File No. 70-9439
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 1 TO FORM U-1 DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement
and address of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Vice President and Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
The Commission is requested to direct all notices, orders and
communications in this matter to:
George Dwight II
Senior Counsel
Cinergy Corp.
(address above)
513-287-2643
513-287-3810 (fax)
[email protected]
The declaration as previously filed is hereby amended and restated in
its entirety (other than the exhibits and financial statements thereto,
except as otherwise specifically noted herein) to read as follows:
Item 1. Description of Proposed Transactions
A. Requested Approvals
Cinergy Corp., a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act"), has in effect
a Retirement Plan for Directors (the "Retirement Plan") under which
non-employee members of the boards of directors of Cinergy, its two
principal public utility subsidiaries, The Cincinnati Gas & Electric
Company, an Ohio electric and gas utility ("CG&E"), and PSI Energy, Inc.,
an Indiana electricity utility ("PSI"), and its service company subsidiary,
Cinergy Services, Inc. ("Services"), have accrued benefits based upon years
of service payable at retirement from the board in cash. In December 1998,
the board of directors of Cinergy (the "Board") amended and restated the
Retirement Plan to eliminate all future benefit accruals and to provide for
conversion of accrued benefits, at the election of each participating
director, to shares of Cinergy's common stock, $0.01 par value per share
("Common Stock"). Also in December 1998, the Board adopted a new
compensation plan for non-employee directors, intended to supersede the
Retirement Plan on a going forward basis, under which annual awards of
deferred hypothetical units of Common Stock will ultimately be paid
entirely in shares of Common Stock (except under certain circumstances),
when the director ceases to be a director.
Cinergy intends to submit the amended and restated Retirement
Plan, as well as the new compensation plan, to the holders of its
outstanding shares of Common Stock for action at the annual meeting of
Cinergy's shareholders scheduled to take place on April 21, 1999 (the
"Annual Meeting"). Assuming the presence of a quorum/1/, approval of the
plans requires the affirmative vote of the holders of not less than a
majority of the shares of Common Stock present at the Annual Meeting in
person or by proxy and entitled to vote on the plans./2/ Cinergy has hired
Corporate Investor Communications, Inc. ("CIC"), a professional proxy
solicitation firm, to assist in the solicitation of proxies.
In this application Cinergy requests Commission approval (1) to
solicit proxies with respect to the plans from the holders of its Common
Stock for action at the Annual Meeting and (2) to issue up to 250,000
shares of Common Stock under the plans from time to time through December
31, 2004. Shares of Common Stock distributed under the plans may be newly
issued or treasury shares or shares purchased on the open market, in
private transactions or otherwise, as determined in the Board's discretion.
With respect to the approval requested in clause (1) of the
preceding paragraph, Cinergy requests that the Commission issue its proxy
solicitation order by not later than March 8, 1999, which date is one week
before the scheduled mailing of the proxy materials to shareholders.
Receipt of the Commission's proxy solicitation order by March 8th will give
Cinergy adequate advance time to print the proxy materials and prepare for
the mailing on the 15th.
Cinergy believes that the amended and restated Retirement Plan
and the new compensation plan for non-employee directors foster long-term
corporate goals and are in the best interests of shareholders since, by
providing for equity- rather than cash-based retirement benefits, the plans
better align the interests of Cinergy's directors with those of its
shareholders.
B. Amended and Restated Cinergy Corp. Retirement Plan for
Directors
1. Introduction
Effective October 24, 1994 (the date CG&E and PSI Resources,
Inc. consummated their merger to form Cinergy), Cinergy adopted the
Retirement Plan, an unfunded retirement plan for non-employee directors of
Cinergy, CG&E, PSI and Services. Under its terms, non-employee directors
with five or more years of service have been entitled to receive annual
retirement compensation in an amount equal to the annual 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 board meeting multiplied by
five, with the compensation paid for as many years as the person served as
a director.
Effective January 1, 1999, subject to shareholder and
Commission approval, Cinergy amended and restated the Retirement Plan (the
"Amended Retirement Plan") to eliminate future accruals of benefits and to
provide for the conversion of currently accrued benefits to hypothetical
units payable at retirement in shares of Common Stock.
2. Summary of Plan Features
a. Participants
Non-employee directors with five or more years of service on
the board of directors of Cinergy, CG&E, PSI or Services prior to December
31, 1998, as well as all non-employee directors serving on one or more of
those boards as of December 31, 1998 regardless of years of service, will
participate in the Amended Retirement Plan. The total number of
participants is 24, of which 14 are current directors and 10 are former
directors.
b. Retirement Benefits
The Amended Retirement Plan provides for three categories of
retirement benefits:
Category 1 - each participant who retires as a director, or
dies while serving as a director, after January 1, 1999 and who has elected
to be included in this category will have his or her "Accrued Benefit"
converted to units (each, a "Deferred Unit") representing shares of Common
Stock (based on the closing market price per share of the Common Stock on
December 31, 1998 - $34.375).
Category 2 - each participant who retires as a director, or
dies while serving as a director, after January 1, 1999 and who has elected
to be included in this category will receive an annual cash payment equal
to the fees in effect on December 31, 1998.
Category 3 - each participant who retires as a director prior
to January 1, 1999 (i.e., a former director already in "pay" status) will
receive an annual cash payment equal to the fees in effect on the date
preceding his or her retirement as a director.
"Fees" have the same meaning under the Amended Retirement
Plan as under the original Retirement Plan, i.e., the annual board of
directors retainer fee plus five times the meeting fee./3/ "Accrued
Benefit" means a participant's total benefit entitlement as of December 31,
1998 reduced to a present value.
c. Unit Accounts
In addition to the initial number of Deferred Units credited
to a Category 1 participant's account (a "Unit Account"), the Unit Account
will be credited with additional Deferred Units equal in value to the cash
dividends which would have been paid on the number of shares represented by
Deferred Units in the Unit Account on any dividend payment date. Unit
Accounts will also be proportionately adjusted for any stock split, stock
dividend, combination or exchange of shares or similar change affecting the
Common Stock.
Unit Accounts will be paid out in shares of Common Stock,
with each credited unit being equal to one share of Common Stock.
d. Payment and Duration of Benefits
Generally, whether paid in cash or stock, benefit payments
under the Amended Retirement Plan will begin in February following the
later of (a) the date a participant ceases to be a director or (b) the
participant's attainment of age 55.
Category 1 participants may choose to have benefits paid
either in a lump sum or in annual installments over a period of two to ten
years.
Category 2 participant will receive benefits for a term equal
to the number of full years of service completed as of December 31, 1998.
Each Category 3 participant will receive benefits for a term
equal to the number of full years for which he or she served as a
non-employee director.
Payments under the Amended Retirement Plan will continue to a
participant's beneficiary after the participant's death.
C. Cinergy Corp. Directors' Equity Compensation Plan
1. Introduction
Effective January 1, 1999, subject to Commission and
shareholder approval, Cinergy adopted the Cinergy Corp. Directors' Equity
Compensation Plan (the "Directors' Equity Plan" and, together with the
Amended Retirement Plan, the "Plans") to replace the Retirement Plan on a
going forward basis. The Directors' Equity Plan is an unfunded plan under
which, commencing December 31, 1999, each non-employee director of Cinergy
will receive, at the Board's discretion, an annual award comprised either
of 450 hypothetical units of Common Stock or the cash equivalent thereof.
Cinergy anticipates that, except under certain circumstances (see below
Section D.1, "Features Common to the Plans/Administration"), all awards
will be in Common Stock.
2. Summary of Plan Features
a. Eligibility
Each non-employee director of Cinergy, on January 1 of any
year, commencing January 1, 1999, and each person who after January 1, 1999
is elected or appointed for the first time to be a non-employee director of
Cinergy during the course of any year, is eligible to receive an award
under the Directors' Equity Plan for that year. All current non-employee
directors of Cinergy are eligible to participate in the Directors' Equity
Plan. The ultimate number of participants will depend on the number of
non-employee directors of Cinergy over the life of the Plan, which has no
set expiration date.
b. Awards
Commencing December 31, 1999, and on each following December
31, each eligible non-employee director during the just-completed year will
be granted a "Stock Award" or a "Cash Award," as determined by the Board in
its discretion. A Stock Award will consist of 450 units ("Units"), with
each Unit representing one share of Common Stock. Any Cash Award will be
an amount in cash equal to the market value of 450 shares of Common Stock
on the date of grant. Awards to directors who retire from the Board during
the course of a year will be prorated based upon their lengths of service
during the year. Subject to Section D.1 below, Cinergy anticipates that
all awards under the Plan will be Stock Awards.
c. Accounts
Stock Awards and any Cash Awards under the Directors' Equity
Plan will be credited to individual bookkeeping accounts ("Accounts")
maintained for each participant. A director's Account will be credited
with additional full and fractional Units equal in value to the cash
dividends which would have been paid on the number of shares represented by
Units in the Account on any dividend payment date. Accounts also will be
proportionately adjusted for any stock split, stock dividend, combination
or exchange of shares or similar change affecting the Common Stock. Any
cash amounts in an Account will be credited with interest at the rate
quoted for a one year $100,000 certificate of deposit.
The Board has discretion at any time to convert Cash Awards and
accrued interest in a director's Account to Units by dividing the amount of
cash credited to the Account by the market value of the Common Stock on the
conversion date.
d. Payment of Benefits
All whole Units in a director's Account will be distributed in
the form of shares of Common Stock (with cash paid in lieu of fractional
shares). Unless converted to Units, any cash in an Account will be paid
out in cash. A director may elect to have his or her Account paid out in a
single lump sum or in annual installments over a period of two to ten
years. In either case, payment will be made, or begin, on the first
business day of the calendar year following the date that the director
ceases to be a director. Upon the death of a Plan participant, any amounts
remaining in his or her Account will be paid in a lump sum, within 90 days,
to the participant's designated beneficiary or estate.
D. Features Common to the Plans
The following features of the Plans are identical, except where
otherwise noted.
1. Administration
The Plans will be administered by the Board. In addition to
having the right to interpret and otherwise regulate each Plan, the Board
is specifically authorized to reverse any action thereunder which would
adversely affect the ability of Cinergy to use pooling of interests
accounting in a merger or other corporate transaction; in that event, the
Board is authorized to provide appropriate cash or other substitute
compensation.
2. Assignment
Benefits or awards, whether payable in stock or cash, may not be
assigned, transferred, pledged, encumbered or otherwise disposed of prior
to their distribution in accordance with the terms of the Plan.
3. Change in Control
If Cinergy undergoes a "change in control" (as defined), each
participant (or beneficiary) will be entitled to receive a lump sum payment
of the actuarial equivalent of benefits accrued and remaining unpaid as of
the date of the change in control. The lump sum equivalent will be
calculated assuming the interest rate used by the Pension Benefit Guaranty
Corporation in determining the value of immediate benefits as of the
immediately preceding January 1.
4. Amendment and Termination
Although the Directors' Equity Plan is intended to be of
indefinite duration, the Board may amend or terminate either Plan at any
time. The foregoing notwithstanding, with respect to the Amended
Retirement Plan, no termination or amendment may deprive any participant
(or beneficiary) of any benefits accrued under the Plan prior to the
termination or amendment without his or her consent, and with respect to
the Directors' Equity Plan, no termination or amendment may adversely
affect the balance in a director's Account or permit payment of a
director's Account balance prior to the date specified by the director or
provided for in the Plan.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses to be incurred, directly or
indirectly, by Cinergy or any associate company thereof in connection with
the proposed transactions are estimated as follows:
Form S-8 registration fees $2,500
Printing $85,000
Postage and handling $240,000
Fees and expenses of CIC $75,000
TOTAL $402,500
Item 3. Applicable Statutory Provisions
Sections 6(a), 7 and 12(e) and rules 42, 54, 62 and 65 are or may
be applicable to the proposed transactions.
Rule 54 provides that in determining whether to approve the issue
or sale of a security by a registered holding company for purposes other
than the acquisition of an exempt wholesale generator ("EWG") or foreign
utility company ("FUCO"), or other transactions by such registered holding
company or its subsidiaries other than with respect to EWGs or FUCOs, the
Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or a FUCO upon the registered holding
company system if the conditions of rule 53(a), (b) and (c) are satisfied.
Cinergy currently does not meet the conditions of rule 53(a). At
September 30, 1998, Cinergy's "aggregate investment," as defined in rule
53(a)(1), in EWGs and FUCOs was approximately $616 million. This amount
equals approximately 65% of Cinergy's "consolidated retained earnings,"
also as defined in rule 53(a)(1) (approximately $954 million), which
exceeds the 50% "safe harbor" limitation contained in rule 53(a). By order
dated March 23, 1998 (HCAR No. 26848) ("100% Order"), the Commission
authorized Cinergy to increase its total investments in EWGs and FUCOs to
100% of consolidated retained earnings. Accordingly, although Cinergy's
aggregate investment exceeds the 50% safe harbor, such additional level of
investment is expressly permitted under the 100% Order.
At September 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, Cinergy's
consolidated capitalization consisted of 44.1% equity and 55.9% debt; at
such date, Cinergy's pro forma consolidated capitalization, taking into
account the entire amount of non-recourse debt allocable to Cinergy's
ownership interest in EWGs and FUCOs (i.e., $949 million) was 38.2% equity
and 61.8% debt. As shown in Exhibit H filed herewith, Cinergy's pro forma
consolidated capitalization at September 30, 1998 consisted of 42.4% equity
and 57.6% debt; also as shown in Exhibit H, even if the entire amount of
then-outstanding non-recourse debt allocable to Cinergy's ownership
interest in EWGs and FUCOs were consolidated (i.e., $1.1 billion), equity
would still comprise 35.9% of the overall capital structure. The proposed
transactions - involving the potential issuance of up to 250,000 shares of
Cinergy's common stock over the next five years under certain retirement
plans for directors - would have an immaterial impact on Cinergy's
capitalization.
With respect to earnings, the 100% Order stated that Cinergy did
not report a full-year operating loss attributable to its investments in
EWGs and FUCOs for any year 1992 through 1996. That order also stated that
Midlands Electricity plc ("Midlands"), a FUCO in the United Kingdom in
which Cinergy has a 50% ownership interest, recorded a one-time
extraordinary charge in the third quarter of 1997 as a result of a windfall
profits tax imposed by the authorities in the United Kingdom, of which $109
million was allocable to Cinergy. However, the 100% Order noted that
Midland's credit ratings by Standard and Poor's remained unchanged
following the charge. Since the date of the 100% Order (as disclosed in
various quarterly notification certificates in File No. 70-9011), Cinergy's
investments in EWGs and FUCOs have continued to make a positive
contribution to Cinergy's earnings.
With respect to the remaining conditions of rule 54, Cinergy has
complied and will continue to comply with the record-keeping requirements
of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of
operating company personnel in rendering services to EWGs and FUCOs, and
the requirements of rule 53(a)(4) concerning submission of specified
filings under the Act to retail rate regulatory agencies. In addition,
none of the conditions in rule 53(b) has occurred.
Item 4. Regulatory Approval
No state or federal regulatory agency other than the Commission under
the Act has jurisdiction over the proposed transactions.
Item 5. Procedure
So that Cinergy has adequate time to solicit proxies for its annual
meeting of shareholders scheduled to take place on April 21, 1999, Cinergy
requests that the Commission issue and publish not later than March 8, 1999
a public notice under rule 23 with respect to the filing of this
declaration together with an order under rule 62(d) permitting the proposed
solicitation of proxies.
Cinergy further requests that such notice and order specify a date
not later than April 5, 1999 as the date after which the Commission may
issue an order permitting this declaration to become effective with respect
to the balance of the transactions proposed herein.
Cinergy waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and requests that there be no waiting period between
the issuance of the Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
A-1 Certificate of Incorporation of Cinergy (incorporated
by reference from exhibit filed with Cinergy's 1993 Form 10-K in File No.
1-11377)
A-2 By-Laws of Cinergy, as amended (filed with original
declaration)
B-1 Draft notice of Annual Meeting (included as part of
Exhibit B-2) (filed with original declaration)
B-2 Draft of proxy statement (filed with original
declaration)
B-3 Draft of form of proxy
B-4 Amended and Restated Cinergy Corp. Retirement Plan for
Directors (filed with original declaration)
B-5 Cinergy Corp. Directors' Equity Compensation Plan
(filed with original declaration)
C-1 Registration Statement on Form S-8 relating to Amended
and Restated Cinergy Corp. Retirement Plan for Directors (to be filed by
amendment)
C-2 Registration Statement on Form S-8 relating to Cinergy
Corp. Directors' Equity Compensation Plan (to be filed by amendment)
D Not applicable
E Not applicable
F-1(a) Preliminary opinion of counsel (filed herewith)
G-1 Revised form of Federal Register notice (filed
herewith)
H Pro Forma Consolidated Capitalization at September 30,
1998 (filed with original declaration)
(b) Financial Statements:
FS-1 Cinergy Pro Forma Consolidated Financial Statements,
dated September 30, 1998 (filed with original declaration)
FS-2 Cinergy Pro Forma Financial Statements, dated
September 30, 1998 (filed with original declaration)
FS-3 Cinergy Consolidated Financial Data Schedule (included
as part of electronic submission only) (filed with original declaration)
FS-4 Cinergy Financial Data Schedule (included as part of
electronic submission only) (filed with original declaration)
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute
major federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company
has duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 25, 1999
CINERGY CORP.
By: /s/William L. Sheafer
Vice President and Treasurer
ENDNOTES
/1/ A majority of the holders of record of the Common Stock at the close
of business on February 22, 1999, present at the Annual Meeting in person
or by proxy, constitutes a quorum for these purposes. The number of shares
of Common Stock outstanding at December 31, 1998 was 158,664,532.
/2/ In the event the amended and restated Retirement Plan is not approved
by shareholders, the existing Retirement Plan will continue in effect.
/3/ Currently, non-employee directors of Cinergy, CG&E, PSI and Services
receive an annual retainer fee of $30,000 plus a fee of $1,500 for each
board meeting attended. Non-employee directors who also serve on one or
more standing committees of the board receive an annual retainer fee of
$3,000 for each committee membership plus a fee of $1,500 for each
committee meeting attended. The fee for any board or committee meeting
held via conference call is $750. In consideration of their additional
responsibilities and time commitments, non-employee directors serving as
chairpersons of board committees receive an additional retainer of $3,000.
Directors who are also employees of Cinergy or any of its subsidiaries
receive no remuneration for their services as director.
EXHIBIT F-1(a)
January 26, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cinergy Corp./ File No. 70-9439
Ladies and Gentlemen:
I am Associate General Counsel of Cinergy Corp. ("Cinergy"), a
Delaware corporation and registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act"). This opinion
supersedes my earlier opinion filed with the initial declaration in this
matter (such Declaration, as amended herewith and as it may further be
amended, the "Application"), in order to correct an incorrect reference to
one of the Plans referred to therein.
In the Application, Cinergy seeks approvals with respect to issuing
shares of its common stock, $0.01 par value per share ("Common Stock"), and
soliciting proxies from the holders thereof, in connection with an amended
and restated retirement plan and a new compensation plan (collectively,
"Plans") for non-employee directors of Cinergy and/or certain of its
subsidiaries. Each of the Plans was adopted by the Board of Directors of
Cinergy in December 1998, subject to shareholder and Commission approval.
In connection with this opinion, I have reviewed the Application
and such documents, agreements, instruments and/or other materials with
respect to the Plans and otherwise as I deemed necessary or advisable.
I am a member of the Bar of the State of Ohio and do not purport to
be an expert on the laws of any other jurisdiction. I have examined the
Delaware General Corporation Law ("DGCL") to the extent necessary to
express the opinions set forth herein. Such opinions are limited solely to
matters governed by the laws of the State of Ohio and the DGCL. This
opinion does not address the potential applicability to the proposed
transactions of any state securities or Blue Sky laws.
Based upon and subject to the foregoing, and assuming that the
proposed transactions are carried out in accordance with (i) the
Application and the Commission's order(s) to be issued with respect
thereto, (ii) the governing instruments with respect to the Plans and (iii)
all other requisite approvals and authorizations, corporate or otherwise, I
am of the opinion that:
All state laws applicable to the proposed transactions will have
been complied with.
Cinergy is duly organized and validly existing under the laws of
the State of Delaware.
The shares of Common Stock to be issued under the Plans will be
validly issued, fully paid and non-assessable and the holders
thereof will be entitled to the rights and privileges appertaining
thereto stated in Cinergy's Certificate of Incorporation.
The consummation of the proposed transactions will not violate the
legal rights of the holders of any securities issued by Cinergy or
any associate company thereof.
I hereby consent to the use of this opinion in connection with the
Application.
Very truly yours,
/s/Jerome A. Vennemann
Associate General Counsel
Exhibit G-1
REVISED FORM OF PUBLIC NOTICE
Cinergy Corp. 70-9439
Notice of Proposal to Issue Shares under Director Retirement Plans; Order
Authorizing Proxy Solicitation
Cinergy Corp., a registered holding company ("Cinergy"), at 139
East Fourth Street, Cincinnati, Ohio 45202, has filed a declaration under
sections 6(a), 7 and 12(e) of the Act and rules 42, 54, 62 and 65
thereunder.
Cinergy seeks approvals with respect to issuing shares of its
common stock, $0.01 par value per share ("Common Stock"), and soliciting
proxies from the holders of outstanding shares thereof, in connection with
an amended and restated retirement plan and a new compensation plan for
non-employee directors of Cinergy and/or certain of its subsidiaries.
Cinergy has in effect a Retirement Plan for Directors ("Retirement
Plan") under which non-employee members of the boards of directors of
Cinergy, its two principal public utility subsidiaries, The Cincinnati Gas
& Electric Company, an Ohio electric and gas utility ("CG&E"), and PSI
Energy, Inc., an Indiana electricity utility ("PSI"), and its service
company subsidiary, Cinergy Services, Inc. ("Services"), have accrued
benefits based upon years of service payable at retirement in cash. In
December 1998, subject to Commission and shareholder approvals, the board
of directors of Cinergy ("Board") (1) amended and restated the Retirement
Plan ("Amended Retirement Plan"), effective January 1, 1999, to eliminate
all future benefit accruals and to provide for conversion of accrued
benefits, at the election of each participating director, to shares of
Common Stock, and (2) adopted effective January 1, 1999 a new compensation
plan for non-employee directors, the Cinergy Corp. Directors' Equity
Compensation Plan ("Directors' Equity Plan" and, together with the Amended
Retirement Plan, "Plans"), intended to supersede the Retirement Plan on a
going forward basis, under which annual awards of deferred hypothetical
units of Common Stock will ultimately be paid entirely in shares of Common
Stock (except under certain circumstances), when a director ceases to be a
director.
The original Retirement Plan is an unfunded retirement plan for
non-employee directors of Cinergy, CG&E, PSI and Services, under whose
terms non-employee directors with five or more years of service have been
entitled to receive annual retirement compensation in an amount equal to
the annual 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
board meeting multiplied by five, with the compensation paid for as many
years as the person served as a director.
With respect to the Amended Retirement Plan, non-employee directors
with five or more years of service on the board of directors of Cinergy,
CG&E, PSI or Services prior to December 31, 1998, as well as all
non-employee directors serving on one or more of those boards as of
December 31, 1998 regardless of years of service, are eligible to
participate. The total number of participants is 24, of which 14 are
current directors and 10 are former directors.
The Amended Retirement Plan provides for three categories of
retirement benefits:
Category 1 - each participant who retires as a director, or dies
while serving as a director, after January 1, 1999 and who has
elected to be included in this category will have his or her
"Accrued Benefit" converted to units (each, a "Deferred Unit")
representing shares of Common Stock (based on the closing market
price per share of the Common Stock on December 31, 1998 -
$34.375).
Category 2 - each participant who retires as a director, or dies
while serving as a director, after January 1, 1999 and who has
elected to be included in this category will receive an annual cash
payment equal to the fees in effect on December 31, 1998.
Category 3 - each participant who retires as a director prior to
January 1, 1999 (i.e., a former director already in "pay" status)
will receive an annual cash payment equal to the fees in effect on
the date preceding his or her retirement as a director.
"Fees" have the same meaning under the Amended Retirement Plan as
under the original Retirement Plan, i.e., the annual board of directors
retainer fee plus five times the meeting fee./1/ "Accrued Benefit" means a
participant's total benefit entitlement as of December 31, 1998 reduced to
a present value.
In addition to the initial number of Deferred Units credited to a
Category 1 participant's account (a "Unit Account"), the Unit Account will
be credited with additional Deferred Units equal in value to the cash
dividends which would have been paid on the number of shares represented by
Deferred Units in the Unit Account on any dividend payment date. Unit
Accounts will also be proportionately adjusted for any stock split, stock
dividend, combination or exchange of shares or similar change affecting the
Common Stock. Unit Accounts will be paid out in shares of Common Stock,
with each credited unit being equal to one share of Common Stock.
Generally, whether paid in cash or stock, benefit payments under
the Amended Retirement Plan will begin in February following the later of
(a) the date a participant ceases to be a director or (b) the participant's
attainment of age 55. Category 1 participants may choose to have benefits
paid either in a lump sum or in annual installments over a period of two to
ten years. A Category 2 participant will receive benefits for a term equal
to the number of full years of service completed as of December 31, 1998.
Each Category 3 participant will receive benefits for a term equal to the
number of full years for which he or she served as a non-employee director.
Payments under the Amended Retirement Plan will continue to a participant's
beneficiary after the participant's death.
With respect to the Directors' Equity Plan, each non-employee
director of Cinergy, on January 1 of any year, commencing January 1, 1999,
and each person who after January 1, 1999 is elected or appointed for the
first time to be a non-employee director of Cinergy during the course of
any year, is eligible to receive an award under the Directors' Equity Plan
for that year. All current non-employee directors of Cinergy are eligible
to participate in the Directors' Equity Plan. The ultimate number of
participants will depend on the number of non-employee directors of Cinergy
over the life of the Plan, which has no set expiration date.
Commencing December 31, 1999, and on each following December 31,
each eligible non-employee director during the just-completed year will be
granted a "Stock Award" or a "Cash Award," as determined by the Board in
its discretion. A Stock Award will consist of 450 units ("Units"), with
each Unit representing one share of Common Stock. Any Cash Award will be
an amount in cash equal to the market value of 450 shares of Common Stock
on the date of grant. Awards to directors who retire from the Board during
the course of a year will be prorated based upon their lengths of service
during the year. Cinergy anticipates that, except under certain
circumstances, all awards under the Plan will be Stock Awards.
Stock Awards and any Cash Awards under the Directors' Equity Plan
will be credited to individual bookkeeping accounts ("Accounts") maintained
for each participant. A director's Account will be credited with
additional full and fractional Units equal in value to the cash dividends
which would have been paid on the number of shares represented by Units in
the Account on any dividend payment date. Accounts also will be
proportionately adjusted for any stock split, stock dividend, combination
or exchange of shares or similar change affecting the Common Stock. Any
cash amounts in an Account will be credited with interest at the rate
quoted for a one year $100,000 certificate of deposit. The Board has
discretion at any time to convert Cash Awards and accrued interest in a
director's Account to Units by dividing the amount of cash credited to the
Account by the market value of the Common Stock on the conversion date.
All whole Units in a director's Account will be distributed in the
form of shares of Common Stock (with cash paid in lieu of fractional
shares). Unless converted to Units, any cash in an Account will be paid
out in cash. A director may elect to have his or her Account paid out in a
single lump sum or in annual installments over a period of two to ten
years. In either case, payment will be made, or begin, on the first
business day of the calendar year following the date of the director's
retirement from Cinergy's Board. Upon the death of a Plan participant, any
amounts remaining in his or her Account will be paid in a lump sum, within
90 days, to the participant's designated beneficiary or estate.
Certain provisions of the Plans are identical or substantially
similar. For example, both Plans will be administered by the Board. In
addition to having the right to interpret and otherwise regulate each Plan,
the Board is specifically authorized to reverse any action thereunder which
would adversely affect the ability of Cinergy to use pooling of interests
accounting in a merger or other corporate transaction; in that event, the
Board is authorized to provide appropriate cash or other substitute
compensation.
Likewise, although the Directors' Equity Plan is intended to be of
indefinite duration, the Board may amend or terminate either Plan at any
time. The foregoing notwithstanding, with respect to the Amended
Retirement Plan, no termination or amendment may deprive any participant
(or beneficiary) of any benefits accrued under the Plan prior to the
termination or amendment without his or her consent, and with respect to
the Directors' Equity Plan, no termination or amendment may adversely
affect the balance in a director's Account or permit payment of a
director's Account balance prior to the date specified by the director or
provided for in the Plan.
Shares of Common Stock distributed under the Plans may be newly
issued or treasury shares or shares purchased on the open market, in
private transactions or otherwise, as determined in the Board's discretion.
Cinergy requests authority to issue up to 250,000 shares of Cinergy
Services under the Plans from time to time through December 31, 2004.
Cinergy proposes to submit the Plans to the holders of its
outstanding shares of Common Stock for action at the annual meeting of
Cinergy's shareholders scheduled to take place on April 21, 1999 ("Annual
Meeting"), and in connection therewith to solicit proxies. Assuming the
presence of a quorum, approval of the Plans requires the affirmative vote
of the holders of not less than a majority of the shares of Common Stock
present at the Annual Meeting in person or by proxy and entitled to vote on
the Plans. Cinergy requests that the effectiveness of its declaration with
respect to such solicitation of proxies be permitted to become effective
forthwith pursuant to rule 62(d).
It appearing to the Commission that Cinergy's declaration regarding
the proposed solicitation of proxies should be permitted to become
effective forthwith, pursuant to rule 62(d):
IT IS ORDERED, that the declaration regarding the proposed
solicitation of proxies be, and it hereby is, permitted to become effective
forthwith pursuant to rule 62(d) and subject to the terms and conditions
prescribed in rule 24 under the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ Currently, non-employee directors of Cinergy, CG&E, PSI and Services
receive an annual retainer fee of $30,000 plus a fee of $1,500 for each
board meeting attended. Non-employee directors who also serve on one or
more standing committees of the board receive an annual retainer fee of
$3,000 for each committee membership plus a fee of $1,500 for each
committee meeting attended. The fee for any board or committee meeting
held via conference call is $750. In consideration of their additional
responsibilities and time commitments, non-employee directors serving as
chairpersons of board committees receive an additional retainer of $3,000.
Directors who are also employees of Cinergy or any of its subsidiaries
receive no remuneration for their services as director.
