall govern in interpreting the Plan:
(a) The provisions of this Plan shall be construed and
governed in all respects under and by the internal laws
of the State of Ohio, to the extent not preempted by
federal law.
(b) Words used in the masculine gender shall be
construed to include the feminine gender, where
appropriate, and vice versa.
(c) Words used in the singular shall be construed to
include the plural, where appropriate, and vice versa.
(d) The headings and subheadings in the Plan are
inserted for convenience of reference only and are not
to be considered in the construction of any provision
of the Plan.
(e) If any provision of the Plan shall be held to be
illegal or invalid for any reason, that provision shall
be deemed to be null and void, but the invalidation of
that provision shall not otherwise impair or affect the
Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Participation in the Plan is limited to
Eligible Employees.
3.2 Election to Defer.
(a) Election Procedure. Within a reasonable time
before the beginning of each Plan Year, the Committee
shall provide each Eligible Employee with a Deferral
Agreement. An Eligible Employee may elect to defer his
or her compensation to the Plan by delivering a
completed Deferral Agreement to the Committee or its
designate prior to the first day of the Plan Year. On
the Deferral Agreement, the Eligible Employee shall
indicate the amount or percentage of his Compensation
to be deferred under the Plan for the Plan Year as an
elective contribution, subject to the provisions of
Subsection (b). The Eligible Employee also shall
indicate whether to contribute to the 401(k) Plan that
portion of his Compensation deferred pursuant to the
preceding sentence that he can contribute to the 401(k)
Plan for the Plan Year without exceeding the
limitations of Code Subsection 402(g), Paragraph
401(k)(3) and 401(a)(17) for the Plan Year. Subject to
Subsection (c), an election made under this Section
shall be effective as of the first day of the Plan
Year, and subject to Subsection (d), the election for
any Plan Year shall be irrevocable.
(b) Maximum Amount of Deferrals. For each Plan
Year beginning on or after the Effective Date, each
Eligible Employee may elect to defer under the Plan up
to 100% of his Compensation.
(c) New Participant Deferrals. The Committee, in
its sole discretion, may permit a new Eligible Employee
to enroll in the Plan during a Plan Year and, no later
than 30 days after becoming an Eligible Employee, make
an irrevocable prospective election to defer a portion
of his Compensation for the remainder of the Plan Year.
(d) Suspension or Cessation of Deferrals. With
the written consent of the Committee, a Participant may
suspend or cease deferrals, in whole or in part, during
the course of a Plan Year, due to an Unforeseeable
Emergency. Suspension or cessation of deferrals shall
not in any way affect a Participant's rights or
benefits with respect to amounts already deferred under
the Plan. In the event a Participant suspends or
ceases deferrals pursuant to this Subsection, the
Participant shall not be permitted to resume deferrals
before the first day of the following Plan Year or such
later date as specified by the Committee.
3.3 Employer Base Matching Contributions. If an Eligible
Employee is entitled to an employer base matching
contribution under his or her 401(k) Plan, the Employer
shall make an Employer Base Matching Contribution to the
Participant's Matching Account equal to the amount of the
Participant's employer base matching contribution computed
in accordance with the 401(k) Plan (prior to the limitation
of Code Paragraph 401(m)(2)), but using the Participant's
Compensation as defined in this Plan.
3.4 Employer Incentive Matching Contributions. If an
Eligible Employee is entitled to an employer incentive
matching contribution under his or her 401(k) Plan, the
Employer shall make an Employer Incentive Matching
Contribution to the Participant's Matching Account equal to
the amount of the Participant's employer incentive matching
contribution computed in accordance with the 401(k) Plan
(prior to the limitation of Code Paragraph 401(m)(2)), but
using the Participant's Compensation as defined in this
Plan.
3.5 Cessation of Participation. Any Participant who ceases
to be an Eligible Employee, but continues to be an Employee,
shall cease to be eligible to make deferrals or receive
contributions under this Article but shall continue to have
a Deferral Account and a Matching Account, shall continue to
be credited with earnings and losses on his Accounts under
Section 4.2 (Earnings and Losses) (until those Accounts are
fully distributed pursuant to Article V (Distribution of
Benefits)) and shall be entitled to receive benefits under
Article V (Distribution of Benefits).
ARTICLE IV
PARTICIPANTS' ACCOUNTS
4.1 Establishment of Accounts. The Committee shall create
and maintain adequate records to disclose the interest in
the Plan of each Participant and Beneficiary. Records shall
be in the form of individual bookkeeping accounts, which
shall be credited with deferrals and contributions pursuant
to Sections 3.2 (Election to Defer), 3.3 (Employer Base
Matching Contributions), and 3.4 (Employer Incentive
Matching Contributions) and earnings and losses pursuant to
Section 4.2 (Earnings and Losses), and debited with any
contributions to a 401(k) Plan pursuant to Section 4.7
(Determination and Treatment of Amounts Contributable to the
401(k) Plan) and any payments pursuant to Article V
(Distribution of Benefits). Each Participant shall have a
separate Deferral Account and Matching Account. The
Participant's interest in his Accounts shall be fully vested
at all times. Notwithstanding the preceding sentence, the
Participant's interest in his Accounts shall be subject to
the claims of the Company's general creditors in the event
the Company becomes Insolvent.
4.2 Earnings and Losses.
(a) Deemed Investment of Accounts. During each
Plan Year, a Participant's Accounts shall be credited
with investment earnings and losses as though they are
invested, in accordance with the Participant's
elections pursuant to Subsection (b), in one or more of
the Investment Options. The deemed investment of a
Participant's Accounts among the Investment Options in
accordance with the Participant's elections, is solely
the measure of the investment performance of the
Deferral Account and Matching Account. It does not give
the Participant any ownership interest in any
Investment Option, nor does it bind the Company, the
Committee, or the Trustee as to the investment of any
Rabbi Trust or any other amounts represented by the
Deferral Accounts or Matching Accounts.
(b) Election Procedure. Each Participant,
upon first becoming an Eligible Employee, may make
initial elections, on a form provided by the Committee,
to allocate his Deferral Account and his Matching
Account among the Investment Options. The Participant
may make separate elections with respect to each of his
Accounts. If the Participant fails to make an initial
election with respect to an Account, he shall be deemed
to have elected to allocate that Account to the
Fidelity Retirement Money Market Fund Investment Option
for that Plan Year. A Participant may change his
Investment Option designations (for his future
deferrals and contributions, his existing Accounts, or
both) once each Plan Year, as of the first day of the
Plan Year, by filing an appropriate election form with
the Committee by the prior December 31. Until a
Participant timely files a new investment election
form, his prior Investment Option designations shall
control.
4.3 Credits to Accounts.
(a) A Participant's deferrals pursuant to
Section 3.2 (Election to Defer) shall be credited to
his Deferral Account in terms of cash as of the date(s)
on which the deferred amount would otherwise have been
paid to the Participant or credited to his accounts
under the 401(k) Plan.
(b) The Employer Base Matching Contribution shall
be credited to a Participant's Matching Account in
terms of cash on the same date(s) as employer base
matching contributions are credited to participants'
accounts under the 401(k) Plan. An Eligible Employee
does not need to make deferrals pursuant to Section 3.2
(Election to Defer) of this Plan to receive Employer
Base Matching Contributions.
(c) The Employer Incentive Matching Contribution
shall be credited to a Participant's Matching Account
in terms of cash on the same date(s) as employer
incentive matching contributions are credited to
participants' accounts under the 401(k) Plan. An
Eligible Employee does not need to make deferrals
pursuant to Section 3.2 (Election to Defer) of this
Plan to receive Employer Incentive Matching
Contributions.
(d) Earnings and losses on the deemed investment
of the Participant's Deferral Account and Matching
Account under Section 4.2 (Earnings and Losses) shall
be credited monthly, on the last day of each month,
based on the value of the Participant's Deferral
Account and Matching Account as of the first day of the
month.
4.4 Accounts Unfunded.
(a) Accounts shall be accounting accruals, in the
names of Participants, on the Employer's books.
Accounts shall be unfunded, so that the Employer's
obligation to pay benefits under the Plan is merely a
contractual duty to make payments when due under the
Plan. The Employer's promise to pay benefits under the
Plan shall not be secured in any way, and except as
provided in Subsection (b), the Company shall not set
aside or segregate assets for the purpose of paying
amounts credited to Participants' Deferral Accounts or
Matching Accounts.
(b) Notwithstanding the provisions of
Subsection (a), the Company, in its sole discretion,
may establish a Rabbi Trust. The Employer, in its sole
discretion, may make such contributions to the Rabbi
Trust as the Committee determines are appropriate to
enable the Employer to pay benefits under the Plan.
Any Rabbi Trust established under this Section shall be
created pursuant to a written trust document that
conforms to the model form of rabbi trust agreement
approved by the Internal Revenue Service in Revenue
Procedure 92-64 (as amended from time to time).
4.5 Valuation of Deferral Accounts.
(a) Deferral Account. The value of a
Participant's Deferral Account as of any date shall
equal the dollar amount of any deferrals credited to
the Deferral Account pursuant to Section 3.2 (Election
to Defer), increased or decreased by the earnings and
losses deemed to be credited to the Deferral Account in
accordance with Section 4.2 (Earnings and Losses), and
decreased by the amount of any contributions made or to
be made from the Deferral Account to the 401(k) Plan
pursuant to Section 4.7(a) (Deferrals) and any payments
made from the Deferral Account to the Participant or
his Beneficiary pursuant to Article V (Distribution of
Benefits).
(b) Matching Account. The value of a
Participant's Matching Account as of any date shall
equal the dollar amount of any contributions credited
to the Matching Account pursuant to Sections 3.3
(Employer Base Matching Contributions) or 3.4 (Employer
Incentive Matching Contributions), increased or
decreased by the earnings and losses deemed to be
credited to the Matching Account in accordance with
Section 4.2 (Earnings and Losses), and decreased by the
amount of any contributions made or to be made from the
Matching Account to the 401(k) Plan pursuant to Section
4.7(b) (Matching Contributions) and any payments made
from the Matching Account to the Participant or his
Beneficiary pursuant to Article V (Distribution of
Benefits).
4.6 Annual Report. Within 120 days following the end of
each Plan Year, the Committee shall provide to each
Participant a written statement of the amount standing to
his credit in his Accounts as of the end of that Plan Year.
4.7 Determination and Treatment of Amounts Contributable to
the 401(k) Plan.
(a) Deferrals. As soon as administratively
feasible for each Plan Year, the Committee shall
determine the amount that each Eligible Employee
electing deferrals pursuant to Section 3.2 (Employer
Base Matching Contributions) can contribute to the
401(k) Plan for the same Plan Year without exceeding
the limitations of Code Subsection 402(g) and Code
Paragraphs 401(k)(3) and 401(a)(17) for the Plan Year.
If an Eligible Employee elected to contribute to the
401(k) Plan that portion of his deferrals that did not
exceed the determined amount, that portion shall be
transferred directly to the 401(k) Plan no later than
March 15 of the following Plan Year. Alternatively, if
the Eligible Employee elected to receive a lump sum
distribution of that portion of his deferrals that did
not exceed the determined amount, that portion shall be
distributed to him no later than March 15 of the
following Plan Year. The earnings and losses credited
to the transferred or distributed portion pursuant to
Section 4.3 (Credits to Accounts) shall remain in the
Eligible Employee's Deferral Account until distributed
pursuant to Article V (Distribution of Benefits).
(b) Matching Contributions. As soon as
administratively feasible for each Plan Year, the
Committee shall determine the amount that the Employer
can contribute as employer base matching contributions
and employer incentive matching contributions to the
401(k) Plan for the same Plan Year without exceeding
the limitations of Code Paragraph 401(m)(2) and its
interpretive regulations and Code Paragraph 401(a)(17)
for the Plan Year. If an Eligible Employee elected to
contribute to the 401(k) Plan that portion of his
Employer Base Matching Contributions and Employer
Incentive Matching Contributions that did not exceed
the determined amount, that portion shall be
transferred directly to the 401(k) Plan no later than
March 15 of the following Plan Year. Alternatively, if
the Eligible Employee elected to receive a lump sum
distribution of that portion of his Employer Base
Matching Contributions and Employer Incentive Matching
Contributions that did not exceed the determined
amount, that portion shall be distributed to him no
later than March 15 of the following Plan Year. The
earnings and losses credited to the transferred or
distributed portion pursuant to Section 4.3 (Credits to
Accounts) shall remain in the Eligible Employee's
Matching Account until distributed pursuant to
Article V (Distribution of Benefits).
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 General Distribution Rules.
(a) General Provisions. Except as otherwise
provided in Sections 5.2 (Distribution Upon a Change in
Control), Section 5.3 (Distribution Upon Financial
Emergency), and Section 5.4 (Death Benefits), a
Participant's Accounts shall be distributed to the
Participant (or to his Beneficiary in the event of his
death) as provided in this Section.
(b) Participant's Election. For each Plan Year,
a Participant may select, on a form provided by the
Committee and from among the options described in this
Section, the form for the payment of his deferrals and
contributions for the Plan Year (and any investment
earnings attributable to those deferrals and
contributions). A Participant's election for each Plan
Year shall be irrevocable, but the Participant may make
a new election for each Plan Year's deferrals and
contributions.
(1) Form of Distribution. A
Participant may elect to have his deferrals and
contributions (and attributable earnings) for a
Plan Year distributed in one of the following
forms:
(A) A lump sum payment; or
(B) Substantially equal
annual installments over a specified
number of two to ten years.
(2) Time of Distribution.
Distribution of a Participant's interest in
his Accounts shall commence no later than 30
days after the earlier of the Participant's
death or his Termination of Employment.
Subsequent installments shall be payable on
or as soon as administratively feasible
following the first business day of each
succeeding year.
(c) Default Procedure. If a Participant fails to
make an election pursuant to this Section, then, except
as otherwise provided in Section 5.2 (Distribution Upon
a Change in Control, Section 5.3 (Distribution Upon
Financial Emergency), and Section 5.4 (Death Benefits),
the Participant's Accounts (and attributable earnings)
shall be distributed in five substantially equal annual
installments commencing no later than 30 days after the
earlier of the Participant's death or his Termination
of Employment.
5.2 Distribution Upon a Change in Control.
(a) Notwithstanding any other Section, if a
Change in Control occurs, the Committee in its sole
discretion may elect to accelerate the distribution of
a Participant's Accounts so that a Participant's
Accounts shall be distributed to the Participant (or,
in the event of his death, to his Beneficiary) in a
single lump sum payment no later than 30 days after the
Change in Control occurs.
(b) As used in this Plan, a "Change in Control"
of the Company shall occur if (1) any "person" or
"group" (within the meaning of Subsection 13(d) and
Paragraph 14(d)(2) of the 1934 Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
1934 Act) of more than 50 percent of the then
outstanding voting stock of the Company, otherwise than
through a transaction arranged by, or consummated with
the prior approval of, the Board of Directors; (2) the
Company's shareholders approve a definitive agreement
to merge or consolidate the Company with or into
another corporation in a transaction in which neither
the Company nor any of its subsidiaries or affiliates
will be the surviving corporation, or to sell or
otherwise dispose of all or substantially all of the
Company's asset to any person or group other than the
Company or any of its subsidiaries or affiliates, other
than a merger or a sale which will result in the voting
securities of the Company outstanding prior to the
merger or sale continuing to represent at least 50
percent of the combined voting power of the voting
securities of the corporation surviving the merger or
purchasing the assets; or (3) during any period of two
consecutive years, individuals who at the beginning of
that period constitute the Board of Directors (and any
new Director whose election by the Board of Directors
or whose nomination for election by the Company's
shareholders was approved by a vote of at least two-
thirds of the Directors then still in office who either
were Directors at the beginning of that period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority
of the Board of Directors.
5.3 Distribution Upon Financial Emergency. A Participant
or Beneficiary, upon written petition to the Committee, may
withdraw some or all of the balance of the Participant's
Deferral Account or Matching Account if the Committee, in
its sole discretion, determines that the requested
withdrawal is on account of an Unforeseeable Emergency and
that the amount to be withdrawn does not exceed the amount
necessary to satisfy the Unforeseeable Emergency. The
balance of the Participant's Deferral Account or Matching
Account available for withdrawal shall not include any
amount that the Participant elected to contribute to the
401(k) Plan but that has not yet been transferred to the
401(k) Plan pursuant to Section 4.7 (Determination and
Treatment of Amounts Contributable to the 401(k) Plan).
Withdrawals under this Section shall not be permitted to the
extent that the Unforeseeable Emergency may reasonably be
relieved through (a) reimbursement or compensation by
insurance or otherwise, (b) liquidation of the Participant's
or Beneficiary's assets (to the extent liquidation would not
itself cause a financial hardship), or (c) suspension or
cessation of elective deferrals under this Plan or the
401(k) Plan.
5.4 Death Benefits. In the event that a Participant dies
before his Accounts are completely distributed, his
Beneficiary shall be entitled to a death benefit equal to
the amount credited to the Participant's Accounts
immediately before his death. The form and timing of the
payment of the death benefit shall be determined pursuant to
Section 5.1 (General Distribution Rules).
5.5 Designation of Beneficiary. A Participant's
Beneficiary shall be the person or persons, including a
trustee, designated by the Participant in writing pursuant
to the practices of, or rules prescribed by, the Committee,
as the recipient of any benefits payable under the Plan
following the Participant's death. To be effective, a
Beneficiary designation must be filed with the Committee
during the Participant's life on a form prescribed by the
Committee; provided, however, that finalized divorce or
marriage (other than a common law marriage) shall
automatically revoke a previously filed Beneficiary
designation, unless in the case of divorce the former spouse
was not designated as the Beneficiary or in the case of
marriage the Participant's new spouse is already the
designated Beneficiary. If the Participant designates more
than one Beneficiary, any payments under this Article to
each Beneficiary shall be made in equal shares unless the
Participant has designated otherwise, in which case the
payments shall be made in the shares designated by the
Participant. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary
designation has been revoked by marriage or divorce, or if
no person designated as Beneficiary survives the
Participant, the Participant's estate shall be his
Beneficiary.
ARTICLE VI
ADMINISTRATION
6.1 Administrator. The Committee shall be the
Administrator of the Plan. All decisions of the Committee
shall be by a vote of a majority of its members and shall be
final and binding.
6.2 Notices. Any notice or filing required or permitted to
be given to the Committee under the Plan shall be sufficient
if it is in writing or hand delivered, or sent by registered
or certified mail, to any member of the Committee or its
designate. The notice or filing shall be deemed made as of
the date of delivery, or if delivery is made by mail, as of
the date shown on the postmark on the receipt for
registration or certification.
6.3 Powers and Duties of the Committee. Subject to the
specific limitations stated in this Plan, the Committee
shall have the following powers, duties, and
responsibilities:
(a) To carry out the general administration of
the Plan;
(b) To cause to be prepared all forms necessary
or appropriate for the administration of the Plan;
(c) To keep appropriate books and records;
(d) To determine amounts to be distributed to
Participants and Beneficiaries under the provisions of
the Plan;
(e) To determine, consistent with the provisions
of this instrument, all questions of eligibility,
rights, and status of Participants and Beneficiaries
under the Plan;
(f) To issue, amend, and rescind rules relating
to the administration of the Plan, to the extent those
rules are consistent with the provisions of this
document;
(g) To exercise all other powers and duties
specifically conferred upon the Committee elsewhere in
this document; and
(h) To interpret, with discretionary authority,
the provisions of this Plan and to resolve, with
discretionary authority, all disputed questions of Plan
interpretation and benefit eligibility.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 Amendment. The Company reserves the right to amend the
Plan at any time by action of the Board of Directors or the
Committee, with written notice given to each Participant in
the Plan. The Company, however, may not make any amendment
that reduces a Participant's benefits accrued as of the date
of the amendment unless the Participant consents in writing
to the amendment. Notwithstanding the foregoing, the
Company may not amend any of the provisions of Section 5.2
(Distribution Upon a Change in Control) within three years
of a Change in Control.
7.2 Termination. The Company reserves the right to
terminate the Plan, by action of the Board of Directors or
the Committee, at any time it deems appropriate. Upon
termination of the Plan, no further contribution shall be
made to the Plan. Subject to Section 5.2 (Distribution Upon
a Change in Control), distribution following termination of
the Plan shall be made at the time and under the terms and
conditions as the Company, in its sole discretion, shall
determine, which shall commence no later than the earlier of
a Participant's death or Termination of Employment.
ARTICLE VIII
MISCELLANEOUS
8.1 Relationship. Notwithstanding any other provision of
this Plan, this Plan and action taken pursuant to it shall
not be deemed or construed to establish a trust or fiduciary
relationship of any kind between or among the Company,
Participants, Beneficiaries or any other persons. The Plan
is intended to be unfunded for purposes of the Code and the
Employee Retirement Income Security Act of 1974, as amended.
The rights of Participants and Beneficiaries to receive
payment of deferred compensation under the Plan is strictly
a contractual right of payment, and this Plan does not
grant, nor shall it be deemed to grant Participants,
Beneficiaries, or any other person any interest or right to
any of the funds, property, or assets of the Employer other
than as an unsecured general creditor of the Employer.
8.2 Other Benefits and Plans. Nothing in this Plan shall
be deemed to prevent Participants from receiving, in
addition to the benefits provided for under this Plan, any
funds that may be distributable to them at any time under
any other present or future retirement or incentive plan of
the Employer.
8.3 Anticipation of Benefits. Neither Participants nor
Beneficiaries shall have the power to transfer, assign,
anticipate, pledge, alienate, or otherwise encumber in
advance any of the payments that may become due under this
Plan, and any attempt to do so shall be void. Any payments
that may become due under this Plan shall not be subject to
attachment, garnishment, execution, or be transferable by
operation of law in the event of bankruptcy, insolvency, or
otherwise.
8.4 No Guarantee of Continued Employment. Nothing
contained in this Plan or any action taken under the Plan
shall be construed as a contract of employment or as giving
any Participant any right to be retained in employment with
the Employer. The Employer specifically reserves the right
to terminate any Participant's employment at any time with
or without cause, and with or without notice or assigning a
reason, subject to the terms of any written employment
agreement between the Participant and the Employer.
8.5 Waiver of Breach. The Company's or the Committee's
waiver of any Plan provision shall not operate or be
construed as a waiver of any subsequent breach by the
Participant.
8.6 Protective Provisions. Each Participant shall
cooperate with the Company and the Committee by furnishing
any and all information requested by the Company or the
Committee in order to facilitate the payment of benefits
under the Plan, and by taking any other relevant action as
may be requested by the Company or the Committee. If any
Participant refuses so to cooperate, the Company shall have
no further obligation to the Participant or his Beneficiary
under this Plan, other than to distribute to the Participant
the cumulative deferrals he has already made, and the
cumulative contributions that have been made on his behalf,
pursuant to the Plan; provided, however, that the Committee
may determine that benefits may be payable in an amount
reduced to compensate the Company for any loss, cost,
damage, or expense suffered or incurred by the Company as a
result in any way of the Participant's action or failure to
act.
8.7 Benefit. This Plan shall be binding upon and inure to
the benefit of the Employer and its successors and assigns.
8.8 Responsibility for Legal Effect. Neither the Committee
nor the Company makes any recommendations or warranties,
express or implied, or assumes any responsibility concerning
the legal context or other implications or effects of this
Plan.
8.9 Tax Withholding. The Employer shall withhold from any
deferrals or from any payment made under the Plan such
amount or amounts as may be required by applicable federal,
State, or local laws.
Cinergy Corp. has caused this document to be executed by its
duly authorized officers, as of the ____ day of
_________________, 1996.
CINERGY CORP.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman, President and
Chief Executive Officer
Dated: December 30, 1996
APPROVED:
By: CHERYL M. FOLEY
Cheryl M. Foley
Vice President, General Counsel
and Corporate Secretary
Dated: December 30, 1996
CINERGY CORP. NONQUALIFIED
DEFERRED INCENTIVE COMPENSATION PLAN
ARTICLE I
NATURE AND PURPOSE OF PLAN
1.1 History of Plan. This document is a continuation and
complete restatement, effective December 1, 1996, of the
Cinergy Corp. Nonqualified Deferred Compensation Plan, which
was approved by the Board of Directors on January 25, 1996.
Effective December 1, 1996, the Plan is renamed the Cinergy
Corp. Nonqualified Deferred Incentive Compensation Plan.
1.2 Type of Plan. The Plan is maintained by the Company as
an unfunded, nonqualified deferred compensation plan for a
select group of the Employer's management or highly-
compensated employees.
1.3 Purpose of Plan. The purpose of the Plan is to provide
a means for the payment of deferred incentive compensation
to a select group of key senior management employees of the
Employer, in recognition of their substantial contributions
to the operation of the Employer, and to provide those
individuals with additional financial security as an
inducement to them to remain in employment with the
Employer.
ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. As used in the Plan, the following words
and phrases, when capitalized, have the following meanings
except when used in a context that plainly requires a
different meaning:
(a) "Account" means the record of a Participant's
interest in the Plan.
(b) "Beneficiary" means, with respect to a
Participant, the person or persons designated pursuant
to Section 5.5 (Designation of Beneficiary) to receive
benefits under the Plan in the event of the
Participant's death.
(c) "Board of Directors" means the duly constituted
board of directors of the Company on the applicable
date.
(d) "Change in Control" means an event described in
Subsection 5.2(b) (Distribution Upon a Change in
Control).
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and interpretive rules and
regulations.
(f) "Committee" means a committee composed of those
members of the Compensation Committee of the Board of
Directors who are not Participants in the Plan.
(g) "Company" means Cinergy Corp., a Delaware
Corporation, and any corporation that shall succeed to
its business and adopt the Plan.
(h) "Compensation" means, with respect to a
Participant for a Plan Year, the award or bonus payable
to the Participant for the Plan Year under any of the
Company's annual or long-term incentive plans or
programs determined by the Committee as awards or
bonuses to be eligible for deferral under this Plan.
(i) "Deferral Agreement" means the written agreement
entered into between an Eligible Employee and the
Employer pursuant to which the Eligible Employee elects
to make deferrals under the Plan.
(j) "Eligible Employee" means a key management
Employee who is selected by the Committee as an
individual who has the opportunity to impact
significantly the annual operating success of the
Employer.
(k) "Employee" means any person employed by the
Employer on a full-time salaried basis, including
officers of the Company or a Related Employer.
(l) "Employer" means the Company and any Related
Employer.
(m) "Insolvent" means, with respect to the Company,
the Company being unable to pay its debts as they are
due, or the Company being subject to a pending
proceeding as a debtor under the United States
Bankruptcy Code.
(n) "Investment Options" means, with respect to any
Plan Year, the investment options designated by the
Committee as available measures of investment earnings
under the Plan for the Plan Year.
(o) "Participant" means an Eligible Employee or former
Eligible Employee who has an interest in the Plan
pursuant to Section 3.2 (Election to Defer).
(p) "Plan" means this document, as amended from time
to time, and the nonqualified deferred compensation
plan so established.
(q) "Plan Year" means a calendar year commencing on or
after January 1, 1997.
(r) "Rabbi Trust" means the grantor trust that the
Company, in its sole discretion, may establish pursuant
to Subsection 4.4(b) (Accounts Unfunded) for the
deposit of funds to be used for the exclusive purpose
of paying benefits accrued under the Plan, subject to
the claims of the Company's general creditors in the
event the Company becomes Insolvent.
(s) "Related Employer" means any Employer that,
together with the Company, is under common control or a
member of an affiliated service group, as determined
under Code Subsections 414(b), (c), (m), and (o).
(t) "Termination of Employment" means, with respect to
a Participant, the cessation of the relationship of
Employer and Employee between the Participant and the
Employer for any reason other than the Participant's
death. A Participant shall not be treated as having
incurred a Termination of Employment until the
employment relationship between the Participant and all
Related Employers has terminated.
(u) "Trustee" means the trustee of the Rabbi Trust
that the Company, in its sole discretion, may establish
pursuant to Subsection 4.4(b) (Accounts Unfunded).
(v) "Unforeseeable Emergency" means, for the purpose
of Subsection 3.2(d) (Suspension or Cessation of
Deferrals) and Section 5.3 (Distribution Upon Financial
Emergency), with respect to a Participant or
Beneficiary, a severe financial hardship to the
Participant or Beneficiary resulting from a sudden and
unexpected illness or accident of the Participant,
Beneficiary, or his or her dependents; loss of the
Participant's or Beneficiary's property due to
casualty; or other similar extraordinary and
unforeseeable circumstances arising as a result of
events beyond the Participant's or Beneficiary's
control.
2.2 Rules of Construction. The following rules of
construction shall govern in interpreting the Plan:
(a) The provisions of this Plan shall be construed and
governed in all respects under and by the internal laws
of the State of Ohio, to the extent not preempted by
federal law.
(b) Words used in the masculine gender shall be
construed to include the feminine gender, where
appropriate, and vice versa.
(c) Words used in the singular shall be construed to
include the plural, where appropriate, and vice versa.
(d) The headings and subheadings in the Plan are
inserted for convenience of reference only and are not
to be considered in the construction of any provision
of the Plan.
(e) If any provision of the Plan shall be held to be
illegal or invalid for any reason, that provision shall
be deemed to be null and void, but the invalidation of
that provision shall not otherwise impair or affect the
Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Participation in the Plan is limited to
Eligible Employees.
3.2 Election to Defer.
(a) Incentive Plans Subject to the Plan. For each
Plan Year the Committee shall designate which, if any,
incentive compensation plans and programs of the
Employers are subject to the provisions of the Plan for
that Plan Year.
(b) Election Procedure. Within a reasonable time
before the beginning of each Plan Year, the Committee
shall provide each Eligible Employee with a Deferral
Agreement. An Eligible Employee may elect to defer all
or a specified portion of his Compensation under the
Plan by delivering a completed Deferral Agreement to
the Committee or its designate prior to the first day
of the Plan Year. On the Deferral Agreement, the
Eligible Employee shall indicate the amount or
percentage of his Compensation to be deferred under the
Plan for the Plan Year, subject to the provisions of
Subsection (b). Subject to Subsection (c), an election
made under this Section shall be effective as of the
first day of the Plan Year, and subject to Subsection
(d), the election for any Plan Year shall be
irrevocable.
(c) Maximum Amount of Deferrals. For each Plan Year
beginning on or after the Effective Date, each Eligible
Employee may elect to defer under the Plan up to 100%
of his Compensation.
(d) New Participant Deferrals. The Committee, in its
sole discretion, may permit a new Eligible Employee to
enroll in the Plan during a Plan Year and, no later
than 30 days after becoming an Eligible Employee, make
an irrevocable prospective election to defer a portion
of his Compensation for the remainder of the Plan Year.
(e) Suspension or Cessation of Deferrals. With the
written consent of the Committee, a Participant may
suspend or cease deferrals, in whole or in part, during
the course of a Plan Year, due to an Unforeseeable
Emergency. Suspension or cessation of deferrals shall
not in any way affect a Participant's rights or
benefits with respect to amounts already deferred under
the Plan. In the event a Participant suspends or
ceases deferrals pursuant to this Subsection, the
Participant shall not be permitted to resume deferrals
before the first day of the following Plan Year or such
later date as specified by the Committee.
3.3 Cessation of Participation. Any Participant who ceases
to be an Eligible Employee, but continues to be an Employee,
shall cease to be eligible to make deferrals under this
Article but shall continue to have an Account, shall
continue to be credited with earnings and losses on his
Account under Section 4.2 (Earnings and Losses) until those
Accounts are fully distributed pursuant to Article V
(Distribution of Benefits), and shall be entitled to receive
benefits under Article V (Distribution of Benefits).
ARTICLE IV
PARTICIPANTS' ACCOUNTS
4.1 Establishment of Accounts. The Committee shall create
and maintain adequate records to disclose the interest in
the Plan of each Participant and Beneficiary. Records shall
be in the form of individual bookkeeping accounts, which
shall be credited with deferrals and contributions pursuant
to Sections 3.2 (Election to Defer), and earnings and losses
pursuant to Section 4.2 (Earnings and Losses), and debited
with any payments pursuant to Article V (Distribution of
Benefits). Each Participant shall have a separate Account.
The Participant's interest in his Account shall be fully
vested at all times. Notwithstanding the preceding
sentence, the Participant's interest in his Account shall be
subject to the claims of the Company's general creditors in
the event the Company becomes Insolvent.
4.2 Earnings and Losses.
(a) Deemed Investment of Accounts. During each
Plan Year, a Participant's Account shall be credited
with investment earnings and losses as though it is
invested, in accordance with the Participant's election
pursuant to Subsection (b), in one or more of the
Investment Options. The deemed investment of a
Participant's Account among the Investment Options in
accordance with the Participant's election is solely
the measure of the investment performance of the
Account. It does not give the Participant any
ownership interest in any Investment Option, nor does
it bind the Company, the Committee, or the Trustee as
to the investment of any Rabbi Trust or any other
amounts represented by the Accounts.
(b) Election Procedure. Each Participant, upon
first becoming an Eligible Employee, may make an
initial election, on a form provided by the Committee,
to allocate his Account among the Investment Options.
If the Participant fails to make an initial election,
he shall be deemed to have elected to allocate his
Account to the Fidelity Retirement Money Market Fund
Investment Option for that Plan Year. A Participant
may change his Investment Option designations (for his
future deferrals, his existing Account, or both) once
each Plan Year, as of the first day of the Plan Year,
by filing an appropriate election form with the
Committee by the prior December 31. Until a
Participant timely files a new investment election
form, his prior Investment Option designation shall
control.
4.3 Credits to Accounts.
(a) A Participant's deferrals pursuant to Section 3.2
(Election to Defer) shall be credited to his Account in
terms of cash as of the date(s) on which the deferred
amount would otherwise have been paid to the
Participant.
(b) Earnings and losses on the deemed investment of
the Participant's Account under Section 4.2 (Earnings
and Losses) shall be credited monthly, on the last day
of each month, based on the value of the Participant's
Account as of the first day of the month.
4.4 Accounts Unfunded.
(a) Accounts shall be accounting accruals, in the
names of Participants, on the Employer's books.
Accounts shall be unfunded, so that the Employer's
obligation to pay benefits under the Plan is merely a
contractual duty to make payments when due under the
Plan. The Employer's promise to pay benefits under the
Plan shall not be secured in any way, and except as
provided in Subsection (b), the Company shall not set
aside or segregate assets for the purpose of paying
amounts credited to Participants' Accounts.
(b) Notwithstanding the provisions of Subsection (a),
the Company, in its sole discretion, may establish a
Rabbi Trust. The Employer, in its sole discretion, may
make such contributions to the Rabbi Trust as the
Committee determines are appropriate to enable the
Employer to pay benefits under the Plan. Any Rabbi
Trust established under this Section shall be created
pursuant to a written trust document that conforms to
the model form of rabbi trust agreement approved by the
Internal Revenue Service in Revenue Procedure 92-64 (as
amended from time to time).
4.5 Valuation of Accounts. The value of a Participant's
Account as of any date shall equal the dollar amount of any
deferrals credited to the Account pursuant to Section 3.2
(Election to Defer), increased or decreased by the earnings
and losses deemed to be credited to the Account in
accordance with Section 4.2 (Earnings and Losses), and
decreased by the amount of any payments made from the
Account to the Participant or his Beneficiary pursuant to
Article V (Distribution of Benefits).
4.6 Annual Report. Within 120 days following the end of
each Plan Year, the Committee shall provide to each
Participant a written statement of the amount standing to
his credit in his Account as of the end of that Plan Year.
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 General Distribution Rules.
(a) General Provisions. Except as otherwise provided
in Sections 5.2 (Distribution Upon a Change in
Control), Section 5.3 (Distribution Upon Financial
Emergency), and Section 5.4 (Death Benefits), a
Participant's Account shall be distributed to the
Participant (or to his Beneficiary in the event of his
death) as provided in this Section.
(b) Participant's Election. For each Plan Year, a
Participant may select, on a form provided by the
Committee and from among the options described in this
Section, the form for the payment of his deferrals for
the Plan Year (and any investment earnings attributable
to those deferrals). A Participant's election for each
Plan Year shall be irrevocable, but the Participant may
make a new election for each Plan Year's deferrals.
(1) Form of Distribution. A Participant may
elect to have his deferrals (and attributable
earnings) for a Plan Year distributed in one
of the following forms:
(A) A lump sum payment; or
(B) Substantially equal
annual installments over a specified
number of two to ten years.
(2) Time of Distribution.
Distribution of a Participant's interest in
his Account shall commence no later than 30
days after the earlier of the Participant's
death or his Termination of Employment.
Subsequent installments shall be payable on
or as soon as administratively feasible
following the first business day of each
succeeding year.
(c) Default Procedure. If a Participant fails to make
an election pursuant to this Section, then, except as
otherwise provided in Section 5.2 (Distribution Upon a
Change in Control, Section 5.3 (Distribution Upon
Financial Emergency), and Section 5.4 (Death Benefits),
the Participant's Account (and attributable earnings)
shall be distributed in five substantially equal annual
installments commencing no later than 30 days after the
earlier of the Participant's death or his Termination
of Employment.
5.2 Distribution Upon a Change in Control.
(a) Notwithstanding any other Section, if a
Change in Control occurs, the Committee in its sole
discretion may elect to accelerate the distribution of
a Participant's Account so that a Participant's Account
shall be distributed to the Participant (or, in the
event of his death, to his Beneficiary) in a single
lump sum payment no later than 30 days after the Change
in Control occurs.
(b) As used in this Plan, a "Change in Control"
of the Company shall occur if (1) any "person" or
"group" (within the meaning of Subsection 13(d) and
Paragraph 14(d)(2) of the 1934 Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
1934 Act) of more than 50 percent of the then
outstanding voting stock of the Company, otherwise than
through a transaction arranged by, or consummated with
the prior approval of, the Board of Directors; (2) the
Company's shareholders approve a definitive agreement
to merge or consolidate the Company with or into
another corporation in a transaction in which neither
the Company nor any of its subsidiaries or affiliates
will be the surviving corporation, or to sell or
otherwise dispose of all or substantially all of the
Company's asset to any person or group other than the
Company or any of its subsidiaries or affiliates, other
than a merger or a sale which will result in the voting
securities of the Company outstanding prior to the
merger or sale continuing to represent at least 50
percent of the combined voting power of the voting
securities of the corporation surviving the merger or
purchasing the assets; or (3) during any period of two
consecutive years, individuals who at the beginning of
that period constitute the Board of Directors (and any
new Director whose election by the Board of Directors
or whose nomination for election by the Company's
shareholders was approved by a vote of at least two-
thirds of the Directors then still in office who either
were Directors at the beginning of that period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority
of the Board of Directors.
5.3 Distribution Upon Financial Emergency. A Participant
or Beneficiary, upon written petition to the Committee, may
withdraw some or all of the balance of the Participant's
Account if the Committee, in its sole discretion, determines
that the requested withdrawal is on account of an
Unforeseeable Emergency and that the amount to be withdrawn
does not exceed the amount necessary to satisfy the
Unforeseeable Emergency. Withdrawals under this Section
shall not be permitted to the extent that the Unforeseeable
Emergency may reasonably be relieved through (a)
reimbursement or compensation by insurance or otherwise, (b)
liquidation of the Participant's or Beneficiary's assets (to
the extent liquidation would not itself cause a financial
hardship), or (c) suspension or cessation of elective
deferrals under this Plan.
5.4 Death Benefits. In the event that a Participant dies
before his Account is completely distributed, his
Beneficiary shall be entitled to a death benefit equal to
the amount credited to the Participant's Account immediately
before his death. The form and timing of the payment of the
death benefit shall be determined pursuant to Section 5.1
(General Distribution Rules).
5.5 Designation of Beneficiary. A Participant's
Beneficiary shall be the person or persons, including a
trustee, designated by the Participant in writing pursuant
to the practices of, or rules prescribed by, the Committee,
as the recipient of any benefits payable under the Plan
following the Participant's death. To be effective, a
Beneficiary designation must be filed with the Committee
during the Participant's life on a form prescribed by the
Committee; provided, however, that finalized divorce or
marriage (other than a common law marriage) shall
automatically revoke a previously filed Beneficiary
designation, unless in the case of divorce the former spouse
was not designated as the Beneficiary or in the case of
marriage the Participant's new spouse is already the
designated Beneficiary. If the Participant designates more
than one Beneficiary, any payments under this Article to
each Beneficiary shall be made in equal shares unless the
Participant has designated otherwise, in which case the
payments shall be made in the shares designated by the
Participant. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary
designation has been revoked by marriage or divorce, or if
no person designated as Beneficiary survives the
Participant, the Participant's estate shall be his
Beneficiary.
ARTICLE VI
ADMINISTRATION
6.1 Administrator. The Committee shall be the
Administrator of the Plan. All decisions of the Committee
shall be by a vote of a majority of its members and shall be
final and binding.
6.2 Notices. Any notice or filing required or permitted to
be given to the Committee under the Plan shall be sufficient
if it is in writing or hand delivered, or sent by registered
or certified mail, to any member of the Committee or its
designate. The notice or filing shall be deemed made as of
the date of delivery, or if delivery is made by mail, as of
the date shown on the postmark on the receipt for
registration or certification.
6.3 Powers and Duties of the Committee. Subject to the
specific limitations stated in this Plan, the Committee
shall have the following powers, duties, and
responsibilities:
(a) To carry out the general administration of the
Plan;
(b) To cause to be prepared all forms necessary
or appropriate for the administration of the Plan;
(c) To keep appropriate books and records;
(d) To determine amounts to be distributed to
Participants and Beneficiaries under the provisions of
the Plan;
(e) To determine, consistent with the provisions
of this instrument, all questions of eligibility,
rights, and status of Participants and Beneficiaries
under the Plan;
(f) To issue, amend, and rescind rules relating
to the administration of the Plan, to the extent those
rules are consistent with the provisions of this
document;
(g) To exercise all other powers and duties
specifically conferred upon the Committee elsewhere in
this document; and
(h) To interpret, with discretionary authority,
the provisions of this Plan and to resolve, with
discretionary authority, all disputed questions of Plan
interpretation and benefit eligibility.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 Amendment. The Company reserves the right to amend the
Plan at any time by action of the Board of Directors or the
Committee, with written notice given to each Participant in
the Plan. The Company, however, may not make any amendment
that reduces a Participant's benefits accrued as of the date
of the amendment unless the Participant consents in writing
to the amendment. Notwithstanding the foregoing, the
Company may not amend any of the provisions of Section 5.2
(Distribution Upon a Change in Control) within three years
of a Change in Control.
7.2 Termination. The Company reserves the right to
terminate the Plan, by action of the Board of Directors or
the Committee, at any time it deems appropriate. Upon
termination of the Plan, no further contribution shall be
made to the Plan. Subject to Section 5.2 (Distribution Upon
a Change in Control), distribution following termination of
the Plan shall be made at the time and under the terms and
conditions as the Company, in its sole discretion, shall
determine, which shall commence no later than the earlier of
a Participant's death or Termination of Employment.
ARTICLE VIII
MISCELLANEOUS
8.1 Relationship. Notwithstanding any other provision of
this Plan, this Plan and action taken pursuant to it shall
not be deemed or construed to establish a trust or fiduciary
relationship of any kind between or among the Company,
Participants, Beneficiaries or any other persons. The Plan
is intended to be unfunded for purposes of the Code and the
Employee Retirement Income Security Act of 1974, as amended.
The rights of Participants and Beneficiaries to receive
payment of deferred compensation under the Plan is strictly
a contractual right of payment, and this Plan does not
grant, nor shall it be deemed to grant Participants,
Beneficiaries, or any other person any interest or right to
any of the funds, property, or assets of the Employer other
than as an unsecured general creditor of the Employer.
8.2 Other Benefits and Plans. Nothing in this Plan shall
be deemed to prevent Participants from receiving, in
addition to the benefits provided for under this Plan, any
funds that may be distributable to them at any time under
any other present or future retirement or incentive plan of
the Employer.
8.3 Anticipation of Benefits. Neither Participants nor
Beneficiaries shall have the power to transfer, assign,
anticipate, pledge, alienate, or otherwise encumber in
advance any of the payments that may become due under this
Plan, and any attempt to do so shall be void. Any payments
that may become due under this Plan shall not be subject to
attachment, garnishment, execution, or be transferable by
operation of law in the event of bankruptcy, insolvency, or
otherwise.
8.4 No Guarantee of Continued Employment. Nothing
contained in this Plan or any action taken under the Plan
shall be construed as a contract of employment or as giving
any Participant any right to be retained in employment with
the Employer. The Employer specifically reserves the right
to terminate any Participant's employment at any time with
or without cause, and with or without notice or assigning a
reason, subject to the terms of any written employment
agreement between the Participant and the Employer.
8.5 Waiver of Breach. The Company's or the Committee's
waiver of any Plan provision shall not operate or be
construed as a waiver of any subsequent breach by the
Participant.
8.6 Protective Provisions. Each Participant shall
cooperate with the Company and the Committee by furnishing
any and all information requested by the Company or the
Committee in order to facilitate the payment of benefits
under the Plan, and by taking any other relevant action as
may be requested by the Company or the Committee. If any
Participant refuses to so cooperate, the Company shall have
no further obligation to the Participant or his Beneficiary
under this Plan, other than to distribute to the Participant
the cumulative deferrals he has already made, and the
cumulative contributions that have been made on his behalf,
pursuant to the Plan; provided, however, that the Committee
may determine that benefits may be payable in an amount
reduced to compensate the Company for any loss, cost,
damage, or expense suffered or incurred by the Company as a
result in any way of the Participant's action or failure to
act.
8.7 Benefit. This Plan shall be binding upon and inure to
the benefit of the Employer and its successors and assigns.
8.8 Responsibility for Legal Effect. Neither the Committee
nor the Company makes any recommendations or warranties,
express or implied, or assumes any responsibility concerning
the legal context or other implications or effects of this
Plan.
8.9 Tax Withholding. The Employer shall withhold from any
deferrals or from any payment made under the Plan such
amount or amounts as may be required by applicable federal,
State, or local laws.
Cinergy Corp. has caused this document to be executed by its
duly authorized officers, as of December 1, 1996.
CINERGY CORP.
By: JAMES E. ROGERS
James E. Rogers
Vice Chairman, President and
Chief Executive Officer
Dated: December 30, 1996
APPROVED:
By: CHERYL M. FOLEY
Cheryl M. Foley
Vice President, General Counsel
and Corporate Secretary
Dated: December 30, 1996
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation by reference of our report, dated January 29, 1997,
included in this Annual Report on Form 10-K for the year ended
December 31, 1996, into (i) Cinergy Corp.'s previously filed
Registration Statement Nos. 33-55267, 33-55291, 33-55293, 33-
55713, 33-56067, 33-56089, 33-56091, 33-56093, 33-56095 and 333-
17531; (ii) PSI Energy, Inc.'s previously filed Registration
Statement Nos. 33-48612, 33-57064 and 333-10899; (iii) The
Cincinnati Gas & Electric Company's previously filed Registration
Statement Nos. 33-45116, 33-52335 and 33-58967; and (iv) The
Union Light, Heat and Power Company's previously filed
Registration Statement Nos. 33-40245 and 33-58965.
Arthur Andersen LLP
Cincinnati, Ohio,
March 27, 1997.
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of Cinergy Corp., The Cincinnati Gas &
Electric Company, The Union Light, Heat and Power Company,
and PSI Energy, Inc., the Form 10-K Annual Report of each
corporation for the fiscal year ended December 31, 1996, and
to deliver said Form 10-K Annual Reports so signed for
filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 29th day of
January, 1997.
/s/ Jackson H. Randolph
Jackson H. Randolph
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 30th day of
January, 1997.
/s/ Neil A. Armstrong
Neil A. Armstrong
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 30th day of
January, 1997.
/s/ Phillip R. Cox
Phillip R. Cox
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 29th day of
January, 1997.
/s/ Kenneth M. Duberstein
Kenneth M. Duberstein
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 27th day of
January, 1997.
/s/ George C. Juilfs
George C. Juilfs
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 24th day of
January, 1997.
/s/ Melvin Perelman
Melvin Perelman
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 30th day of
January, 1997.
/s/ Thomas E. Petry
Thomas E. Petry
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 28th day of
January, 1997.
/s/ John J. Schiff, Jr.
John J. Schiff, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 28th day of
January, 1997.
/s/ Philip R. Sharp
Philip R. Sharp
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 28th day of
January, 1997.
/s/ Dudley S. Taft
Dudley S. Taft
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of Cinergy Corp., the Form 10-K Annual Report of
said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 28th day of
January, 1997.
/s/ Oliver W. Waddell
Oliver W. Waddell
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of Cinergy Corp. and PSI Energy, Inc.,
the Form 10-K Annual Report of each corporation for the
fiscal year ended December 31, 1996, and to deliver said
Form 10-K Annual Reports so signed for filing with the
Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 27th day of
January, 1997.
/s/ James K. Baker
James K. Baker
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of Cinergy Corp. and PSI Energy, Inc.,
the Form 10-K Annual Report of each corporation for the
fiscal year ended December 31, 1996, and to deliver said
Form 10-K Annual Reports so signed for filing with the
Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 30th day of
January, 1997.
/s/ Michael G. Browning
Michael G. Browning
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of Cinergy Corp. and PSI Energy, Inc.,
the Form 10-K Annual Report of each corporation for the
fiscal year ended December 31, 1996, and to deliver said
Form 10-K Annual Reports so signed for filing with the
Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 20th day of
January, 1997.
/s/ John A. Hillenbrand II
John A. Hillenbrand II
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of The Cincinnati Gas & Electric Company
and The Union Light, Heat and Power Company, the Form 10-K
Annual Report of each corporation for the fiscal year ended
December 31, 1996, and to deliver said Form 10-K Annual
Reports so signed for filing with the Securities and
Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 24th day of
January, 1997.
/s/ William J. Grealis
William J. Grealis
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of each of Cinergy Corp. and PSI Energy, Inc.,
the Form 10-K Annual Report of each corporation for the
fiscal year ended December 31, 1996, and to deliver said
Form 10-K Annual Reports so signed for filing with the
Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 30th day of
January, 1997.
/s/ Van P. Smith
Van P. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of PSI Energy, Inc., the Form 10-K Annual Report
of said corporation for the fiscal year ended December 31,
1996, and to deliver said Form 10-K Annual Report so signed
for filing with the Securities and Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 27th day of
January, 1997.
/s/ John M. Mutz
John M. Mutz
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of James E. Rogers and J.
Wayne Leonard, or either of them, the undersigned's true and
lawful attorney-in-fact and agent to execute for and on
behalf of the undersigned, in the undersigned's capacity as
a director of The Union Light, Heat and Power Company, the
Form 10-K Annual Report of said corporation for the fiscal
year ended December 31, 1996, and to deliver said Form 10-K
Annual Report so signed for filing with the Securities and
Exchange Commission.
The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or either of them, shall
lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto caused this
Power of Attorney to be executed on this 28th day of
February, 1997.
/s/ Cheryl M. Foley
Cheryl M. Foley
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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<PERIOD-TYPE> 12-MOS
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<TOTAL-NET-UTILITY-PLANT> 6,289,626
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 566,011
<TOTAL-DEFERRED-CHARGES> 1,168,666
<OTHER-ASSETS> 824,211
<TOTAL-ASSETS> 8,848,514
<COMMON> 1,577
<CAPITAL-SURPLUS-PAID-IN> 1,590,735
<RETAINED-EARNINGS> 992,142
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,584,454
0
194,232
<LONG-TERM-DEBT-NET> 2,534,978
<SHORT-TERM-NOTES> 713,617
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
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0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,681,233
<TOT-CAPITALIZATION-AND-LIAB> 8,848,514
<GROSS-OPERATING-REVENUE> 3,242,740
<INCOME-TAX-EXPENSE> 218,269
<OTHER-OPERATING-EXPENSES> 2,466,213
<TOTAL-OPERATING-EXPENSES> 2,684,482
<OPERATING-INCOME-LOSS> 558,258
<OTHER-INCOME-NET> 15,322
<INCOME-BEFORE-INTEREST-EXPEN> 573,580
<TOTAL-INTEREST-EXPENSE> 215,603
<NET-INCOME> 357,977
23,180
<EARNINGS-AVAILABLE-FOR-COMM> 316,406
<COMMON-STOCK-DIVIDENDS> 274,358
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