File No. 70-
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
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]
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 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 retirement plan for
non-employee directors, intended to supersede the Retirement Plan on a
going forward basis, under which future accruals of retirement benefits
will be paid entirely in shares of Common Stock, except under certain
circumstances.
Cinergy intends to submit the amended and restated Retirement Plan,
as well as the new retirement 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 though 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 retirement 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 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 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.
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
shares 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 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.
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 deprive any participant (or beneficiary) of
any benefits accrued under the Plan prior to the termination or amendment
without his or her consent.
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
B-1 Draft notice of Annual Meeting (included as part of
Exhibit B-2)
B-2 Draft of proxy statement
B-3 Draft of form of proxy (to be filed by amendment)
B-4 Amended and Restated Cinergy Corp. Retirement Plan for
Directors
B-5 Cinergy Corp. Directors' Equity Compensation Plan
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 Preliminary opinion of counsel
G Form of Federal Register notice
H Pro Forma Consolidated Capitalization at September 30,
1998
(b) Financial Statements:
FS-1 Cinergy Pro Forma Consolidated Financial Statements,
dated September 30, 1998
FS-2 Cinergy Pro Forma Financial Statements, dated
September 30, 1998
FS-3 Cinergy Consolidated Financial Data Schedule (included
as part of electronic submission only)
FS-4 Cinergy Financial Data Schedule (included as part of
electronic submission only)
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 20, 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/ 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 A-2
BY-LAWS
OF
CINERGY CORP.
Adopted: October 24, 1994
Amended: January 25, 1996
Amended: December 18, 1997
Amended: April 22, 1998
Amended: October 15, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Offices and Headquarters
Section 1.1 Offices 1
1.2 Headquarters 1
ARTICLE II
Stockholders
Section 2.1 Annual Meeting 2
2.2 Special Meetings 4
2.3 Notice of Meetings 4
2.4 Quorum 5
2.5 Voting 5
2.6 Presiding Officer and Secretary 6
2.7 Proxies 6
2.8 List of Stockholders 7
ARTICLE III
Directors
Section 3.1 Number of Directors 8
3.2 Election and Term of Directors 8
3.3 Vacancies and Newly Created Directorships 10
3.4 Resignation 11
3.5 Meetings 11
3.6 Quorum and Voting 12
3.7 Written Consent of Directors in Lieu of a
Meeting 12
3.8 Compensation 12
3.9 Contracts and Transactions Involving Directors 12
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers 13
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office 15
5.2 The Chairman of the Board 16
5.3 Vice-Chairman 16
5.4 Chief Executive Officer 16
5.5 The President 17
5.6 The Vice-Presidents 17
5.7 The Secretary 17
5.8 The Treasurer 18
5.9 The Comptroller 19
5.10 Compensation and Bond 20
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees
and Agents 20
6.2 Advances for Litigation Expenses 22
6.3 Indemnification Nonexclusive 23
6.4 Indemnity Insurance 23
6.5 Definitions 24
ARTICLE VII
Common Stock
Section 7.1 Certificates 25
7.2 Transfers of Stock 25
7.3 Lost, Stolen or Destroyed Certificates 25
7.4 Stockholder Record Date 26
7.5 Beneficial Owners 27
ARTICLE VIII
Seal
Section 8.1 Seal 27
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice 28
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year 28
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc. 29
ARTICLE XII
Amendments
Section 12.1 Amendments 29
ARTICLE XIII
Dividends
Section 13.1 Dividends 30
<PAGE>
BY-LAWS
OF
CINERGY CORP. (THE "CORPORATION")
ARTICLE I
Offices and Headquarters
Section 1.1 Offices. The location of the Corporation's
principal office shall be in the City of Cincinnati, County of Hamilton,
State of Ohio. The Corporation may, in addition to the aforesaid principal
office, establish and maintain an office or offices elsewhere in Delaware,
Ohio or Indiana or in such other states and places as the Board of
Directors may from time to time find necessary or desirable, at which
office or offices the books, documents, and papers of the Corporation may
be kept.
Section 1.2 Headquarters. Subject to the sentence next
following, the Corporation's headquarters and executive offices, shall be
located in the City of Cincinnati, County of Hamilton, State of Ohio. The
location of the Corporation's headquarters and executive offices may be
changed from the City of Cincinnati, County of Hamilton, State of Ohio only
by the affirmative vote of 80% of the full Board of Directors of the
Corporation and not by the vote of any committee of the Board of Directors.
As used in these By-Laws, the term "the full Board of Directors" shall mean
all directors then in office together with any vacancies, however created.
For the avoidance of doubt and as an example only, if the Board of
Directors consists of 17 members and two vacancies exist, the affirmative
vote of 14 of the 15 members of the Corporation's Board of Directors then
in office would be required to authorize a change in location of the
Corporation's headquarters and executive offices. The headquarters and
executive offices of the Corporation's subsidiary, PSI Energy, Inc., shall
be located in the City of Plainfield, Indiana and the headquarters and
executive offices of the Corporation's subsidiary, The Cincinnati Gas &
Electric Company, shall be located in the City of Cincinnati, Ohio.
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. An annual meeting of stockholders
of the Corporation for the election of directors and for the transaction of
any other proper business shall be held at such time and date in each year
as the Board of Directors may from time to time determine. The annual
meeting in each year shall be held at such hour on said day and at such
place within or without the State of Delaware as may be fixed by the Board
of Directors, or if not so fixed, at the principal business office of the
Corporation in the City of Cincinnati, County of Hamilton, State of Ohio.
No business may be transacted at an annual meeting of
stockholders, other than business that is either: (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors (or any duly authorized committee thereof); (b)
otherwise properly brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized committee thereof); or
(c)otherwise properly brought before the annual meeting by any stockholder
of the Corporation: (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 2.1 and on the record
date for the determination of stockholders entitled to vote at such annual
meeting; and (ii) who complies with the notice procedures set forth in this
Section 2.1.
In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of
the Corporation not less than ninety (90) calendar days nor more than one
hundred twenty (120) calendar days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is not
within thirty (30) calendar days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) calendar day following
the day on which such notice of the date of the annual meeting was mailed
or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to
bring before the annual meeting: (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (ii) the name and record
address of such stockholder; (iii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or
of record by such stockholder; (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by
such stockholder and any material interest of such stockholder in such
business; and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before
the meeting.
Notwithstanding anything to the contrary in the By-Laws, no
business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the
procedures set forth in this Section 2.1; provided, however, that once
business has been properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 2.1 shall be deemed to
preclude discussion by any stockholder of any such business. If the
presiding officer of an annual meeting determines that business was not
properly brought before the annual meeting in accordance with the foregoing
procedures, the presiding officer shall declare to the meeting that the
business was not properly brought before the meeting and such business
shall not be transacted.
Section 2.2 Special Meetings. A special meeting of the
stockholders of the Corporation entitled to vote on any business to be
considered at any such meeting may be called by the Chairman of the Board
or the President or by a majority of the members of the Board of Directors
then in office, acting with or without a meeting, or by the persons who
hold 50% of all shares outstanding and entitled to vote thereat upon notice
in writing, stating the time, place and purpose of the special meeting.
The business transacted at the special meeting shall be confined to the
purposes and objects stated in the call.
Section 2.3 Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, unless notice is
waived in writing by all stockholders entitled to vote at the meeting, a
written notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
Unless otherwise provided by law, and except as to any
stockholder duly waiving notice, the written notice of any meeting shall be
given personally or by mail, not less than 10 days nor more than 60 days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, notice shall be deemed given when deposited in the
mail, postage prepaid, directed to the stockholder at his or her address as
it appears on the records of the Corporation.
When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might
have been transacted at the original meeting. If, however, the adjournment
is for more than 30 days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation or by these By-Laws in respect of the vote
required for a specified action, at any meeting of stockholders the holders
of a majority of the outstanding stock entitled to vote thereat, either
present, in person or represented by proxy, shall constitute a quorum for
the transaction of any business, but the stockholders present, although
less than a quorum, may adjourn the meeting to another time or place and,
except as provided in the last paragraph of Section 2.3 of these By-Laws,
notice need not be given of the adjourned meeting.
Section 2.5 Voting. Whenever directors are to be elected at a
meeting, they shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to
vote thereon. Whenever any corporate action, other than the election of
directors, is to be taken by vote of stockholders at a meeting, it shall,
except as otherwise required by law or by the Certificate of Incorporation
or by these By-Laws, be authorized by the affirmative vote of the majority
of shares present in person or represented by proxy at the meeting and
entitled to vote thereon.
Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled
to vote on any matter at any meeting of stockholders shall be entitled to
one (1) vote for each share of such stock standing in the name of such
holder on the stock ledger of the Corporation on the record date for the
determination of the stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for
directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes
are counted shall be discretionary with the presiding officer at the
meeting.
Section 2.6 Presiding Officer and Secretary. At every meeting
of stockholders, and where the offices of the Chairman of the Board and the
Chief Executive Officer are held by different individuals, the Chief
Executive Officer, or, in his or her absence, the Chairman of the Board,
or, in his or her absence, the appointee of the meeting, shall preside.
The Secretary, or, in his or her absence an Assistant Secretary, or if none
be present, the appointee of the presiding officer of the meeting, shall
act as secretary of the meeting.
Section 2.7 Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons
to act for him or her by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a
longer period. Every proxy shall be signed by the stockholder or by his
duly authorized attorney. A stockholder may authorize another person or
persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like agent
duly authorized by the person who will be the holder of the proxy to
receive such transmission if such transmission is submitted with
information from which it may be determined that the transmission was
authorized by the stockholder.
Section 2.8 List of Stockholders. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to
the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by
this Section or the books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
ARTICLE III
Directors
Section 3.1 Number of Directors. The Board of Directors shall
consist of 17 directors. This number may be changed to an odd number not
less than 15 and not more than 23 by a vote of not less than 75% of the
full Board of Directors ("Supermajority Vote"). Any such determination
made by the Board of Directors shall continue in effect unless and until
changed by the Board of Directors by Supermajority Vote, but no such change
shall affect the term of any director then in office.
Section 3.2 Election and Term of Directors. Only persons who
are nominated in accordance with the following procedures shall be eligible
for election as directors. Except as may be required by applicable law, no
person who is, at the time of nomination, 70 years of age or older shall be
eligible for election as a director. Nominations of persons as candidates
for election as directors of the Corporation may be made at a meeting of
stockholders (i) by or at the direction of the Board of Directors acting by
Supermajority Vote (or by a unanimous vote of the remaining directors if a
Supermajority Vote is not obtainable because the number of vacancies on the
Board of Directors); or (ii) by any stockholder of the Corporation entitled
to vote for the election of directors at such meeting who complies with the
notice procedures set forth herein. Any nomination other than those
governed by clause (i) of the preceding sentence shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received
at the principal office of the Corporation in the State of Ohio not less
than 50 days prior to the meeting; provided, however, that if less than 60
days' notice or prior public disclosure of the date of the meeting is given
to stockholders or made public, to be timely notice by a stockholder must
be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such stockholder's notice to
the Secretary shall set forth: (a) as to each person whom the stockholder
proposes to nominate for election as director: (i) the name, age, business
address, and residence address of such person; (ii) the principal
occupation or employment of such person; (iii) the class and number of any
shares of capital stock of the Corporation that are beneficially owned by
such person; and (iv) any other information relating to such person that is
required to be disclosed in solicittions for proxies for the election of
directors pursuant to any then existing rules or regulations promulgated
under the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving notice: (i) the name and record address of such
stockholder; (ii) the class and number of shares of capital stock of the
Corporation that are beneficially owned by such stockholder, and (iii) the
period of time such stockholder has held such shares. The Corporation may
require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director. No person otherwise eligible
for election as a director shall be eligible for election as a director
unless nominated as set forth herein.
Commencing on October 24, 1994 (the "Classification Date") of the
Board of Directors of the Corporation, the terms of office of the Board of
Directors shall be divided into three (3) classes, Class I, Class II and
Class III, as determined by the Board of Directors. All classes shall be
as nearly equal in number as possible.
The terms of office of directors classified shall be as follows:
(1) that of Class I shall expire at the annual meeting of stockholders that
occurs within the first year after the Classification Date, (2) that of
Class II shall expire at the annual meeting of stockholders that occurs
within the second year after the Classification Date, and (3) that of Class
III shall expire at the annual meeting of stockholders that occurs within
the third year after the Classification Date. At each annual meeting of
stockholders after the Classification Date, the successors to directors
whose terms shall expire shall be elected to serve from the time of
election and qualification until the third annual meeting following
election and until a successor shall have been elected and qualified or
until his earlier resignation, removal from office or death. As being
under 70 years of age constitutes a continuing qualification for service on
the Board of Directors, any director who reaches the age of 70 years while
in office shall, except as limited by applicable law, promptly resign from
the Corporation's Board of Directors.
Section 3.3 Vacancies and Newly Created Directorships. Vacancies
and newly created directorships resulting from any increase in the
authorized number of directors may be filled by election at a meeting of
stockholders. Except as otherwise provided by law, and notwithstanding the
provision of Section 3.6, the remaining directors, whether or not
constituting a majority of the whole authorized number of directors, may,
by not less than a Supermajority Vote (or by a unanimous vote of the
remaining directors if a Supermajority Vote is not obtainable because of
the number of vacancies on the Board of Directors) fill any vacancy in the
Board, however arising, for the unexpired term thereof. Any person elected
to fill a vacancy in the Board shall hold office until the expiration of
the term of office for the class to which he or she is elected and until a
successor is elected and qualified or until his or her earlier resignation,
removal from office or death.
Section 3.4 Resignation. Any director may resign at any time
upon written notice to the Corporation. Any such resignation shall take
effect at the time specified therein or, if the time be not specified, upon
receipt thereof, and the acceptance of such resignation, unless required by
the terms thereof, shall not be necessary to make such resignation
effective.
Section 3.5 Meetings. Meetings of the Board of Directors,
regular or special, may be held at any place within or without the State of
Delaware. Members of the Board of Directors, or of any committee
designated by the Board, may participate in a meeting of such Board or
committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting. An annual meeting of the
Board of Directors shall be held after each annual election of directors.
If such election occurs at an annual meeting of stockholders, the annual
meeting of the Board of Directors shall be held at the same place and
immediately following such meeting of stockholders, and no notice thereof
need be given. The Board of Directors may fix times and places for regular
meetings of the Board and no notice of such meetings need be given. A
special meeting of the Board of Directors shall be held whenever called by
the Chairman of the Board, the President or by the written request of at
least two (2) members of the Board of Directors, at such time and place as
shall be specified in the notice or waiver thereof. Notice of each special
meeting shall be given by the Secretary or by a person calling the meeting
to each director in writing, through the mail, not later than the second
day before the meeting, or personally served or by telephone, telecopy,
telegram, cablegram or radiogram, in each such cases, not later than the
day before the meeting, and such notice shall be deemed to be given at the
time when the same shall be transmitted.
Section 3.6 Quorum and Voting. A majority of the full Board of
Directors shall constitute a quorum for the transaction of business, but,
if there be less than a quorum at any meeting of the Board of Directors, a
majority of the directors present may adjourn the meeting from time to
time, and no further notice thereof need be given other than announcement
at the meeting which shall be so adjourned. Except as otherwise provided
by law, by the Certificate of Incorporation, or by these By-Laws
(including, without limitation, where any Supermajority Vote or any other
vote in excess of a majority is required), the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
Section 3.7 Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes
of proceedings of the Board or committee.
Section 3.8 Compensation. Each director of the Corporation
(other than directors who are salaried officers of the Corporation or any
of its subsidiaries) shall be entitled to receive as compensation for
services such reasonable compensation, which may include pension,
disability and death benefits, as may be determined from time to time by
the Board of Directors. Reasonable compensation may also be paid to any
person other than a director officially called to attend any such meeting.
Section 3.9 Contracts and Transactions Involving Directors. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one
or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his, her or their votes are
counted for such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (2) the
material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or
the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or transaction.
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers. The Board of Directors may,
by resolution adopted by a majority of the Board, designate from time to
time (subject to Article V hereof) no less than three (3) and no more than
six (6) of their number to constitute an Executive Committee, and may
delegate to such committee power to authorize the seal of the Corporation
to be affixed to all papers which may require it and to exercise in the
intervals between the meetings of the Board of Directors the powers of the
Board in the management of the business and affairs of the Corporation to
the fullest extent permitted by Section 141(c)(1) of the Delaware General
Corporation Law; provided, however, that the Executive Committee shall not
have the power or authority to take any action for which a Supermajority
Vote or other vote in excess of a majority of the Board of Directors is
required. Each member of the Executive Committee shall continue to be a
member thereof only during the pleasure of a majority of the full Board of
Directors.
The Executive Committee may act by a majority of its members at a
meeting or by a writing signed by all of its members.
All action by the Executive Committee shall be reported to the
Board of Directors at its meeting next succeeding such action.
Non-employee members of such Executive Committee shall be
entitled to receive such fees and compensation as the Board of Directors
may determine.
The Board of Directors may also appoint a Finance Committee, a
Committee on Directors, an Audit Committee, a Public Policy Committee and a
Compensation Committee and may also appoint such other standing or
temporary committees from time to time as they may see fit, delegating to
such committees all or any part of their own powers (subject to the
provisions of these By-Laws); provided, however, that any compensation or
benefits to be paid to an executive officer who is also a director must be
approved by the Board of Directors. The members of such committees shall
be entitled to receive such fees as the Board may determine.
The Board of Directors shall not amend, modify, vary or waive any
of the terms of the Amended and Restated Agreement and Plan of
Reorganization by and among The Cincinnati Gas & Electric Company, PSI
Resources, Inc., PSI Energy, Inc., the Corporation, Cinergy Corp., an Ohio
corporation, and Cinergy Sub, Inc. dated as of December 11, 1992, as
amended and restated as of July 2, 1993 and as of September 10, 1993 and as
further amended as of June 20, 1994, as of July 26, 1994 and as of
September 30, 1994 (the "Merger Agreement") other than by a Supermajority
Vote of the Board of Directors.
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office. The executive
officers of the Corporation, shall consist of a Chairman of the Board, a
Vice-Chairman, a Chief Executive Officer, a President, one or more
Vice-Presidents, a Secretary, a Treasurer and a Comptroller, all of whom
shall be elected by the Board of Directors by a Supermajority Vote, and
shall hold office for one (1) year and until their successors are chosen
and qualified. Any number of such offices may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. Any vacancy occurring in the office of the Chairman,
Chief Executive Officer or President shall be filed by Supermajority Vote
of the Board of Directors. The Chairman, Chief Executive Officer or
President shall be subject to removal without cause only by Supermajority
Vote of the Board of Directors at a special meeting of the Board of
Directors called for that purpose.
The Board of Directors may appoint, and may delegate power to
appoint, such other non-executive officers, agents and employees as it may
deem necessary or proper, who shall hold their offices or positions for
such terms, have such authority and perform such duties as may from time to
time be determined by or pursuant to authorization of the Board of
Directors.
Section 5.2 The Chairman of the Board. The Chairman of the
Board shall be a director and shall preside at all meetings of the Board of
Directors and, in the absence or inability to act of the Chief Executive
Officer, meetings of stockholders and shall, subject to the Board's
direction and control, be the Board's representative and medium of
communication, and shall perform such other duties as may from time-to-time
be assigned to the Chairman of the Board by Supermajority Vote of the Board
of Directors. The Chairman of the Board shall direct the long-term
strategic planning process of the Corporation and shall also lend his or
her expertise to the President, as may be requested from time-to-time by
the President. The Chairman shall be a member of the Executive Committee.
Section 5.3 Vice-Chairman. The Vice-Chairman of the Board shall
be a director and shall preside at meetings of the Board of Directors in
the absence or inability to act of the Chairman of the Board or meetings of
stockholders in the absence or inability to act of the Chief Executive
Officer and the Chairman of the Board. The Vice-Chairman shall perform
such other duties as may from time-to-time be assigned to him or her by
Supermajority Vote of the Board of Directors. The Vice-Chairman shall be a
member of the Executive Committee and the Corporate Governance Committee.
Section 5.4 Chief Executive Officer. The Chief Executive
Officer shall be a director and shall preside at all meetings of the
stockholders, and, in the absence or inability to act of the Chairman of
the Board and the Vice-Chairman, meetings of the Board of Directors, and
shall submit a report of the operations of the Corporation for the fiscal
year to the stockholders at their annual meeting and from time-to-time
shall report to the Board of Directors all matters within his or her
knowledge which the interests of the Corporation may require be brought to
their notice. The Chief Executive Officer shall be the chairman of the
Executive Committee and ex officio a member of all standing committees.
Where the offices of President and Chief Executive Officer are held by
different individuals, the President will report directly to the Chief
Executive Officer.
Section 5.5 The President. The President shall be the chief
operating officer of the Corporation. The President shall have general and
active management and direction of the affairs of the Corporation, shall
have supervision of all departments and of all officers of the Corporation,
shall see that the orders and resolutions of the Board of Directors and of
the Executive Committee are carried into effect, and shall have the general
powers and duties of supervision and management usually vested in the
office of President of a corporation. All corporate officers and functions
except those reporting to the Chairman of the Board or the Chief Executive
Officer shall report directly to the President.
Section 5.6 The Vice-Presidents. The Vice-Presidents shall
perform such duties as the Board of Directors shall, from time to time,
require. In the absence or incapacity of the President, the Vice President
designated by the President or Board of Directors or Executive Committee
shall exercise the powers and duties of the President.
Section 5.7 The Secretary. The Secretary shall attend all
meetings of the Board of Directors, of the Executive Committee and any
other committee of the Board of Directors and of the stockholders and act
as clerk thereof and record all votes and the minutes of all proceedings in
a book to be kept for that purpose, and shall perform like duties for the
standing committees when required.
The Secretary shall keep in safe custody the seal of the
Corporation and, whenever authorized by the Board of Directors or the
Executive Committee, affix the seal to any instrument requiring the same.
The Secretary shall see that proper notice is given of all the
meetings of the stockholders of the Corporation and of the Board of
Directors and shall perform such other duties as may be prescribed from
time to time by the Board of Directors, the Chairman, the Chief Executive
Officer, or the President.
Assistant Secretaries. At the request of the Secretary, or in
his or her absence or inability to act, the Assistant Secretary or, if
there be more than one, the Assistant Secretary designated by the
Secretary, shall perform the duties of the Secretary and when so acting
shall have all the powers of and be subject to all the restrictions of the
Secretary. The Assistant Secretaries shall perform such other duties as
may from time to time be assigned to them by the President, the Secretary,
or the Board of Directors.
Section 5.8 The Treasurer. The Treasurer shall be the financial
officer of the Corporation, shall keep full and accurate accounts of all
collections, receipts and disbursements in books belonging to the
Corporation, shall deposit all moneys and other valuables in the name and
to the credit of the Corporation, in such depositories as may be directed
by the Board of Directors, shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, the Chairman, the Chief Executive
Officer, or the President, taking proper vouchers therefor, and shall
render to the President, the Chief Executive Officer, the Chairman, and/or
directors at all regular meetings of the Board, or whenever they may
require it, and to the annual meeting of the stockholders, an account of
all his or her transactions as Treasurer and of the financial condition of
the Corporation.
The Treasurer shall also perform such other duties as the Board
of Directors, the Chairman, the Chief Executive Officer, or the President
may from time to time require.
If required by the Board of Directors the Treasurer shall give
the Corporation a bond in a form and in a sum with surety satisfactory to
the Board of Directors for the faithful performance of the duties of his or
her office and the restoration to the Corporation in the case of his or her
death, resignation or removal from office of all books, papers, vouchers,
money and other property of whatever kind in his or her possession
belonging to the Corporation.
Assistant Treasurers. At the request of the Treasurer, or in his
or her absence or inability to act, the Assistant Treasurer or, if there be
more than one, the Assistant Treasurer designated by the Treasurer, shall
perform the duties of the Treasurer and when so acting shall have all the
powers of and be subject to all the restrictions of the Treasurer. The
Assistant Treasurers shall perform such other duties as may from time to
time be assigned to them by the President, the Treasurer, or the Board of
Directors.
Section 5.9 The Comptroller. The Comptroller shall have control
over all accounts and records of the Corporation pertaining to moneys,
properties, materials and supplies. He or she shall have executive
direction over the bookkeeping and accounting departments and shall have
general supervision over the records in all other departments pertaining to
moneys, properties, materials and supplies. He or she shall have such
other powers and duties as are incident to the office of Comptroller of a
corporation and shall be subject at all times to the direction and control
of the Board of Directors, the Chairman, the Chief Executive Officer, the
President, or a Vice President.
Assistant Comptrollers. At the request of the Comptroller, or in his
or her absence or inability to act, the Assistant Comptroller or, if there
be more than one, the Assistant Comptroller designated by the Comptroller,
shall perform the duties of the Comptroller and when so acting shall have
all the powers of and be subject to all the restrictions of the
Comptroller. The Assistant Comptrollers shall perform such other duties as
may from time to time be assigned to them by the President, the
Comptroller, or the Board of Directors.
Section 5.10 Compensation and Bond. The compensation of the
officers of the Corporation shall be fixed by the Compensation Committee of
the Board of Directors, but this power may be delegated to any officer in
respect of other officers under his or her control. The Corporation may
secure the fidelity of any or all of its officers, agents or employees by
bond or otherwise.
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees
and Agents.
(A) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than any
action or suit by or in the right of the Corporation) by reason of the fact
that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (specifically including employee
benefit plans), shall be indemnified by the Corporation, if, as and to the
extent authorized by applicable law, against expenses (specifically
including attorney's fees), judgments, fines (specifically including any
excise taxes assessed on a person with respect to an employee benefit plan)
and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the defense or settlement of such action, suit or
proceeding, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner he or she reasonably believed to be
in and not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful.
(B) The Corporation shall, to the extent not prohibited by
applicable law, indemnify or agree to indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending, or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Corporation or is or was
serving at the request of the Corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign, non-profit
or for-profit, partnership, joint venture, trust or other enterprise
(specifically including employee benefit plans), against expenses
(including attorneys' fees) actually and reasonably incurred by him or her
in connection with the defense or settlement of such action or suit if he
or she acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the Corporation; provided that, no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(C) To the extent that a director, officer, employee, or agent of
the Corporation has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in the paragraphs (A) or (B)
of this Section, or in defense of any claim, issue, or matter therein, he
or she shall be indemnified against expenses, specifically including
attorneys' fees, actually and reasonably incurred by him or her in
connection therewith.
(D) Any indemnification under Paragraphs (A) and (B) of this
Section, unless ordered by a court, shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, trustee, officer, employee, or agent is
proper in the circumstances because he or she has met the applicable
standard of conduct set forth in such Paragraphs (A) and (B). Such
determination shall be made as follows: (1) the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit, or proceeding; (2) if the quorum described in (D)(1) of
this Section is not obtainable or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion; or (3) by the stockholders.
Section 6.2 Advances for Litigation Expenses. Expenses
(including attorneys' fees) incurred by a director, officer, employee, or
agent of the Corporation in defending any civil, criminal, administrative
or investigative action, suit or proceeding, shall be paid by the
Corporation as they are incurred in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director, officer, employee, or agent: (1) to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VI; and (2) to
cooperate reasonably with the Corporation concerning the action, suit or
proceeding.
Section 6.3 Indemnification Nonexclusive. The indemnification
provided by this Article shall not be exclusive of and shall be in addition
to any other rights granted to those seeking indemnification under the
Certificate of Incorporation, these By-Laws, any agreement, any vote of
stockholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has ceased to be
a director, trustee, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
Section 6.4 Indemnity Insurance. The Corporation may purchase
and maintain insurance or furnish similar protection, including but not
limited to trust funds, letters of credit, or self-insurance, on behalf of
or for any person who is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the request of the Corporation as
a director, trustee, officer, employee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture,
trust, or other enterprise, against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his
or her status as such, whether or not the Corporation would have the power
to indemnify him or her against such liability under this Article.
Insurance may be purchased from or maintained with a person in which the
Corporation has a financial interest.
Section 6.5 Definitions. For purposes of this Article: (1) a
person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall conclusively be deemed to have acted in a
manner "not opposed to the best interests of the Corporation"; (2) a person
shall be deemed to have acted in "good faith" and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care by the Corporation or another
enterprise; (3) the term "another enterprise" as used in this Article VI
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer, employee
or agent; and (4) references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, which, if its separate existence had continued, would have had
power and authority to indemnify its directors, officers, employees, and
agents.
ARTICLE VII
Common Stock
Section 7.1 Certificates. Certificates for stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors and shall be signed in the name of the Corporation by the
Chairman or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary. Such
certificates may be sealed with the seal of the Corporation or a facsimile
thereof. Any of or all the signatures on a certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he
or she were such officer, transfer agent or registrar at the date of issue.
Section 7.2 Transfers of Stock. Transfers of stock shall be
made only upon the books of the Corporation by the holder, in person or by
duly authorized attorney, and on the surrender of the certificate or
certificates for such stock properly endorsed. The Board of Directors
shall have the power to make all such rules and regulations, not
inconsistent with the Certificate of Incorporation and these By-Laws and
the law, as the Board of Directors may deem appropriate concerning the
issue, transfer and registration of certificates for stock of the
Corporation. The Board of Directors or the Finance Committee may appoint
one (1) or more transfer agents or registrars of transfers, or both, and
may require all stock certificates to bear the signature of either or both.
Section 7.3 Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new stock certificate in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate or his or her legal representative to give the
Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of any such new certificate. The Board of
Directors may require such owner to satisfy other reasonable requirements.
Section 7.4 Stockholder Record Date. In order that the
Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which
shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than sixty days prior to any other action. Only such
stockholders as shall be stockholders of record on the date so fixed shall
be entitled to notice of, and to vote at, such meeting and any adjournment
thereof, or to give such consent, or to receive payment of such dividend or
other distribution, or to exercise such rights in respect of any such
change, conversion or exchange of stock, or to participate in such action,
as the case may be, notwithstanding any transfer of any stock on the books
of the Corporation after any record date so fixed.
If no record date is fixed by the Board of Directors, (l) the
record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day
next preceding the date on which notice is given, or, if notice is waived
by all stockholders entitled to vote at the meeting, at the close of
business on the day next preceding the day on which the meeting is held and
(2) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 7.5 Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to
or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VIII
Seal
Section 8.1 Seal. The seal of the Corporation shall be circular
in form and shall bear, in addition to any other emblem or device approved
by the Board of Directors, the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice. Whenever notice is required to be given
by statute, or under any provision of the Certificate of Incorporation or
these By-Laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. In the case of a stockholder, such waiver of notice
may be signed by such stockholder's attorney or proxy duly appointed in
writing. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of,
any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year. The Fiscal Year of the Corporation
shall begin on the first day of January and terminate on the thirty-first
day of December each year.
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc. The Board of Directors or
the Finance Committee may by resolution adopted at any meeting designate
officers of the Corporation who may in the name of the Corporation execute
contracts, checks, drafts, and orders for the payment of money in its
behalf and, in the discretion of the Board of Directors or the Finance
Committee, such officers may be so authorized to sign such contracts or
checks singly without the necessity of counter-signature.
ARTICLE XII
Amendments
Section 12.1 Amendments. Except as set forth below, these
By-Laws may be amended or repealed by the Board of Directors or by the
affirmative vote of the holders of a majority of the issued and outstanding
common stock of the Corporation, or by the unanimous written consent of the
holders of the issued and outstanding common stock of the Corporation.
Notwithstanding the foregoing paragraph, the affirmative vote of
the holders of at least 80% of the issued and outstanding shares of common
stock of the Corporation shall be required to amend, alter or repeal, or
adopt any provision inconsistent with, the requirements of Section 2.2,
Section 3.1, Section 3.2, Section 3.3 or this paragraph of Section 12.1 of
these By-Laws, in addition to any requirements of law and any provisions of
the Certificate of Incorporation, any By-law, or any resolution of the
Board of Directors adopted pursuant to the Certificate of Incorporation
(and notwithstanding that a lesser percentage may be specified by law, the
Certificate of Incorporation, these By-Laws, such resolution, or
otherwise).
Notwithstanding any of the foregoing, the affirmative vote of a
majority of the holders of the issued and outstanding common stock of the
Corporation shall be required to amend, alter or repeal, or adopt any
provision inconsistent with (i) any provision of these By-Laws requiring a
Supermajority Vote of the Board of Directors (including this provision of
Section 12.1) or (ii) the responsibilities of the Chief Executive Officer
or President as set forth in Section 5.4 or Section 5.5, and the Board of
Directors shall not recommend any such amendment to such provisions to the
stockholders unless the proposed amendment is approved by the Board of
Directors acting by Supermajority Vote.
ARTICLE XIII
Dividends
Section 13.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for any proper purpose, and the Board of Directors may modify or abolish
any such reserve.
Exhibit B-2
DRAFT
January 14, 1999
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
March 15, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Cinergy Corp. to be held on Wednesday, April 21, 1999, at 11:00 a.m.,
eastern daylight saving time, in the Hall of Mirrors of the Omni Netherland
Plaza Hotel, 35 West Fifth Street, Cincinnati, Ohio. At the meeting, the
shareholders will be asked to vote for the election of six Class II
directors, approval of the Amended and Restated Retirement Plan for
Directors, approval of the new Directors' Equity Compensation Plan and the
adoption of an amendment to ARTICLE III, Section 3.1 of the Company's
By-Laws, and to consider any other business that may legally come before
the meeting.
It is important to your interests that all shareholders, regardless of
the number of shares owned, participate in the affairs of the Company.
Last year, over 85% of the Company's shares were represented in person or
by proxy at the annual meeting.
Even if you plan to attend this year's meeting, we urge you to take
prompt action to assure that your shares will be voted. You may wish to
vote your shares by using the toll-free telephone number as described in
the enclosed telephone voting instructions. Or, you can mark, date and
sign the proxy form and return it using the enclosed envelope, on which no
postage stamp is necessary if mailed in the United States. Either way,
your response is greatly appreciated.
Thank you for your continued interest in Cinergy.
Sincerely yours,
Jackson H. Randolph James E. Rogers
Chairman of the Board Vice Chairman, President and
Chief Executive Officer
P. S. If you plan to attend the 1999 Annual Meeting, please let us know by
checking the box on the form of proxy.
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 1999
To the Shareholders of
Cinergy Corp.:
Notice is Hereby Given that the Annual Meeting of Shareholders of
Cinergy
Corp. will be held in the HALL OF MIRRORS of the OMNI NETHERLAND PLAZA
HOTEL, 35 West Fifth Street, Cincinnati, Ohio, on Wednesday, April 21, 1999
at 11:00 a.m., eastern daylight saving time, for purposes of:
(1) electing six Class II directors to serve for three-year terms
expiring in 2002;
(2) approving the Amended and Restated Cinergy Corp. Retirement Plan
for Directors, as described at pages ___-___ in the Proxy Statement and set
forth in Appendix A;
(3) approving the Cinergy Corp. Directors' Equity Compensation Plan,
as described at pages ___-___ in the Proxy Statement and set forth in
Appendix B;
(4) adopting an amendment to ARTICLE III, Section 3.1, of the Cinergy
Corp. By-Laws, as described at page ___ in the Proxy Statement;
(5) acting upon, if presented at the meeting, a shareholder proposal
which the Board of Directors OPPOSES, as described at pages ____-____ in
the Proxy Statement; and transacting such other business as may legally
come before the meeting, or any adjournment or postponement thereof.
Only shareholders of record at the close of business on Monday,
February 22, 1999, will be entitled to vote at the meeting, or any
adjournment or postponement thereof. It is important that your shares be
represented at this meeting in order that the presence of a quorum may be
assured. Whether or not you now expect to be present at the meeting, you
are requested to vote by toll-free telephone as described in the enclosed
telephone voting instructions, or to mark, date and sign the enclosed proxy
and return it promptly. A shareholder giving a proxy by either means has
the power to revoke it at any time before the authority granted by the
proxy is exercised.
By Order of the Board of Directors,
Cheryl M. Foley
Vice President, General Counsel
and Secretary
Dated: March 15, 1999<PAGE>
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
PROXY STATEMENT
Introduction
Cinergy Corp., a Delaware corporation (the "Company"), is a registered
holding company under the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act"), and the parent company of The Cincinnati Gas &
Electric Company ("CG&E"), PSI Energy, Inc. ("PSI"), Cinergy Services, Inc.
("Services"), Cinergy Global Resources, Inc. ("Global Resources") and
Cinergy Investments, Inc. ("Investments"). CG&E is an operating utility
primarily engaged in providing electric and gas service in the southwestern
portion of Ohio and, through its principal subsidiary, The Union Light,
Heat and Power Company ("ULH&P"), in adjacent areas in Kentucky. PSI is an
operating utility primarily engaged in providing electric service in north
central, central and southern Indiana. Services provides management,
financial, administrative, engineering, legal and other services to the
Company and its subsidiaries. The Company conducts its international
businesses through Global Resources and its subsidiaries, and its
non-regulated businesses through Investments and its subsidiaries.
Solicitation
This Proxy Statement and the enclosed form of proxy are first being
mailed on or about March 15, 1999, to holders of the common stock of the
Company in connection with the solicitation of proxies by the Board of
Directors (the "Board") of the Company for use at the Annual Meeting of
Shareholders to be held on April 21, 1999, or any adjournment or
postponement of such meeting (the "Annual Meeting"). Included as Appendix
C to this Proxy Statement are the Company's consolidated financial
statements and accompanying notes for the calendar year ended December 31,
1998, and other information relating to the Company's financial results and
position. The Company's Summary Annual Report to Shareholders also
accompanies the mailing of this proxy solicitation material.
The Board recommends voting: (i) FOR the election of all nominees as
directors; (ii) FOR the Amended and Restated Cinergy Corp. Retirement Plan
for Directors; (iii) FOR the Cinergy Corp. Directors' Equity Compensation
Plan; (iv) FOR the amendment to ARTICLE III, Section 3.1, of the Company's
By-Laws; and (v) AGAINST the shareholder proposal. Shares of the Company's
common stock represented by properly voted proxies received by telephone or
mail at or prior to the Annual Meeting will be voted in accordance with the
instructions indicated. If no instructions are indicated, the proxies will
be voted in accordance with the recommendation of the Board. It is not
anticipated that any other matters will be brought before the Annual
Meeting. However, a shareholder giving a proxy grants discretionary
authority to the named proxy holders should any other matters be presented
at the Annual Meeting, and it is the intention of the proxy holders to act
on any other matters in accordance with their best judgment.
A shareholder giving a proxy may revoke it at any time before it is
voted by delivering to the Secretary of the Company written notice of
revocation bearing a later date than the proxy, by delivering a duly
executed proxy bearing a later date, by using the telephone voting
procedures, or by attending the Annual Meeting and voting in person.
The Company will bear the cost of the solicitation of proxies by the
Board. The Company has engaged Corporate Investor Communications, Inc. to
assist in the solicitation of proxies for a fee estimated to be $8,500 plus
reimbursement of reasonable out-of-pocket expenses. In addition to the
solicitation of proxies by mail, officers and employees of the Company may
solicit proxies personally or by telephone; such persons will receive no
additional compensation for these services.
The Company has requested that brokerage houses and other custodians,
nominees and fiduciaries forward solicitation materials to the beneficial
owners of shares of the Company's common stock held of record by such
persons, and will reimburse the brokers and other fiduciaries for their
reasonable out-of-pocket expenses for forwarding the materials.
The solicitation of proxies has been approved by the Securities and
Exchange Commission (the "SEC") under the 1935 Act. An application has
been filed with the SEC requesting approval of the items set forth in this
Proxy Statement as Item 2 and Item 3.
Voting Procedures and Rights
Only holders of record of the Company's common stock at the close of
business on February 22, 1999 (the "Record Date") will be entitled to vote
at the Annual Meeting. A majority of such holders, present in person or
represented by proxy, constitutes a quorum. The number of shares of the
Company's common stock outstanding as of the Record Date was
[?157,764,020?]. Each share of common stock entitles its owner to one vote
upon each matter to come before the meeting.
The vote required for the election of directors, adoption of the
Amended and Restated Cinergy Corp. Retirement Plan for Directors, adoption
of the Cinergy Corp. Directors' Equity Compensation Plan, and adoption of
the amendment to ARTICLE III, Section 3.1, of the Company's By-Laws is set
forth within the respective discussion of each such item.
Any other matter to be presented at the Annual Meeting (including the
shareholder proposal) will be determined by the affirmative vote of the
majority of the shares present in person or represented by proxy at the
meeting and entitled to vote on the proposal. In tabulating the vote on
any other matter, abstentions will have the same effect as votes cast
against the matter; broker non-votes will be deemed absent shares and have
no effect on the outcome of the vote.
Votes at the Annual Meeting will be tabulated preliminarily by the
Company acting as its own transfer agent. Inspectors of election, duly
appointed by the presiding officer of the Annual Meeting, will definitively
count and tabulate the votes and determine and announce the results at the
meeting.
ITEM 1. ELECTION OF DIRECTORS
In accordance with the provisions of the By-Laws of the Company, the
Board is divided into three classes (i.e., Class I, Class II and Class
III), with one class of directors ordinarily being elected at each annual
meeting of shareholders for a three-year term. Melvin Perelman, Thomas E.
Petry, Jackson H. Randolph, Mary L. Schapiro, Philip R. Sharp and Dudley S.
Taft have been nominated by the Board for election as Class II directors at
the Annual Meeting for terms of three years each and until their respective
successors are duly elected and qualified. The Company would like to
acknowledge Mr. Van P. Smith, who is retiring after 18 years of combined
service as a member of the boards of directors of the Company and PSI. His
support, valued counsel and many contributions during his years of devoted
and distinguished service to the Company and PSI are immeasurable and
sincerely appreciated.
In accordance with the General Corporation Law of the State of
Delaware and the Company's By-Laws, directors will be elected at the Annual
Meeting by a plurality of the votes. Duly executed and returned proxies
representing shares held on the Record Date will be voted, unless otherwise
specified, in favor of the nominees for the Board. Each nominee and
continuing director is a member of the Company's present Board. All
nominees have consented to serve if elected, but if any becomes unavailable
to serve, the persons named as proxies may exercise their discretion to
vote for a substitute nominee.
Except as otherwise noted, the principal occupation or employment of
each individual set forth below has been such individual's principal
occupation or employment for at least the past five years. All nominees
and continuing directors, other than Messrs. Randolph and Rogers and Ms.
Foley, are otherwise unaffiliated with the Company and its subsidiaries.
The Board Recommends Voting FOR ALL Nominees, Designated in the Proxy as
Item 1.
Class II Director Nominees for Terms to Expire in 2002
Melvin Perelman, Ph.D.
Director of the Company since 1994;
Member of the Corporate Governance Committee and
of the Finance Committee.
Director of PSI from 1980 to 1995. Age 68.
Dr. Perelman is retired as Executive Vice President of Eli Lilly and
Company, which is engaged in the manufacturing of pharmaceuticals. Prior
to his retirement, he also served as a member of the board of directors of
Eli Lilly, and as President of Lilly Research Laboratories. Dr. Perelman
is a director of The Immune Response Corporation and Inhale Therapeutic
Systems, Inc.
______________________________________________________________________
Thomas E. Petry
Director of the Company since 1994;
Member of the Audit Committee and
of the Executive Committee.
Director of CG&E from 1986 to 1995. Age 59.
Mr. Petry served as Chairman of the Board and Chief Executive Officer of
Eagle-Picher Industries, Inc., a diversified manufacturer of industrial and
automotive products, from December 1994 until his retirement in February
1998. He was Chairman of the Board, President and Chief Executive Officer
of Eagle-Picher from April 1992 until December 1994; he previously served
as Chairman of the Board and Chief Executive Officer. Mr. Petry is a
director of Eagle-Picher Industries, Inc., Firstar Corporation, and The
Union Central Life Insurance Company.
______________________________________________________________________
Jackson H. Randolph
Director of the Company since 1993;
Member of the Executive Committee.
Director of CG&E since 1983 and of PSI since 1994. Age 68.
Mr. Randolph has served as Chairman of the Board of the Company,
Investments, Services, CG&E, PSI and ULH&P since December 1995. He served
as Chairman of the Board and Chief Executive Officer of the Company,
Investments, Services, CG&E and PSI from October 1994, and of ULH&P from
January 1995, through November 1995. Mr. Randolph was Chairman of the
Board, President and Chief Executive Officer of CG&E from May 1993 until
October 1994, and of ULH&P from June 1993 until January 1995; he previously
served as President and Chief Executive Officer of CG&E and ULH&P. Mr.
Randolph is a director of Cincinnati Financial Corporation and PNC Bank
Corp.
______________________________________________________________________
Mary L. Schapiro
Director of the Company since 1999;
Member of the Audit Committee and of the Finance Committee. Age 43
Ms. Schapiro has served as the President and as a member of the board of
NASD Regulation, Inc. in Washington, D.C. since 1996. NASD Regulation is
the independent regulatory subsidiary of the National Association of
Securities Dealers, Inc., and is responsible for regulating all member
brokerage firms and individual registered representatives and oversight for
The Nasdaq Stock Market. Ms. Schapiro served as Chair of the Commodity
Futures Trading Commission from 1994 to 1996. From 1988 until 1994, she
served as a Commissioner of the Securities and Exchange Commission. Ms.
Schapiro is also a member of the Board of Governors of the National
Association of Securities Dealers, Inc.
______________________________________________________________________
Philip R. Sharp, Ph.D.
Director of the Company since 1995;
Member of the Audit Committee. Age 56.
Dr. Sharp is a Lecturer in Public Policy at the John F. Kennedy School of
Government at Harvard University in Cambridge, Massachusetts. He also
serves as a member of the Secretary of Energy's Advisory Board and as
Chairman of the Secretary's Electric System Reliability Task Force. Dr.
Sharp is also Vice Chairman of the Energy Board of The Keystone Center, a
not-for-profit public policy, scientific and educational organization with
locations in Keystone, Colorado, and Washington, D.C. He previously served
as a member of the U. S. House of Representatives from 1975 until January
1995, representing the second Congressional district of the State of
Indiana. Dr. Sharp was a ranking member of the House Energy and Commerce
Committee, where he chaired the Energy and Power Subcommittee and served on
the Transportation and Hazardous Materials Subcommittee, and of the House
Natural Resources Committee, where he served on the Energy and Mineral
Resources and the Oversight and Investigations Subcommittees.
______________________________________________________________________
Dudley S. Taft
Director of the Company since 1994;
Chairman of the Corporate Governance Committee.
Director of CG&E from 1985 to 1995. Age 58.
Mr. Taft is President and Chief Executive Officer of Taft Broadcasting
Company, which holds investments in media-related activities. He is a
director of Fifth Third Bancorp, The Fifth Third Bank, Tribune Company,
The Union Central Life Insurance Company and U.S. Playing Card Company.
______________________________________________________________________
Class III Directors Whose Terms Expire in 2000
Michael G. Browning
Director of the Company since 1994;
Member of the Compensation Committee and
of the Corporate Governance Committee.
Director of PSI since 1990. Age 52.
Mr. Browning is Chairman and President of Browning Investments, Inc.,
which is engaged in real estate ventures. He also served as President
of Browning Real Estate, Inc., the general partner of various real estate
investment partnerships, through December 30, 1994.
______________________________________________________________________
Phillip R. Cox
Director of the Company since 1994;
Member of the Corporate Governance Committee and
of the Public Policy Committee.
Director of CG&E from 1994 to 1995. Age 52.
Mr. Cox is President and Chief Executive Officer of Cox Financial
Corporation, a provider of financial and estate planning services. He
is a director of Cincinnati Bell Inc., the Cincinnati office of the Federal
Reserve Bank of Cleveland, PNC Bank, Ohio, N.A., and Touchstone Mutual
Funds.
______________________________________________________________________
Kenneth M. Duberstein
Director of the Company since 1994;
Member of the Public Policy Committee.
Director of PSI from 1990 to 1995. Age 54.
Mr. Duberstein is Chairman and Chief Executive Officer of The Duberstein
Group, Inc., a provider of strategic planning and consulting services. He
is a director of The Boeing Company, Federal National Mortgage Association,
Global Vacation Group, Inc. and St. Paul Companies, and is also a member of
the Board of Governors of the American Stock Exchange and the National
Association of Securities Dealers, Inc.
______________________________________________________________________
James E. Rogers
Director of the Company since 1993;
Chairman of the Executive Committee and
Member of the Corporate Governance Committee.
Director of PSI since 1988 and of CG&E since 1994. Age 51.
Mr. Rogers has served as Vice Chairman, President and Chief Executive
Officer of the Company and Services, and as Vice Chairman and Chief
Executive Officer of CG&E, PSI, Investments and ULH&P, since December 1995.
He also has served as Chief Executive Officer and Director of Global
Resources since May 1998. Mr. Rogers served as Vice Chairman, President
and Chief Operating Officer of the Company and Services, and as Vice
Chairman and Chief Operating Officer of CG&E, PSI and Investments, from
October 1994 through November 1995. He also served as Vice Chairman and
Chief Operating Officer of ULH&P from January 1995 through November 1995.
Mr. Rogers served as Chairman, President and Chief Executive Officer of PSI
from August 1990 until October 1994; he previously served as Chairman and
Chief Executive Officer. He also served as Chairman and Chief Executive
Officer of PSI Resources, Inc., the former parent company of PSI, from
October 1993 until October 1994; he previously served as Chairman,
President and Chief Executive Officer. Mr. Rogers is a director of Duke
Realty Investments, Inc., Fifth Third Bancorp and The Fifth Third Bank.
______________________________________________________________________
John J. Schiff, Jr.
Director of the Company since 1994;
Member of the Compensation Committee.
Director of CG&E from 1986 to 1995. Age 55.
Mr. Schiff is Chairman of the Board of Cincinnati Financial Corporation, an
insurance holding company, and of The Cincinnati Insurance Company. He
also served as Chairman and Chief Executive Officer of John J. & Thomas R.
Schiff & Co., Inc., an insurance agency, through December 1996. Mr. Schiff
is a director of Fifth Third Bancorp, The Fifth Third Bank and The Standard
Register Company.
______________________________________________________________________
Oliver W. Waddell
Director of the Company since 1994;
Chairman of the Finance Committee.
Director of CG&E from 1989 to 1995. Age 68.
Mr. Waddell is the retired Chairman of the Board of Star Banc Corporation
(predecessor entity to Firstar Corporation, a bank holding company). Prior
to his retirement, he held various executive officer positions during his
career with Star, including Chairman, President and Chief Executive Officer
of the holding corporation and its lead bank, Star Bank, N.A. Mr. Waddell
is a director of Chiquita Brands International, Inc. and Firstar
Corporation.
______________________________________________________________________
Class I Directors Whose Terms Expire in 2001
Neil A. Armstrong
Director of the Company since 1994;
Member of the Audit Committee and
of the Executive Committee.
Director of CG&E from 1973 to 1995. Age 68.
Mr. Armstrong is Chairman of the Board of AIL Systems Inc., which is
engaged in the manufacturing of electronic devices and systems. He is a
director of Milacron Inc., RMI Titanium Co., Thiokol Corp. and USX Corp.
______________________________________________________________________
James K. Baker
Director of the Company since 1994;
Chairman of the Audit Committee and
Member of the Executive Committee.
Director of PSI since 1986. Age 67.
Mr. Baker served as Vice Chairman of Arvin Industries, Inc., a worldwide
supplier of automotive parts, from February 1996 until his retirement in
April 1998. He served as Chairman of the Board of Arvin Industries from
November 1986 through January 1996 and as Chief Executive Officer from 1981
until June 1993. Mr. Baker is a director of Amcast Industrial Corp., Geon
Company and Tokheim Corporation.
______________________________________________________________________
Cheryl M. Foley
Director of the Company since 1998. Age 51.
Ms. Foley has served as Vice President and General Counsel of the Company
and Services since October 1994, of PSI since April 1991, and of each of
Investments, CG&E and ULH&P since January 1995. She holds the additional
office of Secretary at the Company and PSI, and previously held this
additional office at CG&E (until April 1998) and Investments, Services and
ULH&P (at each until May 1998). She also served as Vice President, General
Counsel and Secretary of PSI Resources, Inc., the former parent company of
PSI, from April 1991 until October 1994. Ms. Foley also serves as a
director and as the President of Global Resources (since May 1998), having
overall responsibility for the Company's international business operations,
and is also a director of Investments, Services and ULH&P.
________________________________________________________________________
John A. Hillenbrand II
Director of the Company since 1994;
Chairman of the Public Policy Committee and
Member of the Finance Committee.
Director of PSI since 1985. Age 67.
Mr. Hillenbrand principally serves as Chairman, President and Chief
Executive Officer of Glynnadam, Inc., a personal investment holding
company. He is also Chairman of Able Body Corporation and Nambe' Mills,
Inc., and Vice Chairman of Pri-Pak, Inc. Mr. Hillenbrand is a director of
Hillenbrand Industries, Inc. and National City Bank, Indiana.
________________________________________________________________________
George C. Juilfs
Director of the Company since 1994;
Member of the Compensation Committee and
of the Public Policy Committee.
Director of CG&E from 1980 to 1995. Age 59.
Mr. Juilfs is President and Chief Executive Officer of SENCORP, an
international holding company with subsidiaries that manufacture fastening
systems, finance and lease capital equipment, and commercialize health-care
technologies. He is a director, serving as chairman of the board, of the
Cincinnati office of the Federal Reserve Bank of Cleveland.
_____________________________________________________________________
Meetings and Committees of the Board
During the calendar year ended December 31, 1998, the Board held six
meetings. All directors attended more than 75% of the aggregate number of
Board meetings and meetings of committees on which they serve, with the
exception of Mr. Schiff who attended 70%. In accordance with the
provisions of the By-Laws of the Company, the Board has six standing
committees which facilitate the carrying out of its responsibilities.
The Audit Committee, which met three times during 1998, recommends to
the Board a firm of independent certified public accountants to conduct
audits of the accounts and affairs of the Company and its subsidiaries;
reviews with the independent certified public accountants the scope and
results of audits, as well as the accounting procedures, internal controls,
and accounting and financial reporting policies and practices of the
Company and its subsidiaries; and makes such reports and recommendations to
the Board as it deems appropriate.
The Compensation Committee met four times during 1998. The nature and
scope of the Compensation Committee's responsibilities are described in the
"Board Compensation Committee Report on Executive Compensation" (see page
___).
The Corporate Governance Committee, which met twice during 1998,
recommends to the Board the slate of nominees of directors to be elected by
the shareholders, and presents to the Board, whenever vacancies occur,
names of individuals who would make suitable directors of the Company and
consults with appropriate officers of the Company on matters relating to
the organization of the Board and its committees. The Committee has no
established procedures for consideration of nominees recommended by
shareholders.
Other standing committees of the Board include the Executive
Committee, the Finance Committee and the Public Policy Committee.
Compensation of Directors
Directors who are not employees (the "non-employee directors") 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 for their additional
responsibilities and time commitments, non-employee directors serving as
chairpersons of the committees of the Board receive an additional annual
retainer of $3,000. Directors who are also employees of the Company
receive no remuneration for their services as directors.
Under the Company's Directors' Deferred Compensation Plan, each
non-employee director of the Company or any of its subsidiaries may defer
fees and have them accrued either in cash or in units representing shares
of the Company's common stock. If deferred in units, dividends are
credited to the individual director's plan account and thereby acquire
additional units, at the same time and rate as dividends are paid to
holders of the Company's common stock. The deferred units are distributed
to the director as shares of the Company's common stock at the time of
retirement from the appropriate board. Amounts deferred in cash earn
interest at the rate per annum, adjusted quarterly, equivalent to the
interest rate for a one-year certificate of deposit as quoted in The Wall
Street Journal for the first business day of the calendar quarter, and are
paid to the director at the time of retirement from the appropriate board.
Under the Company's Stock Option Plan, each non-employee director is
granted a non-qualified stock option to purchase 12,500 shares of the
Company's common stock when he or she first is elected to the Board. The
price per share at which options are granted must be no less than 100% of
the fair market value of the Company's common stock on the New York Stock
Exchange ("NYSE") on the date of the grant. Options vest at the rate of
20% per year over a five-year period from the date of grant and may be
exercised over a ten-year term.
The Company has maintained a Retirement Plan for Directors (the
"Retirement Plan") under which non-employee directors of the Company,
Services, PSI and CG&E have accrued retirement benefits based upon their
years of service. In December 1998, the Board amended and restated the
Retirement Plan to eliminate future benefit accruals and adopted a new
Cinergy Corp. Directors' Equity Compensation Plan under which future
retirement benefits for non-employee directors are expected to be
equity-based. Each of these plans is subject to shareholder approval at
the Annual Meeting. Please refer to pages ____ - ____ and Appendix A of
this Proxy Statement for a description and the text of the amended and
restated Retirement Plan, and to pages ____ - ____ and Appendix B for a
description and the text of the new Directors' Equity Compensation Plan.
Security Ownership of Certain Beneficial Owners and Management
The only persons or groups known to the Company to be the beneficial
owners of more than 5% of the Company's common stock, the only voting
security, as of December 31, 1998, are set forth in the following table.
This information is based on the most recently available reports filed with
the SEC pursuant to the requirements of Sections 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
transmitted to the Company by the persons or groups named.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
Scudder Kemper 9,593,572 shares/1/ 6.1%
Investments, Inc.
345 Park Avenue
New York, NY 10154
U. S. Trust Company 9,152,892 shares/2/ 5.8%
of California, N.A.
515 South Flower Street
Los Angeles, CA 90071
The beneficial ownership of the Company's common stock held by each
nominee, continuing director and named executive officer (as defined on
page ___), and of units representing shares of the Company's common stock
paid as compensation to non-employee directors, as of December 31, 1998, is
set forth in the following table.
Amount and Nature
Name of Beneficial Owner/3/ Of Beneficial Ownership/4/ Units/5/
Neil A. Armstrong 10,750 shares
James K. Baker 23,605 shares 5,900
Michael G. Browning 28,835 shares 9,495
Phillip R. Cox 10,238 shares
Kenneth M. Duberstein 22,991 shares
Cheryl M. Foley 81,306 shares
William J. Grealis 109,649 shares
John A. Hillenbrand II 33,472 shares 9,541
George C. Juilfs 13,750 shares
John M. Mutz 113,145 shares
Melvin Perelman 23,423 shares 8,918
Thomas E. Petry 12,000 shares
Jackson H. Randolph 209,609 shares
James E. Rogers 398,526 shares
Mary L. Schapiro 0 shares
John J. Schiff, Jr. 51,059 shares/6/
Philip R. Sharp 6,000 shares
Dudley S. Taft 13,000 shares
Larry E. Thomas 131,397 shares
Oliver W. Waddell 15,253 shares
All directors and executive 1,650,504 shares
officers as a group
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board (the "Committee"): (i)
establishes the Company's compensation policy; (ii) recommends, oversees
and administers compensation plans for all executive officers and key
employees; (iii) determines compensation for the chief executive officer;
and (iv) reviews and approves compensation for the Company's remaining
executive officers. During 1998, the Committee was composed of Messrs. Van
P. Smith (Chairman), Michael G. Browning, George C. Juilfs, and John J.
Schiff, Jr., each of whom was an independent, "non-employee director" of
the Company, within the meaning of Rule 16b-3 under the 1934 Act, and an
"outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
Compensation Policy
The Company's executive compensation program is designed to attract,
retain and motivate the high quality employees needed to provide superior
service to its customers and to maximize returns to its shareholders. The
Company's compensation for executive officers consists of base salary,
annual cash incentives, and long-term incentives.
Base salaries for the executive group are targeted at the median of
comparably sized utility companies based on kilowatt-hours ("kwh") sold.
Because of the Company's low-cost position, kwh sales are considered to be
a better measure than revenues for constructing a comparative group. Base
salary levels are reviewed annually, and any increases are based on such
factors as the Company's financial results and each individual's
performance, role and skills.
The Company's executive compensation program also seeks to link
executive and shareholder interests through cash-based and equity-based
incentive plans, in order to reward corporate and individual performance
and balance short-term and long-term considerations. Annual and long-term
incentive plans are structured to provide opportunities that are
competitive with general industry companies.
This emphasis on incentive compensation results in a compensation mix
for the chief executive officer and the remaining executive officers
consisting of annual and long-term incentives accounting for at least 50%
of the employee's annual compensation. It is the Committee's view that
short-term and long-term incentive opportunities that distinguish between
short-term and long-term corporate goals can assist in appropriately
incentivizing the type of behavior crucial to managing successfully in an
increasingly competitive environment.
Consistent with its belief that a well-planned and well-implemented
executive incentive compensation program, with meaningful and measurable
performance targets and competitive award opportunities, sends a strong,
positive message to the financial markets, the Committee has implemented an
executive long-term incentive compensation program (the "LTIP") within the
parameters of the Company's 1996 Long-Term Incentive Compensation Plan (the
"Umbrella Plan "). The LTIP combines the interests of the Company's
shareholders, customers, and management to enhance the Company's value.
(Specifics of the program are discussed below under the heading "Long-Term
Incentive Compensation and Stock Options.")
The Committee also has two non-qualified deferred compensation plans
for executive officers of the Company, as follows: (i) the Deferred
Incentive Compensation Plan allows deferral of receipt of all or a portion
of cash awards otherwise payable under the Company's Annual Incentive Plan;
and (ii) the Excess 401(k) Plan allows deferral of receipt of a portion of
base salaries that otherwise could not be deferred under the Company's
qualified 401(k) plan, due to federal government limitations on the amount
of compensation that can be deferred into qualified plans.
Annual Incentive Compensation
Approximately 425 employees, consisting of executive officers and
certain others (i.e., managers, general managers or equivalent-level
positions), are eligible to participate in the Company's Annual Incentive
Plan. Each participant is eligible to receive an incentive cash award or
bonus to the extent that certain pre-determined corporate and individual
goals are achieved. For 1998, the Company's corporate goal was based on
earnings per share. Individual performance goals varied for each executive
officer; however, all related to the achievement of the Company's overall
strategic vision of becoming a premier energy services company.
Achievement of the corporate goal for 1998 and achievement of individual
goals each accounted for 50% of the total possible award.
For 1998, the potential awards ranged from 2.5% to 90% of the
participant's annual base salary, depending upon the achievement levels and
the participant's position. Graduated standards for achievement were
developed to encourage each employee's contribution. The Committee
reviewed and approved both the plan goals at the beginning of the year and
the achievements at the end of the year.
[DISCUSSION WITH RESPECT TO ATTAINMENT OF 1998 CORPORATE GOAL
TO GO HERE]
[?For 1999, the parameters of the Company's Annual Incentive Plan will
be the same as those applicable for 1998. The corporate goal will account
for [?50%?] of the total possible award and achievement of individual goals
will account for the remaining [?50%?]. The corporate goal for 1999 will
be based on earnings per share.?]
Long-Term Incentive Compensation and Stock Options
The LTIP is intended to tie a significant portion of the participants'
pay to long-term performance of the Company, to provide a greater upside
potential for outperforming peer companies as well as downside risk for
underperforming, to focus on creating shareholder value through increasing
total shareholder return, and to provide a significant portion of total
compensation opportunity through the use of the Company's common stock to
create an ownership mindset. Approximately 80 employees, consisting of
executive officers (with the exception of the chairman of the board) and
certain others (i.e., general managers or equivalent-level positions), are
eligible for participation in the LTIP.
The LTIP consists of two components: (1) stock options, and (2)
performance-based restricted stock and performance shares (this second
portion is called the "Value Creation Plan"). "Performance-based
restricted stock" means grants of the Company's common stock that are
subject to transfer restrictions and risk of forfeiture for a specified
restriction period, and the vesting of which are conditional upon the
attainment of Performance Measures. Stock options comprise
25% of the total award opportunity under the plan, and the Value Creation
Plan comprises the other 75%. The annualized target award opportunity as a
percent of base salary ranges from 15% to 100% depending on the
participant's position. With respect to the named executive officers
eligible for participation in the LTIP, the target LTIP award values are
100% of base salary for the chief executive officer and 70% of the
respective base salary for each of the remaining named executive officers.
The LTIP operates on three-year, non-overlapping performance periods or
cycles. The first performance period covers October 1, 1996, through
December 31, 1999.
The first portion of the LTIP consists of annual grants of stock
options, which commenced effective January 1, 1997, and continue effective
each January 1 thereafter. The number of options granted to a participant
is determined by taking 25% of the participant's target LTIP award value
and dividing it by the projected stock price appreciation of an option, to
arrive at the number of options granted to a participant for each year of
the three-year cycle. The stock options vest three years from the date of
grant. Information with respect to stock options granted during 1998 to
the named executive officers is set forth in the Summary Compensation Table
and the Option/SAR Grants Table.
The second portion of the LTIP consists of the Value Creation Plan.
The Value Creation Plan consists of a target grant of performance-based
restricted stock and performance shares, both of which can be earned based
on the Company's total shareholder return ("TSR") vs. the TSR of the peer
group. TSR is defined as share price appreciation plus dividends. For the
three-year performance cycle, the Company's average TSR is measured against
the average TSR of the peer group. The peer companies are the 25 largest
utility companies, based on kwh sales.
At the end of the performance period, participants will earn an award
based upon the Company's performance relative to its peer group. If the
Company's TSR equals the TSR of the peer group, participants will earn the
target number of restricted shares. Participants will earn the target
number of restricted shares plus a greater number of non-restricted shares
(called "performance shares") if the Company's TSR exceeds that of the peer
group. However, if the Company's TSR is lower than that of the peer group,
participants will not earn some of the target restricted shares or any
performance shares and could lose all of the restricted shares if the
Company's performance falls dramatically below that of the peer companies.
The maximum that can be earned under the Value Creation Plan by a
participant for the performance cycle is three times the total LTIP target
value less the value of any stock options.
Except in the case of disability, death, voluntary termination, or
retirement on or after age 50 during the three-year performance cycle, a
participant must be employed by the Company on January 1 following the end
of a performance cycle to receive any earned award. The earned target
restricted shares become unrestricted (or vested) as soon as practicable
after the end of a performance cycle, but no later than April 1 following
the end of a performance cycle. The earned performance shares (based on
the added incremental value created during the cycle), if any, will be paid
in two equal, annual installments. One-half will be paid as soon as
practicable after the first anniversary date (e.g., January 1, 2001 with
respect to the performance cycle ending December 31, 1999), but no later
than three months subsequent to that anniversary date (e.g., April 1,
2001), following the end of a performance cycle. The remaining half will
be paid as soon as practicable after the second anniversary date (e.g.,
January 1, 2002 with respect to the performance cycle ending December 31,
1999), but no later than three months subsequent to that anniversary date
(e.g., April 1, 2002), following the end of a performance cycle.
Because grants under the Value Creation Plan are made at the beginning
of the three-year performance cycle, there were no grants made during 1998
to any of the named executive officers.
Prior to January 1, 1997, the Company sponsored a Performance Shares
Plan (the "Performance Shares Plan"), a long-term incentive compensation
plan designed to reward executive officers and other key employees for
contributing to long-term success by achieving corporate and individual
goals approved by the Committee. The LTIP described above effectively
replaces the Performance Shares Plan. Accordingly, as part of the
transition toward implementation of the LTIP, the Performance Shares Plan
was amended to preclude the commencement of any new performance cycles and
to provide that the fifth performance cycle covering 1994-1997 be shortened
to three years, i.e., 1994-1996, and that the sixth and final performance
cycle covering 1996-1999 be shortened to one year, i.e., 1996. The
amendments further provided that payouts under the fifth performance cycle
were paid in 1998, and that payouts under the sixth performance cycle are
to be paid in 1999.
Chief Executive Officer
Mr. Rogers' 1998 base salary was determined by the Committee after
giving consideration to his employment agreement with the Company (see
"Employment Agreements and Severance Arrangements" on page ____), and
various surveys on chief executive compensation of both peer companies and
general industry. For 1998, Mr. Rogers also earned incentive compensation
under the Annual Incentive Plan in the amount of [?$________?], which was
based [?entirely upon the Committee's determination of his achievement of
individual goals.?] Under the Annual Incentive Plan, Mr. Rogers' maximum
potential award is equal to 90% of his annual base salary (including
deferred compensation).
Effective January 1, 1998, the Committee granted Mr. Rogers an option
to purchase 55,400 shares of the Company's common stock, at the fair
market value of $38.59375 per share, as the second annual option grant
under the first performance period of the LTIP. Effective March 24, 1998,
the Committee granted Mr. Rogers an option to purchase 480,000 shares of
the Company's common stock, at the fair market value of $36.875 per share,
under the Stock Option Plan. The Committee believed that the March 1998
grant signified Mr. Rogers' importance to the current and future success of
the Company and further demonstrated its support and commitment to him.
Information with respect to these grants is set forth in the Summary
Compensation Table and the Option/SAR Grants Table.
In September 1998, the Committee approved an amended and restated
employment agreement for Mr. Rogers, which incorporated previous amendments
made to his agreement and the substantive terms of his prior severance
agreement. The substantive terms of the restated employment agreement are
discussed under "Employment Agreements and Severance Arrangements."
Summary
The Committee's executive compensation policy is designed to provide
competitive levels of executive compensation that integrate compensation
with the Company's goals, reward superior corporate performance, recognize
individual initiative and achievement, and assist the Company in attracting
and retaining qualified and highly motivated executive employees. The
Committee believes that ownership of stock assists in the attraction and
retention of qualified executive employees, and provides them with
additional incentives to devote their best efforts to pursue and sustain
the Company's growth and profitability through the accomplishment of
corporate goals. The philosophy thus tends to coalesce the interests of
the Company's shareholders, customers and management to enhance the
Company's value.
Code Section 162(m) limits the tax deduction to one million dollars
for compensation paid to each of the named executive officers. However,
performance-based compensation that has been approved by shareholders is
excluded from the one million dollars limit if, among other requirements,
the compensation is payable only upon attainment of pre-established,
objective performance goals. Both the Annual Incentive Plan and Umbrella
Plan have been approved by the Company's shareholders. Half of the award
opportunity under the Annual Incentive Plan is based on pre-established,
objective corporate performance goals, and a significant portion of the
remaining award opportunity is based on objective, individual performance
goals. Both the stock options and the restricted stock features of the
LTIP (which has been implemented under the auspices of the Umbrella Plan)
are performance-based.
The Committee will continue to review the applicability of the
Internal Revenue Service ("IRS") rules and regulations to future
compensation. The Committee intends to continue basing its executive
compensation decisions primarily upon performance achieved, both corporate
and individual, but retains the right to make subjective decisions and to
award compensation that might be subject to the tax deductibility
limitation under Code Section 162(m).
The tables which follow, and accompanying footnotes, reflect the
decisions covered by the above discussion.
Compensation Committee
Van P. Smith, Chairman
Michael G. Browning
George C. Juilfs
John J. Schiff, Jr.
Summary Compensation Table
The following table sets forth the compensation of the chief executive
officer and each of the other four most highly compensated executive
officers (these five executive officers are sometimes collectively referred
to as the "named executive officers") for services to the Company and its
subsidiaries during the calendar years ended December 31, 1998, 1997 and
1996.
<PAGE>
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restr. Securities Other
Compen- Stock Underlying LTIP Compen-
Name and Salary Bonus/7/ sation/8/ Awards/9/ Options/SARs Payouts/10/ sation/11/
PrincipalPosition Year ($) ($) ($) ($) (#) ($) ($)
James E. Rogers 1998 810,000 xxx,xxx 191,144 0 535,400 0 138,329
Vice Chairman, 1997 700,008 337,504 17,039 1,951,169 55,400 0 126,956
President and Chief 1996 625,000 607,518 3,697 0 0 849,750 108,108
Executive Officer
Jackson H. Randolph 1998 585,000 321,750 13,405 0 0 0 98,157
Chairman of the 1997 585,000 321,750 14,575 0 0 0 88,181
Board 1996 535,000 321,750 10,675 0 0 675,212 120,512
John M. Mutz 1998 415,188 xxx,xxx 5,574 0 21,700 0 23,611
Vice President of 1997 395,412 118,624 3,763 761,985 21,700 0 22,162
the Company, and 1996 376,584 150,634 2,431 0 0 339,108 14,993
President of PSI
William J. Grealis 1998 396,900 xxx,xxx 25,643 0 20,700 0 34,313
Vice President and 1997 378,000 113,400 13,094 728,443 20,700 0 15,550
Chief Strategic 1996 343,200 205,920 8,828 0 0 246,048 35,611
Officer of the Company,and
President of Investments
Larry E. Thomas 1998 352,848 xxx,xxx 9,678 0 18,400 0 16,594
Vice President of 1997 336,048 100,814 11,502 647,575 18,400 0 15,809
the Company, and 1996 294,350 176,610 5,030 0 0 252,285 36,162
President of the Energy Delivery
Business Unit
</TABLE>
Option/SAR Grants Table
The following table sets forth information concerning individual
grants of options to purchase the Company's common stock made to the named
executive officers during 1998.
<PAGE>
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (C) (d) (e) (f) (g)
% of
Number of Securities Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees in Price Expiration 5% 10%
Name (#) Fiscal Year ($/Sh) Date ($) ($)
James E. Rogers 55,400 5.98% 38.59375 1/1/2008 1,344,558 3,407,654
480,000 51.77% 36.875 3/24/2008 11,424,000 28,675,200
John M. Mutz 21,700 2.34% 38.59375 1/1/2008 526,659 1,334,767
William J. Grealis 20,700 2.23% 38.59375 1/1/2008 502,389 1,273,257
Larry E. Thomas 18,400 1.98% 38.59375 1/1/2008 446,568 1,131,784
</TABLE>
Aggregated Option/SAR Exercises and Year End Option/SAR Values Table
The following table sets forth information concerning: (i) stock
options exercised by the named executive officers during 1998, including
the value realized (i.e., the spread between the exercise price and market
price on the date of exercise); and (ii) the numbers of shares for which
options were held as of December 31, 1998, including the value of
"in-the-money" options (i.e., the positive spread between the exercise
prices of outstanding stock options and the closing market price of the
Company's common stock on December 31, 1998, which was $34.375 per share).
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(a) (b) (C) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised In-The-Money
Options/SARs at Options/SARs at
Year End Year End
Shares Acquired Value (#) ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
James E. Rogers 0 N/A 195,629/640,800 2,249,734/623,475
Jackson H. Randolph 8,742 102,992 91,258/50,000 1,049,467/575,000
John M. Mutz 12,787 225,356 82,660/60,740 922,328/246,660
William J. Grealis 2,650 28,156 73,237/61,400 736,947/219,363
Larry E. Thomas 31,588 478,800 62,516/56,800 718,934/246,100
</TABLE>
Pension Benefits
The pension benefits payable at retirement to each of the named
executive officers are provided under the terms of the Cinergy Corp.
Non-union Employees' Pension Plan, a non-contributory, defined benefit
pension
plan (the "Cinergy Pension Plan"), plus certain supplemental plans or
agreements. Pension benefits previously earned under the terms of the
former CG&E and PSI pension plans are fully preserved for participants
under the terms of the Cinergy Pension Plan.
Under the terms of the Cinergy Pension Plan, the retirement income
payable to a pensioner is 1.1% of final average pay plus 0.5% of final
average pay in excess of covered compensation, times the number of years of
plan participation through 35 years, plus 1.4% of final average pay times
the number of years of plan participation over 35 years. Final average pay
is the average annual salary, based upon retirement anniversary date,
during the employee's three consecutive years producing the highest such
average within the last ten anniversary years immediately preceding
retirement, plus any short-term incentive and/or deferred compensation.
Covered compensation is the average social security taxable wage base over
a period of up to 35 years. The IRS annually establishes a dollar limit,
indexed to inflation, of the amount of pay permitted for consideration
under the terms of such plans, which for 1998 was $160,000.
The Cinergy Excess Benefit Plan is designed to restore pension
benefits to those individuals whose benefits under the Cinergy Pension Plan
would otherwise exceed the limits imposed by the Code. Each of the named
executive officers is covered under the terms of the Cinergy Excess Benefit
Plan.
The pension plan table set forth below illustrates the estimated
annual benefits payable as a straight-life annuity under both Cinergy plans
to participants who retire at age 62. Such benefits are not subject to any
deduction for social security or other offset amounts.
<PAGE>
<TABLE>
<CAPTION>
Years of Service
<S> <C> <C> <C> <C> <C> <C> <C>
Compensation 5 10 15 20 25 30 35
$ 300,000 . . . $ 23,045 $46,085 $ 69,130 $ 92,170 $ 115,215 $ 138,255 $ 161,300
400,000 . . . 31,045 62,085 93,130 124,170 155,215 186,255 217,300
500,000 . . . 39,045 78,085 117,130 156,170 192,215 234,255 273,300
600,000 . . . 47,045 94,085 141,130 188,170 235,215 282,255 329,300
700,000 . . . 55,045 110,085 165,130 220,170 275,215 330,255 385,300
800,000 . . . 63,045 126,085 189,130 252,170 315,215 378,255 441,300
900,000 . . . 71,045 142,085 213,130 284,170 355,215 426,255 497,300
1,000,000 . . . 79,045 158,085 237,130 316,170 395,215 474,255 553,300
1,100,000 . . . 87,045 174,085 261,130 348,170 435,215 522,255 609,300
1,200,000 . . . 95,045 190,085 285,130 380,170 475,215 570,255 665,300
1,300,000 . . . 103,045 206,085 309,130 412,170 515,215 618,255 721,300
1,400,000 . . . 111,045 222,085 333,130 333,170 555,215 666,255 777,300
1,500,000 . . . 119,045 238,085 357,130 476,170 595,215 714,255 833,300
1,600,000 . . . 127,045 254,085 381,130 508,170 635,215 762,255 889,300
</TABLE>
The accrued annual benefit payable to Messrs. Randolph and Mutz upon
their retirement is based upon credited service of 35 years and 3.39 years,
respectively, and for Mr. Randolph will be the greater of the benefit
calculated under the terms of the Cinergy Pension and Excess Benefit Plans,
or under the former CG&E plan and credited service of 37 years under that
plan. The estimated credited years of service at age 62 for each of the
remaining named executive officers are as follows: Mr. Rogers, 20.22
years; Mr. Grealis, 11.69 years; and Mr. Thomas, 35 years.
Effective January 1, 1999, the Cinergy Supplemental Retirement Plan
was amended, restated and renamed the Cinergy Supplemental Executive
Retirement Plan (the "SERP"). One part of the SERP, the "Mid-career
Benefit," is designed to provide coverage to executives who will not
qualify for full retirement benefits under the Cinergy Pension Plan. The
Mid-career Benefit is an amount equal to that which a covered employee with
maximum permitted years of participation (35 years) would have received
under the Cinergy Pension Plan, reduced by the actual benefit provided by
that plan and Cinergy's Excess Benefit Plan, and further reduced by 50% of
the employee's estimated age 62 social security benefit. Messrs. Rogers,
Mutz and Grealis are covered under the terms of the Mid-career Benefit
portion of the SERP, and the estimated annual benefit payable at age 62 to
each is $104,013, $200,898 and $29,960, respectively.
The second part of the SERP, the "Senior Executive Supplement," is
designed to provide selected senior officers of the Company an opportunity
to earn a retirement benefit that will replace 60% of their final pay.
Each participant accrues a retirement income replacement percentage at the
rate of 4% per year from date of hire (maximum of 15 years). The Senior
Executive Supplement is an amount equal to 60% of the employee's final
average pay (as defined in the Cinergy Pension Plan) or the final 12 months
of base pay and Annual Incentive Plan pay, reduced by the actual benefits
provided under the Cinergy Pension Plan, the Cinergy Excess Benefit Plan
and the Mid-career Benefit, and further reduced by 50% of the employee's
estimated age 62 social security benefit. Messrs. Rogers, Mutz, Grealis
and Thomas are covered under the terms of the Senior Executive Supplement,
and the estimated annual benefit payable at age 62 to each is $_______,
$________, $_______ and $_______, respectively.
Moreover, Mr. Randolph has a Supplemental Executive Retirement Income
Agreement under which he or his beneficiary will receive an annual
supplemental retirement benefit of $511,654, in monthly installments of
$42,638 for 180 months beginning December 1, 2000.
The Cinergy Executive Supplemental Life Insurance Program provides key
management personnel, including the named executive officers, with
additional life insurance coverage during employment and with
post-retirement deferred compensation. At the later of age 55 or
retirement,
the participant's life insurance coverage under the program is canceled.
At that time, the participant receives the total amount of coverage in the
form of deferred compensation payable in ten equal annual installments of
$15,000 per year.
Employment Agreements and Severance Arrangements
Mr. Rogers has an employment agreement which was effective October 24,
1994 and was amended and restated in its entirety effective September 22,
1998. Pursuant to the terms of his agreement, Mr. Rogers served as Vice
Chairman, President and Chief Operating Officer of the Company until
November 30, 1995, and, since that time, has served as Vice Chairman,
President and Chief Executive Officer. Mr. Rogers' agreement currently is
automatically extended for an additional year on each annual anniversary
date, unless either the Company or Mr. Rogers gives timely notice
otherwise. During the term of his agreement, Mr. Rogers receives a minimum
annual base salary of $810,000. Under the terms of his employment
agreement, Mr. Rogers was credited with 25 years of participation in the
Mid-career Benefit portion of the SERP as of his 50th birthday. He has
been or will be credited with an additional two years of participation on
each birthday through his 55th, provided that he is employed by the Company
as of each birthday. Mr. Rogers' employment agreement also provides that
if he retires on or after age 55 he will be entitled to receive annual
retirement income for his lifetime equal to the greater of 60% of his final
average pay, or 60% of his base pay and Annual Incentive Plan pay for the
final 12 months immediately preceding his retirement.
Mr. Randolph has an employment agreement which commenced on October
24, 1994. Pursuant to the terms of his agreement, Mr. Randolph served as
Chairman and Chief Executive Officer of the Company until November 30,
1995, at which time he relinquished the position of Chief Executive
Officer. He will continue to serve as Chairman of the Board of the Company
until November 30, 2000, the expiration of his agreement. During the term
of his agreement, Mr. Randolph receives a minimum annual base salary of
$465,000.
If the employment of Messrs. Rogers or Randolph (each sometimes
individually referred to as the "executive") is terminated as a result of
death, his beneficiary will receive a lump sum cash amount equal to the sum
of (a) the executive's annual base salary through the termination date to
the extent not previously paid, (b) a pro rata portion of the benefit under
the Company's Annual Incentive Plan calculated based upon the termination
date, and (c) any compensation previously deferred but not yet paid to the
executive (with accrued interest or earnings thereon) and any unpaid
accrued vacation pay. Mr. Rogers' beneficiary will also receive an amount
equal to his vested accrued benefit under the Value Creation Plan. In
addition to these accrued amounts, if the Company terminates the
executive's employment without "cause" or the executive terminates his
employment for "good reason" (as each is defined in the employment
agreements), the Company will pay to the executive (a) a lump sum cash
amount equal to the present value of his annual base salary and benefit
under the Company's Annual Incentive Plan payable through the end of the
term of employment, at the rate and applying the same goals and factors in
effect at the time of notice of such termination, (b) the value of all
benefits to which the executive would have been entitled had he remained in
employment until the end of the term of employment under the Company's
Executive Supplemental Life Insurance Program (and also including the Value
Creation Plan in the case of Mr. Rogers), (c) the value of all deferred
compensation and all executive life insurance benefits whether or not then
vested or payable, and (d) medical and welfare benefits for the executive
and his family through the end of the term of employment. If the
executive's employment is terminated by the Company for cause or by the
executive without good reason, the executive will receive unpaid annual
base salary accrued through the termination date and any accrued deferred
compensation.
Mr. Mutz has an employment agreement which commenced on October 4,
1993, and was amended most recently effective as of December 31, 1998.
Pursuant to the terms of his agreement, Mr. Mutz serves as President, and
is nominated for election as a director, of PSI until May 31, 1999, the
expiration date of his agreement. During the term of his agreement, Mr.
Mutz receives a minimum annual base salary of $330,000. Under his
employment agreement, Mr. Mutz is fully vested in the Mid-career Benefit
portion of the SERP, without offset for other retirement benefits, and is
guaranteed a benefit thereunder based on its current terms even if the plan
subsequently is amended to reduce benefits or is terminated. Mr. Mutz's
employment agreement further provides that in connection with the Senior
Executive Supplement portion of the SERP, Mr. Mutz will be credited with a
pay replacement percentage of 60% as of his retirement date.
Mr. Grealis has an employment agreement which commenced on January 16,
1995 and currently is automatically extended for an additional year on each
January 1, unless either the Company or Mr. Grealis gives timely notice
otherwise. During the term of his agreement, Mr. Grealis receives a
minimum annual base salary of $288,000. Under his employment agreement,
Mr. Grealis will receive annual retirement income of no less than $283,000
payable as a straight-life annuity at age 62.
Mr. Thomas has an employment agreement which currently is
automatically extended for an additional year on each January 1, unless
either the Company or Mr. Thomas gives timely notice otherwise. During the
term of his agreement, Mr. Thomas receives a minimum annual base salary of
$240,000. Under his employment agreement, if Mr. Thomas retires on or
after age 55 he will be entitled to receive annual retirement income equal
to the greater of 60% of his final average pay, or 60% of his base pay and
Annual Incentive Plan pay for the final 12 months immediately preceding
retirement.
If the employment of Messrs. Mutz, Grealis or Thomas (each sometimes
individually referred to as the "officer") is terminated as a result of
death, for cause, or by the officer without good reason, the officer or the
officer's beneficiary will be paid a lump sum cash amount equal to (a) the
officer's unpaid annual base salary through the termination date, (b) a pro
rata portion of the officer's award under the Company's Annual Incentive
Plan, (c) the officer's vested accrued benefits under the Value Creation
Plan (and also including the Cinergy Pension Plan, Excess Benefit Plan, and
Supplemental Executive Retirement Plan in the case of Mr. Mutz), and (d)
any unpaid deferred compensation (including accrued interest or earnings)
and unpaid accrued vacation pay. If, instead, the officer's employment is
terminated prior to a change in control (as defined) without cause or by
the officer for good reason, the officer will be paid (a) a lump sum cash
amount equal to the present value of the officer's annual base salary and
target annual incentive cash award payable through the end of the term of
the agreement, at the rate and applying the same goals and factors in
effect at the time of notice of such termination, (b) the present value of
all benefits to which the officer would have been entitled had the officer
remained in employment until the end of the term of the agreement under the
Value Creation Plan and Executive Supplemental Life Insurance Program (and
also including the Cinergy Pension Plan, Excess Benefit Plan, and
Supplemental Executive Retirement Plan in the case of Mr. Mutz), (c) the
value of all deferred compensation and all executive life insurance
benefits whether or not vested or payable, and (d) continued medical and
welfare benefits through the end of the term of the agreement. In addition
to the above, under Mr. Mutz's employment agreement the Company has waived
its right to challenge Mr. Mutz in the event he elects to terminate his
employment agreement for good reason.
Each of the named executive officers participates in the Company's
Annual Incentive Plan, Stock Option Plan, LTIP, Excess Benefit Plan, SERP,
and Executive Supplemental Life Insurance Program (with the exception of
Mr. Randolph who does not participate in the LTIP or SERP), participates
in all other retirement and welfare benefit plans applicable generally to
Company employees and executives, and receives other fringe benefits.
If the employment of any named executive officer is terminated after a
change in control, the officer will be paid a lump sum cash payment equal
to the greater of (i) three times the sum of his annual base salary
immediately prior to the date of his termination of employment or, if
higher, the date of the change in control, plus all incentive compensation
or bonus plan amounts in effect prior to the date of his termination of
employment or, if higher, prior to the change in control, and (ii) the
present value of all annual base salary, bonuses and incentive compensation
and retirement benefits that would otherwise be due under the agreement,
plus deferred compensation and executive life insurance benefits. In
addition, the officer will be provided life, disability, accident and
health insurance benefits for thirty-six months, reduced to the extent
comparable benefits are received, without cost, by the officer. In
addition to the above, Messrs. Rogers and Randolph will receive their
benefits under their deferred compensation agreements (discussed below) and
split dollar life insurance agreements.
Deferred Compensation Agreements
Mr. Randolph and CG&E, and Mr. Rogers and PSI, entered into deferred
compensation agreements effective as of January 1, 1992, which were assumed
by the Company effective as of October 24, 1994.
Pursuant to the terms of his deferred compensation agreement, Mr.
Randolph was credited annually with a $50,000 base salary increase in the
form of deferred compensation for the five-year period from January 1, 1992
through December 31, 1996, and when his employment terminates he will
receive an annual cash benefit of $179,000 payable for a 15-year period
beginning January 2001.
Pursuant to the terms of his deferred compensation agreement, Mr.
Rogers was credited annually with a $50,000 base salary increase in the
form of deferred compensation for the five-year period from January 1, 1992
through December 31, 1996, and is credited annually the same amount for the
additional five-year period from January 1, 1997 through December 31, 2001.
Mr. Rogers' deferred compensation agreement further provides that when his
employment terminates for any reason, other than death, he will receive an
annual cash benefit over a 15-year period beginning the first January
following termination of his employment, but in no event earlier than
January 2003 nor later than January 2010. The annual cash benefit amount
payable for such 15-year period ranges from $179,000 per year, if payment
begins in January 2003, to $554,400 per year if payment commences in
January 2010. Comparable amounts are payable to Mr. Rogers if he dies
before commencement of payment of the 15-year payments described above. In
addition, if Mr. Rogers' employment terminates before January 1, 2002 for
any reason other than death or disability, he will receive a lump sum cash
payment equal to the total amount deferred during the second five-year
period described above plus interest; if his employment terminates on or
after January 1, 2002 for any reason other than death or disability, he
will receive an additional annual benefit for a 15-year period beginning
the first January following termination of his employment, but in no event
earlier than January 2008 nor later than January 2010. The annual cash
benefit amount payable for such period ranges from $179,000 per year, if
payment begins in January 2008, to $247,000 per year if payment begins in
January 2010. Comparable amounts are payable to Mr. Rogers in the event
his employment is terminated for disability prior to January 1, 2002 or if
he dies (i) prior to January 1, 2002 while employed or disabled, or (ii) on
or after January 1, 2002 but before commencement of payment of benefits;
provided, however, if Mr. Rogers becomes disabled prior to the completion
of the second award period, his payments will be proportionately reduced in
the same manner as described above for disability during the first award
period.
Compensation Committee Interlocks and Insider Participation
Mr. Schiff, Chairman of the Board of Cincinnati Financial Corporation,
serves on the Company's Compensation Committee and Mr. Randolph, Chairman
of the Board of the Company, serves on the board of directors of Cincinnati
Financial Corporation.
Performance Graph
The following line graph compares the cumulative total average
shareholder return of the common stock of the Company 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 October 25, 1994, the initial trading date of the
Company's common stock, through December 31, 1998, and assumes a $100
investment on such initial trading date and dividend reinvestment.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10/25/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
Company Common Stock $100.00 $104.40 $145.30 $167.70 $203.30 $192.00
S&P Electric Utilities $100.00 $104.80 $137.40 $137.20 $173.20 $200.00
Index
S&P 500 Stock Index $100.00 $100.10 $137.70 $169.30 $225.80 $290.30
</TABLE>
ITEM 2. APPROVAL OF AMENDED AND RESTATED CINERGY CORP.
RETIREMENT PLAN FOR DIRECTORS
Introduction
Effective October 24, 1994, the Company adopted the Cinergy Corp.
Retirement Plan for Directors (the "Retirement Plan"), an unfunded
retirement plan for non-employee directors of the Company, Services, PSI
and CG&E. Under the terms of this plan, 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, and subject to shareholder approval, the
Company amended and restated the Retirement Plan (the "Amended Retirement
Plan") to eliminate the future accrual of benefits and to provide for the
conversion of currently accrued benefits to units payable at retirement in
shares of the Company's common stock. The Amended Retirement Plan is also
subject to SEC approval under the 1935 Act.
The Company believes that the approval of the Amended Retirement Plan
is in the best interests of the shareholders because, in effectively
terminating a cash-based retirement program for directors, it promotes the
accomplishment of long-term corporate goals by aligning the interests of
directors with those of the Company's shareholders. However, should the
Amended Retirement Plan not be approved by shareholders, the original
Retirement Plan will continue as it previously has existed.
Vote Required
Assuming the presence of a quorum at the Annual Meeting, approval of
the Amended Retirement Plan will require the affirmative vote of the
holders of a majority of the shares of the Company's common stock present
in person or represented by proxy and entitled to vote on the proposal.
Abstentions will have the same effect as votes against the proposal.
Broker non-votes will be deemed absent shares and will not effect the
outcome of the vote.
Summary of Plan Features
The full text of the Amended Retirement Plan is included as Appendix A
to this Proxy Statement. The following description summarizes the material
features of the Plan.
Participants. Non-employee directors with five or more years of
service on the board of directors of the Company, Services, PSI or CG&E
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.
Retirement Benefits. The Amended Retirement Plan provides for three
categories of 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 "Accrued
Benefit" converted to units representing shares of the Company's
common stock;
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; and
Category 3 each participant who retired 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 Company's annual Board
retainer fee plus five times the meeting fee. "Accrued Benefit" means a
participant's total benefit entitlement as of December 31, 1998 reduced to
a present value. The Accrued Benefit of each participant eligible to
participate in Category 1 or 2 above is set forth on page A-16.
Each participant named on page A-16, other than Mr. Hillenbrand (who
defers his director's fees into stock units under the Company's Directors'
Deferred Compensation Plan) [?and Dr. Sharp?], has elected to participate
in Category 1 of the Amended Retirement Plan. The initial number of
deferred stock units ("Deferred Units") into which each Category 1
participant's Accrued Benefit will be converted will equal the dollar
amount of the Accrued Benefit divided by $34.375, the closing market price
per share of the Company's common stock on December 31, 1998.
Unit Accounts. In addition to the initial number of Deferred Units
credited to a Category 1 participant's account ("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 Account on any dividend payment date.
Unit Accounts also will be proportionately adjusted for any stock split,
stock dividend, combination or exchange of shares or similar change
affecting the Company's common stock.
Unit Accounts will be paid out in shares of the Company's common
stock, with each credited unit being equal to one share of stock.
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.
The 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.
Shares of the Company's common stock distributed under the Amended
Retirement Plan may be newly issued or treasury shares or shares purchased
on the open market, as determined by the Company.
As of December 31, 1998, the present value of the accrued retirement
benefits under the Plan for the 14 current directors was $3,910,245. As to
the 10 former directors who are participants, annual cash payments of
$18,750 to $32,500 will be paid for periods of 5 to 25 years, depending
upon the number of years the recipient had served prior to his or her
retirement as a director.
Amendment and Termination. The Board may amend or terminate the
Amended Retirement Plan at any time. However, 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.
Administration. The Amended Retirement Plan will be administered by
the Company's Board. In addition to having the right to interpret and
otherwise regulate the Plan, the Board is specifically authorized to
reverse any action under the Plan which would adversely affect the ability
of the Company to use pooling of interests accounting in a merger or other
corporate transaction. If the Board were to exercise its discretion in
this regard, it also has the authority to provide appropriate cash or other
substitute compensation.
Effects of a Change in Control of the Company. In the event of a
"change in control" (as defined in the Amended Retirement Plan) of the
Company, each participant (or beneficiary, if appropriate) 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.
The Board Recommends Voting FOR this Proposal, which is Designated in the
Proxy as Item 2.
ITEM 3. APPROVAL OF CINERGY CORP. DIRECTORS' EQUITY
COMPENSATION PLAN
Introduction
To replace the Retirement Plan on a going-forward basis, the Company
has adopted, effective January 1, 1999 and subject to shareholder approval,
the Cinergy Corp. Directors' Equity Compensation Plan (the "Directors'
Equity Plan"). The Plan is also subject to SEC approval under the 1935
Act.
The Company believes that the approval of the Directors' Equity Plan
is in the best interests of the shareholders because the Plan aligns the
long-term interests of the Company's non-employee directors with those of
its shareholders, thus providing further incentive to enhance the financial
success of the Company and increase shareholder value.
The Directors' Equity Plan is an unfunded plan under which each
non-employee director of the Company will receive, beginning December 31,
1999,
an annual award equivalent to 450 shares of the Company's common stock.
Although the Plan permits the payment of cash awards at the Board's
discretion, the Board fully anticipates that all awards under the
Directors' Equity Plan will be paid in shares of the Company's common
stock.
Shares of the Company's common stock distributed under the Directors'
Equity Plan may be newly issued or treasury shares or shares acquired on
the open market or otherwise. A maximum of 75,000 shares are authorized
for issuance under the Plan, subject to adjustments for changes in the
Company's capitalization.
Vote Required
Assuming the presence of a quorum at the Annual Meeting, approval of
the Directors' Equity Plan will require the affirmative vote of the
holders of a majority of the shares of the Company's common stock present
in person or represented by proxy and entitled to vote on the proposal.
Abstentions will have the same effect as votes against the proposal.
Broker non-votes will be deemed absent shares and will not effect the
outcome of the vote.
Summary of Plan Features
The full text of the Directors' Equity Plan is included as Appendix B
to this Proxy Statement. The following description summarizes the material
features of the Plan.
Eligibility. Each non-employee director of the Company 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 the Company 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 the Company are eligible to participate
in the Directors' Equity Plan. The ultimate number of participants will
depend upon the number of non-employee directors of the Company over the
life of the Plan, which has no set expiration date.
Awards. Commencing December 31, 1999, and on each following December
31, each eligible non-employee director during the just-completed year will
be granted either 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 the Company's common
stock. Any Cash Award will be an amount in cash equal to the market value
of 450 shares of the Company's common stock on the date of grant. As
indicated above, the Board fully anticipates that all Plan awards will be
Stock Awards.
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.
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 Company's
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 Company's common stock
on the conversion date.
Payment of Benefits. All whole Units in a director's Account will be
distributed in the form of shares of the Company's common stock (with cash
paid in lieu of any fractional share). 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 the 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.
Assignment. Awards and other amounts credited to a director's Account
under the Plan may not be assigned, transferred, pledged, encumbered or
otherwise disposed of prior to their distribution.
Duration, Amendment and Termination. The Directors' Equity Plan has
no expiration date. The Board may amend or terminate the Plan at any time.
However, no termination or amendment may adversely affect the balance in a
director's Account or permit early payment of an Account.
Administration. The Directors' Equity Plan will be administered by
the Company's Board. In addition to having the right to interpret and
otherwise regulate the Plan, the Board is specifically authorized to
reverse any Award under the Plan which would adversely affect the ability
of the Company to use pooling of interests accounting in a merger or other
corporate transaction. If the Board were to exercise its discretion in
this regard, it also has the authority to provide appropriate cash or other
substitute compensation.
Effects of a Change in Control of the Company. In the event of a
"change in control" (as defined in the Directors' Equity Plan) of the
Company, each participant (or beneficiary, if appropriate) 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.
The Board Recommends Voting FOR this Proposal, which is Designated in the
Proxy as Item 3.
ITEM 4. AMENDMENT TO ARTICLE III, SECTION 3.1, OF THE COMPANY'S BY-LAWS
Introduction
ARTICLE III, Section 3.1, of the Company's By-Laws currently provides
that the Board shall consist of 17 directors, and that this number may be
changed to an odd number ranging between 15 and 23 by the affirmative vote
of not less than 75% of the full Board.
The proposed amendment will reduce the lower end of the range to 7
(rather than the current 15, while keeping the higher number of the range
at 23) and provide the Board more flexibility in establishing its size by
eliminating the requirement that there be an odd number of directors. The
proposed amendment gives the Board the ability to reduce its size if a
lesser number of directors is desired, having no effect on the term of any
current director or nominee.
The Board deems it advisable and in the best interests of the Company
and its shareholders that the proposed amendment be adopted. Accordingly,
effective October 15, 1998, the Board duly adopted the resolution
recommending that the Company's shareholders duly adopt a certain amendment
to ARTICLE III, Section 3.1, of the Company's By-Laws as set forth below,
with the amended provisions shown in italics and the deleted provisions
lined through.
Section 3.1 Number of Directors. The Board of Directors shall
consist of 17 directors. This a number of directors may be
changed to an odd number not less than seven (7) 15 and not more than
twenty-three (23) as determined by a vote of not less than 75% of the full
Board of Directors ("Supermajority Vote"). Any such determination made by
the Board of Directors shall continue in effect unless and until changed by
the Board of Directors by Supermajority Vote, but no such change shall
affect the term of any director then in
office.
Vote Required
Assuming the presence of a quorum at the Annual Meeting, approval of
the proposed amendment will require the affirmative vote of the holders of
at least 80% of the issued and outstanding shares of the Company's common
stock. Abstentions will have the same effect as votes against the
proposal. In the absence of specific instructions from beneficial owners,
brokers will retain authority to vote in their discretion with respect to
this matter.
The Board Recommends Voting FOR this Proposal, which is Designated in the
Proxy
as Item 4.
ITEM 5. SHAREHOLDER PROPOSAL
The Service Employees International Union Master Trust, 1313 L Street,
N.W., Washington, DC 20005, the beneficial owner of 2,400 shares of the
Company's common stock, has submitted the proposal set forth below for
consideration by shareholders at the Annual Meeting.
The Board strongly opposes the adoption of the proposal, which is
designated in the proxy as Item 5, and recommends that shareholders vote
AGAINST it.
Shareholder Proposal
BE IT RESOLVED: That the shareholders of Cinergy Corp. ("Company")
urge that the Board of Directors take the necessary steps, in compliance
with state law, to declassify the Board of Directors for the purpose of
director elections. The Board declassification shall be done in a manner
that does not affect the unexpired terms of directors previously elected.
Supporting Statement
The election of corporate directors is the primary avenue in the
American corporate governance system for shareholders to influence
corporate affairs and exert accountability on management. We strongly
believe that our Company's financial performance is closely linked to its
corporate governance policies and procedures, and the level of management
accountability they impose. Therefore, as shareholders concerned about the
value of our investment, we are very disturbed by our Company's current
system of electing only one-third of the board of directors each year. We
believe this staggering of director terms prevents shareholders from
annually registering their views on the performance of the
board collectively and each director individually.
Concerns that the annual election of all directors would leave our
Company without experienced Board members in the event that all incumbents
are voted out is unfounded. If the owners should choose to replace the
entire board, it would be obvious that the incumbent directors'
contributions were not valued. Additionally, concerns that the annual
election of all directors would expose shareholders to takeover attempts at
below full value is also unfounded. It is our belief that the staggered
Board insulates directors and senior executives from the consequences of
poor performance by denying shareholders the opportunity to replace an
entire Board which is pursuing failed policies. We believe that
allowing shareholders to annually register their views on the performance
of the Board collectively is one of the best methods to insure that our
Company will be managed in the best interests of the shareholders.
We urge your vote "FOR" the Proposal.
Statement of the Board in Opposition to the Shareholder Proposal
The Company was formed as a result of the October 24, 1994 merger of
CG&E and PSI Resources, Inc. Prior to the merger, the shareholders of each
corporation, voting separately at special meetings, adopted the agreement
providing for the merger, which agreement specified the form of the
Company's By-Laws, including the express provisions requiring that the
Company's Board be divided into three classes. Accordingly, in forming the
Company, shareholders already have given their consideration to this
matter.
The system of three-year terms promotes continuity and stability in the
conduct of business by the Board, since generally two-thirds of the
directors at all times will have had prior experience with the business
affairs, strategies and policies of the Company. This experience enables
the directors to plan in a reasonable manner for the future of the Company,
and to judge the performance of management against long-term goals
established by the Board. The Board does not believe the directors who are
elected for three-year terms are any less accountable to shareholders than
directors elected annually because the same standards of performance apply
regardless of the length of a director's term.
The use of three-year terms also is intended to encourage any persons
who may seek to acquire control of the Company, or to further some other
goal, to initiate such action through negotiations with the Board, which is
in a position to act to protect all of the shareholders of the Company.
The Board believes that declassification weakens the ability of the Board
to negotiate favorable terms with such persons. An attempt to effect a
change of control of the Board at a single shareholders' meeting, even if
unsuccessful, can seriously disrupt the conduct of the business of the
Company and cause it to incur substantial expense.
Moreover, the Company's current system of electing directors to
three-year terms is very common and is permitted by the laws of the State
of Delaware and by the rules of the New York Stock Exchange.
The Board believes that its obligation is to enhance the Company's
business competitiveness for the long-term, and provide sustained,
long-term return to the Company's shareholders. The Board continues to
believe that the present system of three-year terms is in the best
interests of the shareholders, and that the shareholders should oppose all
efforts to eliminate three-year terms.
The Board strongly urges a vote AGAINST this proposal, designated in
the proxy as Item 5. Proxies will be so voted unless shareholders specify
a contrary choice on their proxies.
Relationship with Independent Public Accountants
Arthur Andersen LLP served as independent public accountants for the
Company and its subsidiaries for the year 1998. On January 21, 1999, upon
recommendation of its Audit Committee, the Board engaged Arthur Andersen
LLP as independent public accountants for the Company and its subsidiaries
for the year 1999. Representatives of Arthur Andersen LLP are expected to
be present at the Annual Meeting with the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
Proposals and Business by Shareholders
In order to be considered for inclusion in the Company's proxy
statement for the 2000 annual meeting of shareholders, proposals from
shareholders must be received by November 16, 1999.
In addition, in order for a shareholder properly to introduce business
for action by shareholders at the Company's 2000 annual meeting (other than
business specified in the Notice of the meeting), the Company must be given
written notice, which complies with all requirements of the Company's
By-Laws, no earlier than December 23, 1999 and no later than January 21,
2000. The Company will retain discretionary authority to vote proxies on
matters of which it is not properly notified and also may retain such
authority under other circumstances.
Any proposal or notice should be directed to the Secretary of the
Company at 139 East Fourth Street, Cincinnati, Ohio 45202.
By Order of the Board of Directors,
Cheryl M. Foley
Vice President, General Counsel
and Secretary Secretary
Dated: March 15, 1999<PAGE>
APPENDIX C
1998 CONSOLIDATED FINANCIAL STATEMENTS
AND ACCOMPANYING NOTES
(TO GO HERE)
C-1
pages to be numbered consecutively beginning at C-1; approx. 50 pages in
length)
ENDNOTES
/1/ Holder reports having sole voting power with respect to 2,243,550
shares, shared voting power with respect to 5,871,922 shares, sole
dispositive power with respect to 9,546,850 shares, and shared dispositive
power with respect to 46,722 shares.
/2/ Shares held as trustee of benefit plans for employees of the Company
and its subsidiaries. Under the terms of the plans, participants have the
right to vote the shares credited to their accounts; however, the trustee
may, at its discretion, vote those shares not voted by participants.
Holder reports having shared voting and dispositive powers with respect to
all shares, and sole voting and dispositive powers with respect to none of
these shares.
/3/ Beneficial ownership of directors and executive officers as a group
represents 1.04% of the outstanding shares of common stock; individual
beneficial ownership by any director, nominee or executive officer does not
exceed 0.252% of the outstanding shares of common stock.
/4/ Includes shares which there is a right to acquire within 60 days
pursuant to the exercise of stock options in the following amounts: Mr.
Armstrong - 10,000; Mr. Baker - 10,000; Mr. Browning - 22,787; Mr. Cox -
10,000; Mr. Duberstein - 15,287; Ms. Foley - 20,000; Mr. Grealis - 73,237;
Mr. Hillenbrand - 10,000; Mr. Juilfs - 10,000; Mr. Mutz - 82,660; Dr.
Perelman - 10,000; Mr. Petry - 10,000; Mr. Randolph - 91,258; Mr. Rogers -
195,629; Mr. Schiff - 10,000; Dr. Sharp - 5,000; Mr. Taft - 10,000; Mr.
Thomas - 62,516; and all directors and executive officers as a group -
800,181.
/5/ Each unit represents one share of the Company's common stock credited
to the account of the respective director as of December 31, 1998 under the
Company's Directors' Deferred Compensation Plan.
/6/ Includes 15,000 shares owned of record by a trust of which Mr.
Schiff is one of three trustees who share voting and investment power
equally.
Does not include 1,791,000 shares, as to which Mr. Schiff disclaims any
beneficial interest, held by Cincinnati Financial Corporation and certain
of its subsidiaries.
/7/ Amounts appearing in this column reflect the Annual Incentive Plan
award earned during the year listed and paid in the following year.
/8/ Amounts appearing in this column for 1998 include for Mr. Rogers
personal use of corporate leased aircraft recognized as income to him in
the amount of $77,871. The majority of the remainder of the amounts in
this column reflect payments for certain federal and state income tax
obligations.
/9/ Amounts appearing in this column reflect the dollar values of
restricted stock awards, determined by multiplying the number of shares in
each award by the closing market price of the Company's common stock as of
the effective date of grant. The aggregate number of all restricted stock
holdings and values at calendar year ended December 31, 1998, determined by
multiplying the number of shares by the year end closing market price, are
as follows: Mr. Rogers - 58,462 shares ($2,009,631); Mr. Mutz - 22,831
shares ($784,816); Mr. Grealis - 21,826 shares ($750,269); and Mr. Thomas -
19,403 shares ($666,978). Dividends are retained by the Company for the
duration of the three-year performance cycle; upon settlement of the
restricted stock awards, dividends will be paid in shares of the Company's
common stock based on the number of shares of restricted stock actually
earned and the fair market value of the Company's common stock on the
settlement date.
/10/ Amounts appearing in this column reflect the values of the shares
earned under the Company's Performance Shares Plan during the 1994-1997 and
1996-1999 performance cycles that were ended during 1996 in transition to
the Valuation Creation Plan.
/11/ Amounts appearing in this column for 1998 include for Messrs. Rogers,
Randolph, Mutz, Grealis and Thomas, respectively: (i) employer matching
contributions under 401(k) plan and related excess benefit plan of $24,300,
$17,550, $12,456, $11,907 and $10,585; and (ii) insurance premiums paid
with respect to executive/group-term life insurance of $245, $752, $11,155,
$22,406 and $6,009. Also includes for Mr. Rogers deferred compensation in
the amount of $50,000, and for Messrs. Rogers and Randolph, respectively,
above-market interest on amounts deferred pursuant to deferred compensation
agreements of $48,955 and $63,447, and benefits under split dollar life
insurance agreements of $14,829 and $16,408.
Exhibit B-4
CINERGY CORP.
RETIREMENT PLAN
FOR DIRECTORS
(As Amended and Restated Effective January 1, 1999)
INTRODUCTION
Effective October 24, 1994, Cinergy Corp. ("Cinergy") established the
"Cinergy Corp. Retirement Plan for Directors," a retirement plan for
non-employee directors of Cinergy Corp., Cinergy Services, Inc., PSI
Energy, Inc., and The Cincinnati Gas & Electric Company.
As amended and restated effective January 1, 1999, the Cinergy Corp.
Retirement Plan for Directors (the "Plan") is set forth in its entirety
below.
ARTICLE 1ARTICLE 1ARTICLE 1ARTICLE 1ARTICLE 1ARTICLE 1
DEFINITIONS
When used in this document, the following terms shall have the
respective meanings set forth below, unless a different meaning is plainly
required by the context:
1.1 "Accrued Benefit" means a Participant's total benefit under the
Plan as of December 31, 1998, reduced to a present value using a
discount rate and other assumptions approved by the Compensation
Committee of Cinergy's Board of Directors, as set forth on
Schedule A.
1.2 "Beneficiary" means the person or persons designated by a
Participant to receive benefits under the Plan after the
Participant's death.
1.3 "CG&E" means The Cincinnati Gas & Electric Company, an Ohio
corporation, and its successors.
1.4 "CG&E's Board of Directors" means the duly constituted board of
directors of CG&E on the applicable date.
1.5 "Cinergy" means Cinergy Corp., a Delaware corporation, and its
successors.
1.6 "Cinergy Services" means Cinergy Services, Inc., a Delaware
corporation, and its successors.
1.7 "Cinergy's Board of Directors" means the duly constituted board of
directors of Cinergy on the applicable date.
1.8 "Cinergy Services' Board of Directors" means the duly constituted
board of directors of Cinergy Services on the applicable date.
1.9 "Cinergy's Secretary" means the person holding the position of
Secretary of Cinergy on the applicable date.
1.10 "Common Stock" means the common stock, par value $.01 per share,
of Cinergy.
1.11 "Deferred Unit" means a bookkeeping unit representing one share or
a fractional share of Common Stock, ultimately payable in Common
Stock as provided in this Plan.
1.12 "Director" means any person duly selected to serve as a member of
Cinergy's Board of Directors, Cinergy Services' Board of
Directors, PSI's Board of Directors, or CG&E's Board of Directors.
1.13 "Fees" means (a) the amount of the annual retainer compensation
paid to a nonemployee Director of Cinergy, plus (b) five times the
compensation paid to a nonemployee Director of Cinergy upon
attending a meeting of Cinergy's Board of Directors.
1.14 "Market Value Per Share" means the closing price of the Common
Stock, as reported by the "NYSE Composite Transactions"
published in The Wall Street Journal, on the appropriate date of
reference or on the preceding trading day if that date was not a
trading date.
1.15 "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations under such Act.
1.16 "Participant" means any Director or former Director who meets the
eligibility requirements for participation described in Article 3.
1.17 "Plan" means this retirement plan for Directors known as the
"Cinergy Corp. Retirement Plan for Directors," as amended and
restated effective January 1, 1999 and as it may be further
amended from time to time.
1.18 "PSI" means PSI Energy Inc., an Indiana corporation, and its
successors.
1.19 "PSI's Board of Directors" means the duly constituted board of
directors of PSI on the applicable date.
1.20 "PSI Resources" means PSI Resources, Inc., an Indiana corporation,
and its successors.
1.21 "Unit Account" means the individual bookkeeping account maintained
for a Participant who has made the election provided for in
Section 5.2, to which Deferred Units are credited and debited.
The uses of singular and masculine words are for practical purposes
only and shall be deemed to include the plural and feminine, respectively,
unless the context plainly indicates a distinction. Certain other
definitions, as required, appear in the following Articles of the Plan.
ARTICLE 2
EFFECTIVE DATE OF PLAN
The provisions of this Plan are, unless the context indicates
otherwise, effective January 1, 1999.
ARTICLE 3
ELIGIBILITY
With the exception of any Director who, as of February 1, 1990, was a
former employee of PSI Resources or PSI, each Director who is not also an
employee or former employee of Cinergy, its subsidiaries, or affiliates
with vested rights under a pension plan sponsored by Cinergy, its
subsidiaries, or affiliates is eligible to participate in the Plan. No
Director elected on or after January 1, 1999, shall be eligible to
participate in the Plan.
An eligible Director shall become a Participant in the Plan commencing
with the sixth year of service as a Director. Service as a Director of
Cinergy, Cinergy Services, PSI, CG&E, or Resources prior to October 24,
1994, shall be applied in determining eligibility. Notwithstanding
anything in this Article to the contrary, anyone who is an eligible
Director on December 31, 1998, shall become a Participant in the Plan on
January 1, 1999, irrespective of whether the Director has completed five
years of service as of December 31, 1998.
ARTICLE 4
VESTING
Each eligible Director shall be fully vested in his benefits under the
Plan immediately upon becoming a Participant.
ARTICLE 5
AMOUNT OF RETIREMENT BENEFITS
5.1 Each Participant who retires as a Director prior to January 1,
1999, shall be entitled to receive an annual cash payment in an amount
equal to the Fees in effect on the day preceding the date of the
Participant's retirement as a Director.
5.2 Each Participant who retires as a Director, or dies while a
Director, on or after January 1, 1999, and who has signed the written
consent and election described below, shall be entitled to receive his
Accrued Benefit, which shall be converted into Deferred Units by dividing
the dollar amount of the Accrued Benefit by the Market Value Per Share on
December 31, 1998. The Accrued Benefit will be payable to the Director in
Common Stock as set forth in Article 7.
In order for a Director to receive his Accrued Benefit in Common Stock,
he must affirmatively consent, in writing, by filing with Cinergy's
Secretary, on or before December 31, 1998, an election form requesting that
his Accrued Benefit be converted to Deferred Units. If the Participant
does not so consent, his benefit under the Plan will be paid as provided in
Section 5.3.
5.3 Each Participant who retires as a Director, or dies while a
Director, on or after January 1, 1999 and who has not consented to
receiving his Accrued Benefit in the form of Deferred Units shall be
entitled to receive an annual cash payment in an amount equal to the Fees
in effect on December 31, 1998.
ARTICLE 6
UNIT ACCOUNTS
6.1 In addition to Deferred Units credited to a Participant's Unit
Account as a result of the initial conversion of the Participant's Accrued
Benefit, the Participant's Unit Account shall be credited with additional
Deferred Units in amounts equal to:
(a) the amount of any cash dividend (or the fair market value of a
dividend paid in property, other than a dividend paid in Common
Stock) which the Participant would have received if on the record
date for the dividend the Participant had been the owner of record
of a number of shares of Common Stock equal to the number of
Deferred Units (including fractions) then credited to the
Participant's Unit Account divided by
(b) the Market Value Per Share on the date the dividend is paid.
From time to time, additional Deferred Units shall be credited to the
Participant's Unit Account in amounts equal to the number of full and
fractional shares of Common Stock which the Participant would have received
if on the record date for a dividend which is to be paid in Common Stock
the Participant had been the owner of record of a number of shares of
Common Stock equal to the number of Deferred Units (including fractions)
then credited to the Participant's Unit Account.
6.2 A Participant's Unit Account shall be proportionately adjusted, if
and to the extent appropriate, for any change in the Common Stock by reason
of any stock split, combination or exchange of shares, recapitalization,
reorganization, merger, consolidation, or any similar change affecting the
Common Stock.
ARTICLE 7
PAYMENT OF BENEFITS
7.1 Benefits Paid in Cash
A. Payment to the Participant if Living
The annual benefit shall be payable on the first business day of
February each year, beginning with the February following the
later of (a) the date the Participant ceases to be a Director, or
(b) the Participant's attainment of age 55.
B. Payment to the Participant's Beneficiary
If a Participant dies before the payment of benefits has commenced
under Section 7.1A, then the annual benefit shall be payable on
the first business day of February each year, beginning with the
February following the Participant's date of death.
7.2 Benefits Paid in Common Stock
A. Payment to the Participant if Living
The Participant's Unit Account shall be payable on the first
business day of February each year, beginning with the February
following the later of (a) the date the Participant ceases to be a
Director, or (b) the Participant's attainment of age 55.
Prior to retirement, a Participant shall elect the method of
payment by filing with Cinergy's Secretary an appropriate election
form. At the Participant's election, the Unit Account shall be
distributed either in a single lump sum payment or in annual
installments of two to ten years.
If the Participant elects to have the Unit Account paid in a
single lump sum, the number of shares of Common Stock to be
transferred to the Participant shall be the number of whole
Deferred Units credited to the Participant's Unit Account as of
the distribution date.
If the Participant elects to have his Unit Account paid in
installments, the number of shares of Common Stock to be
distributed each year shall be equal to the number of Deferred
Units credited to the Participant's Unit Account on the day
preceding the date of payment of the installment, divided by the
number of installments remaining to be paid, and reduced, if
necessary, to the nearest whole Deferred Unit.
B. Payment to the Participant's Beneficiary
If a Participant dies before the payment of benefits has commenced
under Section 7.2A, then the Participant's Unit Account shall be
paid to the Participant's Beneficiary either in a single lump sum
or in annual installments (of two to ten years) as determined by
the Participant's Beneficiary. If paid in annual installments,
the amount distributed each year shall be computed as provided in
Section 7.2A and shall be payable on the first business day of
February each year, beginning with the February following the
Participant's date of death. If the benefit is payable in a
single lump sum, the benefit shall be payable as soon as
administratively feasible following the Participant's death.
C. Manner of Payment of Common Stock
Shares of Common Stock distributed under the Plan may be newly
issued or treasury shares or shares purchased on the open market,
as determined by Cinergy. Cash shall be paid in lieu of any
fractional share.
ARTICLE 8
DURATION OF BENEFITS
For a Participant who retires as a Director prior to January 1, 1999,
the annual benefit shall be payable for a term certain equal to the number
of completed full years the Participant served as a Director as of the date
of the Participant's retirement as a Director.
For a Participant who retires as a Director, or who dies while a
Director, on or after January 1, 1999 and who has not elected to receive
his Accrued Benefit in the form of Deferred Units, the annual benefit shall
be payable for a term certain equal to the number of completed full years
the Participant served as a Director as of December 31, 1998.
ARTICLE 9
DESIGNATION OF BENEFICIARY
AND PAYMENT OF BENEFIT UPON DEATH
9.1 Designation of Beneficiary
A Participant may designate a Beneficiary or Beneficiaries (which may
be an entity other than a natural person) to receive any benefit payments
to be made under this Plan upon the Participant's death. A Participant may
change or cancel his Beneficiary designation at any time without the
consent of the Beneficiary. Any Beneficiary designation, change, or
cancellation must be by written notice filed with Cinergy's Secretary and
shall not be effective until received by Cinergy's Secretary. If the
Participant designates more than one Beneficiary, any payments under this
Plan to a Beneficiary shall be made in equal shares unless the Participant
has designated otherwise, in which case the payments shall be made in
shares designated by the Participant. If no Beneficiary has been named by
the Participant, payment shall be made to the Participant's estate.
9.2 Payments Upon Death of Participant
A. Payments Made in Cash
Upon the death of a Participant who retires as a Director prior
to January 1, 1999, payment shall be made to the Participant's
Beneficiary for the balance of the number of completed full years
the Participant served as a Director for which the Participant
had not received payment at the date of his death.
Upon the death of a Participant who retires as a Director, or
dies while a Director, on or after January 1, 1999 and who has
not provided the written consent described in Section 5.2,
payment shall be made to the Participant's Beneficiary for the
balance of the number of completed full years the Participant
served as a Director as of December 31, 1998 for which the
Participant had not received payments at the date of his death.
Upon a Beneficiary's death, any remaining benefit shall be paid
in a lump sum to the Beneficiary's estate.
B. Payments Made in Common Stock
Upon the death of a Participant who retires as a Director, or who
dies while a Director, on or after January 1, 1999 and who has
provided the written consent described in Section 5.2, payment
shall be made to the Participant's Beneficiary in a single lump
sum or for the remaining number of installments designated by the
Participant. Upon the Beneficiary's death, any remaining benefit
shall be paid in a lump sum to the Beneficiary's estate.
ARTICLE 10
NONALIENATION OF BENEFITS
The Plan shall not in any manner be liable for, or subject to, the
debts and liabilities of any Participant or Beneficiary. No payee may
assign the benefit payments due him under the Plan. No benefits at any
time payable under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, attachment, garnishment,
levy, execution, or other legal or equitable process or covenants of any
kind.
ARTICLE 11
SHAREHOLDER APPROVAL
The Plan shall be subject to approval by a majority of the shares
present in person or represented by proxy and entitled to vote thereon at a
duly held shareholders' meeting of Cinergy at which a quorum exists.
ARTICLE 12
FUNDING POLICY
The Plan shall be totally unfunded so that Cinergy is under merely a
contractual duty to make benefit payments when due under the Plan. The
promise to pay shall not be represented by notes and shall not be secured
in any way. No contributions to the Plan by Participants shall be required
or permitted under the Plan.
ARTICLE 13
AMENDMENT AND TERMINATION
Cinergy, by resolution duly adopted by Cinergy's Board of Directors,
shall have the right, authority and power to alter, amend, modify, revoke
or terminate the Plan at any time. However, subject to the provisions of
Section 14.6, without his, her or its written consent, no termination or
amendment shall deprive any Participant (or Beneficiary, in the event of
the Participant's death prior to the date of such action) of any benefits
accrued under the Plan prior to the termination or amendment.
ARTICLE 14
MISCELLANEOUS
14.1 Forfeitability
If a Director or former Director becomes a director, proprietor,
officer, partner or employee of, or otherwise becomes affiliated with, any
utility in the States of Indiana, Ohio or Kentucky that competes with
Cinergy, its subsidiaries or affiliates, or if a former Director shall
refuse a reasonable request from Cinergy, its subsidiaries or affiliates to
perform consulting services after he retires from Cinergy's Board of
Directors, Cinergy Services' Board of Directors, PSI's Board of Directors
or CG&E's Board of Directors, any payments remaining payable to Participant
under this Plan shall be forfeited.
14.2 No Right to Continue as a Director
Nothing in this Plan shall be construed as conferring upon a
Participant any right to continue as a member of Cinergy's Board of
Directors, Cinergy Services' Board of Directors, PSI's Board of Directors
or CG&E's Board of Directors.
14.3 No Right to Corporate Assets
Nothing in this Plan shall be construed as giving the Participant, any
Beneficiary or any other person any equity or interest of any kind in the
assets of Cinergy, Cinergy Services, PSI or CG&E or creating a trust of any
kind or a fiduciary relationship of any kind between Cinergy, Cinergy
Services, PSI or CG&E and any person. As to any claim for payments due
under the provisions of the Plan, a Participant, a Beneficiary and any
other persons having claim for payments shall be unsecured creditors of
Cinergy, Cinergy Services, PSI or CG&E.
14.4 Governing Law
The Plan shall be construed and administered according to the laws of
the State of Delaware to the extent that those laws are not preempted by
the laws of the United States of America.
14.5 Headings
The headings of articles, sections, subsections, paragraphs, or other
parts of the Plan are for convenience of reference only and do not define,
limit, construe or otherwise affect the Plan's contents.
14.6 Pooling of Interests Accounting
In the event any action under this Plan would adversely affect the
ability of Cinergy to use pooling of interests accounting in a subsequent
merger or other corporate transaction, Cinergy's Board of Directors may, in
its sole discretion, reverse any such action effective as of the effective
date of the action and provide cash or such other substitute compensation
as it deems appropriate and as may be necessary to cure the adverse effect
on pooling.
ARTICLE 15
ADMINISTRATION
Cinergy's Board of Directors shall be responsible for the
administration of the Plan. Cinergy's Board of Directors reserves the
right to interpret and regulate the Plan, by exercise of discretionary
authority, and its interpretation and regulation shall be effective and
binding on all parties concerned.
ARTICLE 16
PAYMENTS UPON CHANGE IN CONTROL
Notwithstanding anything contained in this Plan to the contrary,
following a Change in Control of Cinergy, each Participant (or Beneficiary,
if appropriate) shall 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 shall 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.
A "Change in Control" of Cinergy shall be deemed to have occurred if
the
event set forth in any one of the following paragraphs shall have occurred:
(1) Any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the 1934 Act) is or becomes the beneficial owner (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of securities of Cinergy (not including in the securities
beneficially owned by such person any securities acquired directly
from Cinergy or its affiliates) representing 50% or more of the
combined voting power of Cinergy's then outstanding securities,
excluding any person who becomes such a beneficial owner in
connection with a transaction described in clause (i) of paragraph
(2) below; or
(2) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (i) a merger or consolidation which would
result in the voting securities of Cinergy outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least
50% of the combined voting power of the securities of Cinergy or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Cinergy (or similar transaction) in which no person is or becomes
the beneficial owner, directly or indirectly, of securities of
Cinergy (not including in the securities beneficially owned by
such person any securities acquired directly from Cinergy or its
affiliates other than in connection with the acquisition by
Cinergy or its affiliates of a business) representing 25% or more
of the combined voting power of Cinergy's then outstanding
securities; or
(3) During any period of two consecutive years, individuals who at the
beginning of that period constitute Cinergy's Board of Directors
and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of Cinergy)
whose appointment or election by Cinergy's Board of Directors or
nomination for election by Cinergy's shareholders was approved or
recommended 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 that period or whose appointment, election or
nomination for election was previously so approved or recommended
cease for any reason to constitute a majority of Cinergy's Board
of Directors; or
(4) The shareholders of Cinergy approve a plan of complete liquidation
or dissolution of Cinergy or there is consummated an agreement for
the sale or disposition by Cinergy of all or substantially all of
Cinergy's assets, other than a sale or disposition by Cinergy of
all or substantially all of Cinergy's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by shareholders of Cinergy in substantially the
same proportions as their ownership of Cinergy immediately prior
to such sale.
Notwithstanding the provisions of Article 13, the provisions of this
Article may not be amended by an amendment to the Plan effected within
three years following a Change in Control.
<PAGE>
Schedule A
SCHEDULE OF CALCULATIONS OF ACCRUED BENEFITS
FOR CURRENT DIRECTORS
Active Participants as of January 1, 1999
Present Value of Vested
Director's Name Accrued Benefit
Armstrong, Neil A. $ 447,959
Baker, James K. $ 304,975
Browning, Michael G. $ 208,466
Cox, Phillip R. $ 128,495
Duberstein, Kenneth M. $ 212,624
Hillenbrand, John A., II $ 320,212
Juilfs, George C. $ 365,159
Perelman, Melvin $ 384,397
Petry, Thomas E. $ 288,570
Schiff, John J., Jr. $ 278,933
Sharp, Philip R. $ 110,132
Smith, Van P. $ 304,975
Taft, Dudley S. $ 301,793
Waddell, Oliver W. $ 253,555
Total $3,910,245
ASSUMPTIONS
Discount rate 6.00%
Mortality None
Increase rate 5.00%
Exhibit B-5
CINERGY CORP.
DIRECTORS' EQUITY COMPENSATION PLAN
INTRODUCTION
On December 16, 1998, Cinergy Corp., subject to the approval of its
shareholders, adopted a compensation plan known as the "Cinergy Corp.
Directors' Equity Compensation Plan" (the "Plan") for the exclusive benefit
of eligible non-employee directors of Cinergy Corp. Under the Plan,
eligible non-employee directors of Cinergy are granted as of December 31 of
each calendar year beginning in 1999 either a stock award consisting of 450
deferred units of Cinergy common stock or a cash award equal to the fair
market value of 450 shares of Cinergy common stock, as determined by
Cinergy's Board of Directors. The Plan, effective as of January 1, 1999,
is set forth in its entirety below.
ARTICLE 1
DEFINITIONS
When used in this document, the following terms shall have the
respective meanings set forth below, unless a different meaning is plainly
required by the context:
1.1 "Account" means the individual bookkeeping account maintained for a
Non-employee Director to which Awards, other amounts provided for in
this Plan and distributions under this Plan are credited or debited.
1.2 "Award" means a Cash Award or a Stock Award granted to a Non-employee
Director pursuant to this Plan.
1.3 "Beneficiary" means the recipient designated by a Non-employee Director
who is, upon the Non-employee Director's death, entitled in accordance
with the Plan's terms to receive the benefits to be paid with respect
to the Non-employee Director.
1.4 "Board" means the duly constituted board of directors of Cinergy on the
applicable date.
1.5 "Cash Award" means the grant of cash compensation to a Non-employee
Director pursuant to Article 7 of the Plan. A Cash Award will be
equal to the fair market value of 450 shares of Common Stock
(subject to adjustment as provided in Section 6.2) on the Grant
Date. The fair market value is determined by multiplying 450
(subject to adjustment) by the Market Value Per Share on the Grant
Date.
1.6 "Cinergy" means Cinergy Corp., a Delaware corporation, and any
successor to its business.
1.7 "Cinergy's Secretary" means the person holding the position of
Secretary of Cinergy on the applicable date.
1.8 "Common Stock" means the common stock, par value $.01 per share, of
Cinergy.
1.9 "Current Interest Rate" means the interest rate in effect for the
period during which Cash Awards are held in a Non-employee Director's
Account. The Current Interest Rate, until changed by action of the
Board, shall be that percent per annum equivalent to the quoted
interest rate for a one year certificate of deposit of $100,000 as
quoted in The Wall Street Journal for the first business day of the
particular calendar quarter.
The Current Interest Rate shall be adjusted quarterly.
1.10 "Disability" shall have the meaning ascribed to it in Cinergy's
Long-Term Disability Plan.
1.11 "Grant Date" means December 31 of each calendar year beginning
December 31, 1999.
1.12 "Market Value Per Share" means the closing price of the common stock,
as reported by the "NYSE - Composite Transactions" published in The
Wall Street Journal, on the appropriate date of reference or on the
preceding trading day if that date was not a trading date.
1.13 "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations under such Act.
1.14 "Non-employee Director" means a member of the Board who is not an
employee of Cinergy or of any of its subsidiaries or affiliates.
1.15 "Plan" means this compensation plan known as the "Cinergy Corp.
Directors' Equity Compensation Plan," as amended from time to time.
1.16 "Stock Award" means the grant on a Grant Date of 450 whole Units of
Common Stock (subject to adjustment as provided in Section 6.2) to a
Non-employee Director pursuant to Article 7 of the Plan.
1.17 "Unit" means a bookkeeping unit representing one share or a fractional
share of Common Stock on the applicable date.
The use of singular words is for practical purposes only and shall be
deemed to include the plural unless the context clearly indicates a
distinction. Certain other definitions, as required, appear in the
following Articles of the Plan.
ARTICLE 2
EFFECTIVE DATE OF PLAN
Subject to Article 11, this Plan is effective as of January 1, 1999.
ARTICLE 3
PURPOSE OF PLAN
The Plan's purposes are to benefit Cinergy's shareholders by
encouraging and enabling the acquisition of a proprietary interest, or
increasing the proprietary interest, in Cinergy by Non-employee Directors
thereby promoting the achievement of long-term corporate objectives by
linking the personal interests of Non-employee Directors to those of
Cinergy's shareholders, and to aid Cinergy in attracting and retaining
qualified Non-employee Directors of outstanding competence.
ARTICLE 4
ADMINISTRATION
The Plan shall be administered by the Board. The Board is authorized
to establish any rules and regulations and appoint any agents as it deems
appropriate for the Plan's proper administration and to make any
determinations under and to take any steps in connection with the Plan as
it deems necessary or advisable. Each determination or other action taken
pursuant to the Plan, including interpretation of the Plan and the specific
conditions and provisions of the Awards granted under the Plan, shall be
final and conclusive for all purposes and upon all persons including,
without limitation, each Non-employee Director, Beneficiary, legal
representative, and any other interested parties.
ARTICLE 5
ELIGIBILITY
Each Non-employee Director 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 during the course of any
year, is eligible to receive an Award under this Plan in respect of that
year.
ARTICLE 6
STOCK
6.1 Stock Subject to the Plan
Stock to be issued or transferred under the Plan shall be shares of
Common Stock. Cinergy may use authorized and unissued shares of
Common Stock, treasury shares or shares acquired on the open market,
in rivate transactions or otherwise, or a combination of the
foregoing, for purposes of granting or settling an Award. Subject to
adjustment as provided below, the aggregate maximum number of shares
that may be issued or transferred in payment of Awards is 75,000.
6.2 Adjustment in the Number of Shares
If there is any change in the shares of Common Stock as a result of a
stock dividend, stock split, recapitalization, merger, consolidation,
combination or exchange of shares, spin-off, other significant
distribution of assets, or similar change in capitalization, the Board
shall make such equitable and proportionate adjustment, if any, as it
deems appropriate in the total number of shares of Common Stock
available for Awards under this Plan, as well as in the number of
shares of Common Stock underlying a Stock Award or used as a basis for
calculating the amount of a Cash Award.
ARTICLE 7
AWARDS
7.1 Grant of Awards
Each eligible Non-employee Director during any year shall be granted
automatically on December 31st of that year, commencing December 31,
1999, either a Cash Award or a Stock Award, as determined by the Board
in its discretion. Awards granted under this Plan shall be credited to
each Non-employee Director's Account.
Notwithstanding anything in the Plan to the contrary, the amount of the
Award to any Non-Employee Director who retires from the Board prior to
December 31 of any calendar year shall be prorated based on the period
of time the Non-employee Director served on the Board during that
calendar year.
7.2 Cash Awards
Cash Awards held in an Account shall be credited with interest at the
Current Interest Rate until distributed. Interest credited to the
Account will bear interest (compounded quarterly) at the same rate.
The Board, in its discretion, may elect at any time to convert Cash
Awards and accrued interest thereon credited to a Non-Employee
Director's Account to Units by dividing the amount of cash credited to
the Account on the applicable date by the Market Value Per Share on
the date the conversion is made.
7.3 Stock Awards
Stock Awards held in an Account shall be credited, until distributed,
with additional Units in amounts equal to:
(a) the amount of any cash dividend (or the fair
market value of a dividend paid in property,
other than a dividend paid in Common Stock)
which the Non-employee Director would have
received if on the record date for the dividend
the Non-employee Director had been the owner of
record of a number of shares of Common Stock
equal to the number of Units (including
fractions) then credited to the Non-employee
Director's Account divided by
(b) the Market Value Per Share on the date the dividend is paid.
From time to time, additional Units shall be credited to the
Non-employee Director's Account in amounts equal to the number of full and
fractional shares of Common Stock which the Non-employee Director would
have received if, on the record date for a dividend which is to be paid in
Common Stock, the Non-employee Director had been the owner of record of a
number of shares of Common Stock equal to the number of Units (including
fractions) then credited to the Non-employee Director's Account. At the
time any adjustment is made in accordance with Section 6.2, the Units in a
Non-employee Director's Account also shall be appropriately adjusted.
ARTICLE 8
PAYMENT
8.1 Method and Time
A Non-employee Director's Account, together with imputed earnings
thereon, shall be distributed in a single lump sum payment or in equal
annual installments of two to ten years, provided that the
Non-employee Director has properly elected the installment method. A
single lump sum payment and, where applicable, the first installment
payment shall be payable on the f irst business day of the calendar
year immediately following the year in which the Non-employee Director
ceases to be a director, and any additional installments shall be
payable on the first business day of each succeeding year. The
election described in this paragraph shall be made by the Non-employee
Director at least one year prior to the date in which the Non-Employee
Director ceases to be a director by filing with Cinergy's Secretary a
written election form.
8.2 Lump Sum
If payment of the Non-employee Director's Account is made in a single
lump sum, (i) the number of shares of Common Stock to be tra nsferred
to the Non-employee Director shall be the number of whole Units
credited to the Non-employee Director's Account as of the close of
business on the last business day of the calendar year in which the
Non-employee Director ceases to be a director, and any fractional share
shall be paid in cash, and (ii) the full amount of Cash Awards,
and interest thereon, credited to the Non-employee Director's Account
as of the close of business on that date shall be paid in cash.
8.3 Installments
If the Non-employee Director's Account is paid in installments, (i) the
number of whole shares of Common Stock distributed on the date an
installment is payable shall be equal to the number of Units credited
to the Account as of the close of business on the last business day of
the calendar year preceding the payment date, divided by the number of
installments remaining to be paid, with any fractional share paid in
cash and (ii) the amount of cash shall be equal to the cash balance
credited to the Account as of the close of business on the last
business day of the calendar year preceding the payment date, divided
by the number of installments remaining to be paid.
ARTICLE 9
EFFECT OF DISABILITY OR DEATH
In the event of a Non-employee Director's Disability, the Board may
take any action that it deems to be equitable under the circumstances or in
the best interests of Cinergy, including, without limitation, accelerating
the payment of the Non-employee Director's Account and prorating the Award
that otherwise may have been awarded on the Grant Date based on the
Non-employee Director's period of service during the calendar year.
If a Non-employee Director dies while a member of the Board or prior to
the full payment of the Non-employee Director's Account, a number of whole
shares of Common Stock equal to the number of whole Units credited to the
Non-employee Director's Account (plus cash in lieu of any fractional
share), and any cash allocated to the Account, shall be paid in a single
sum payment to the Non-employee Director's designated Beneficiary or
Beneficiaries, if any, or to the Non-employee Director's estate if no
Beneficiaries are designated. The single sum payment shall be made within
90 days from the date of the Non-employee Director's death.
A Non-employee Director may designate a Beneficiary or Beneficiaries
(which may be an entity other than a natural person) to receive any
payments to be made under this Plan upon the Non-employee Director's death.
At any time, and from time to time, any designation may be changed or
cancelled by a Non-employee Director without the consent of any
Beneficiary. Any designation, change or cancellation must be by written
notice filed with Cinergy's Secretary and shall not be effective until
received by Cinergy's Secretary. If the Non-employee Director designates
more than one Beneficiary, payments to each Beneficiary shall be made in
equal shares unless the Non-employee Director has designated otherwise, in
which case payment shall be made in the shares designated by the
Non-employee Director.
ARTICLE 10
NO TRANSFER OR ASSIGNMENT
Awards and other amounts credited to a Non-employee Director's Account
shall not be subject to assignment, conveyance, transfer, anticipation,
pledge, alienation, sale, encumbrance or charge, whether voluntary or
involuntary, by the Non-employee Director or any Beneficiary of the
Non-employee Director, even if directed under a qualified domestic
relations order or other divorce order. An interest in an Award or the
amount represented thereby shall not provide collateral or security for a
debt of a Non-employee Director or Beneficiary or be subject to
garnishment, execution, assignment, levy or any other form of judicial or
administrative process or to the claim of a creditor of a Non-employee
Director or Beneficiary, through legal process or otherwise. Any attempt
to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge
or to otherwise dispose of benefits payable, before actual receipt of the
benefits, or a right to receive benefits, shall be void and shall not be
recognized.
ARTICLE 11
SHAREHOLDER APPROVAL
The Plan shall be subject to approval by the holders of a majority of
the shares present in person or represented by proxy and entitled to vote
thereon at a duly held shareholders' meeting of Cinergy at which a quorum
exists.
ARTICLE 12
FUNDING
12.1 Unsecured Creditor Status
This shall be unfunded plan within the meaning of the Internal Revenue
Code of 1986, as amended. Benefits provided for in the Plan constitute
only an unsecured contractual promise to pay in accordance with the
terms of the Plan by Cinergy. The right of any Non-employee Director
or Beneficiary to be paid any benefit under the Plan shall be no
greater than the right of any other general, unsecured creditor of
Cinergy.
12.2 No Trust or Fiduciary Relationship
Cinergy shall be responsible for the payment of all benefits provided
under the Plan. Nothing contained in the Plan shall be deemed to
create a trust or fiduciary relationship of any kind for the benefit of
any Non-employee Director or Beneficiary. Although, at its discretion,
Cinergy may establish one or more trusts for the purpose of providing
for the payment of such benefits, the assets of any such trust shall be
subject to the claims of Cinergy's creditors and, to the extent any
benefits provided for under the Plan are not paid from any such trust,
they shall remain the obligation of, and shall be paid by, Cinergy.
ARTICLE 13
MISCELLANEOUS
13.1 No Right of Nomination
Nothing in this Plan shall be deemed to create any obligation on the
part of the Board to nominate any Non-employee Director for re-election
by Cinergy's shareholders.
13.2 No Individual Liability
It is declared to be the express purpose and intention of the Plan
that, except as otherwise required by law, no individual liability
whatever shall attach to, or be incurred by, Cinergy, its
shareholders, officers, employees, or members of the Board, or any
representatives appointed by the Board, under or by reason of any of
the Plan's terms or conditions.
13.3 Governing Laws
The Plan shall be construed and administered according to the laws of
the State of Delaware (without giving effect to the conflict of law
principles of that State) to the extent that those laws are not
preempted by the laws of the United States of America.
13.4 Amendment; Termination
The Plan may at any time or from time to time be amended, modified or
terminated by the Board; provided that, except as previously specified
in the Plan, without a Non-employee Director's consent, no amendment,
modification or termination shall (i) adversely affect the balance in a
Non-employee Director's Account or (ii) permit payment of such balance
prior to the date(s) specified by the Non-employee Director or provided
for in the Plan.
13.5 Headings
The headings of articles and sections of the Plan are for convenience
of reference only and do not define, limit, construe or otherwise
effect the contents thereof.
13.6 Change in Control
Notwithstanding anything in this Plan to the contrary, in the event of
a Change in Control of Cinergy, each Non-employee Director's Account
shall be immediately payable.
A "Change in Control" of Cinergy shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have
occurred:
(1) Any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the 1934 Act) is or becomes the beneficial owner (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of securities of Cinergy (not including in the securities
beneficially owned by such person any securities acquired directly
from Cinergy or its affiliates) representing 50% or more of the
combined voting power of Cinergy's then outstanding securities,
excluding any person who becomes such a beneficial owner in
connection with a transaction described in clause (i) of paragraph
(2) below; or
(2) There is consummated a merger or consolidation of Cinergy or any
direct or indirect subsidiary of Cinergy with any other
corporation, other than (i) a merger or consolidation which would
result in the voting securities of Cinergy outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least
50% of the combined voting power of the securities of Cinergy or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Cinergy (or similar transaction) in which no person is or becomes
the beneficial owner, directly or indirectly, of securities of
Cinergy (not including in the securities beneficially owned by
such person any securities acquired directly from Cinergy or its
affiliates other than in connection with the acquisition by
Cinergy or its affiliates of a business) representing 25% or more
of the combined voting power of Cinergy's then outstanding
securities; or
(3) During any period of two consecutive years, individuals who at the
beginning of that period constitute the Board and any new director
(other than a director whose initial assumption of office is in
connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to
the election of directors of Cinergy) whose appointment or
election by the Board or nomination for election by Cinergy's
shareholders was approved or recommended 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 that period or whose
appointment, election or nomination for election was previously
so approved or recommended cease for any reason to constitute a
majority of the Board; or
(4) The shareholders of Cinergy approve a plan of complete liquidation
or dissolution of Cinergy or there is consummated an agreement for
the sale or disposition by Cinergy of all or substantially all of
Cinergy's assets, other than a sale or disposition by Cinergy of
all or substantially all of Cinergy's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by shareholders of Cinergy in substantially the
same proportions as their ownership of Cinergy immediately prior
to such sale.
13.7 Pooling of Interests Accounting
In the event any Award under this Plan would adversely affect the
ability of Cinergy to participate in a subsequent merger or other
corporate transaction that involves the use of pooling of interests
accounting, the Board may, in its discretion, reverse any such
Award, effective as of its Grant Date, and replace it with a Cash
Award or provide other substitute compensation or take any other
action which it deems necessary or appropriate to allow the
transaction to proceed on a pooling of interests basis.
ARTICLE 14
CONTINUANCE BY A SUCCESSOR
In the event that Cinergy shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that a corporation,
partnership or person other than a subsidiary or affiliate of Cinergy shall
succeed to all or substantially all of Cinergy's business, the successor
may be substituted for Cinergy under the Plan by adopting the Plan.
EXHIBIT F-1
January 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cinergy Corp./ File No. 70-______
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"). As required
by the rules and regulations of the Commission under the Act, I am
furnishing this opinion as an exhibit to Cinergy's Declaration on Form U-1
being concurrently filed herewith (such Declaration, including any
amendments that may be filed thereto, the "Application").
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 retirement 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
<PAGE>
Exhibit G
FORM OF PUBLIC NOTICE
Cinergy Corp. 70-
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 retirement 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 retirement
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 future accruals of retirement benefits
will be paid entirely in shares of Common Stock, except under certain
circumstances.
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. "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
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 deprive any
participant (or beneficiary) of any benefits accrued under the Plan prior
to the termination or amendment without his or her consent.
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.
<PAGE>
Exhibit H/SEC File No. 70-_____
CINERGY CORP. CONSOLIDATED CAPITALIZATION
ACTUAL
SEPTEMBER 30, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,601
Retained earnings 943
Accumulated other comprehensive income (4)
Total common stock equity 2,542 40.9%
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.5%
Debt
Long-term debt 2,211
Long-term debt due within one year 186
Notes payable and other short-term
obligations 1,185
Total debt 3,582 57.6%
Total capitalization $ 6,217 100.0%
The following table sets forth Cinergy's pro forma capitalization, assuming
consolidation of non-recourse debt issued by EWGs and FUCOs allocable to
Cinergy ($1.1 billion) based on its ownership interest therein. It should
be noted that such consolidation is inconsistent with the requirements of
GAAP, and is being provided to the staff of the Securities and Exchange
Commission solely at its request.
CINERGY CORP. CONSOLIDATED CAPITALIZATION
PRO FORMA
SEPTEMBER 30, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,601
Retained earnings 943
Accumulated other comprehensive income (4)
Total common stock equity 2,542 34.6 %
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.3 %
Debt
Long-term debt 3,194
Long-term debt due within one year 190
Notes payable and other short-term
obligations 1,318
Total debt 4,702 64.1 %
Total capitalization $ 7,337 100.0 %
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.
FINANCIAL STATEMENTS
TWELVE MONTHS ENDED SEPTEMBER 30, 1998
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP. CONSOLIDATED
(Unaudited)
Pages 1 through 5
Note:
Pro forma adjustments are not included with the following financial statements
since the authorization requested herein does not have a material effect on the
components of the financial statements presented.
1
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1998
(unaudited)
(dollars in thousands)
ASSETS
Current Assets
Cash and temporary cash investments $ 78,826
Restricted deposits 1,531
Notes receivable 71
Accounts receivable less accumulated provision
for doubtful accounts of $20,689 at September
30, 1998 832,766
Materials, supplies, and fuel - at average cost 189,300
Prepayments and other 56,368
-----------
1,158,862
Utility Plant - Original Cost
In service
Electric 9,102,204
Gas 772,006
Common 185,896
10,060,106
Accumulated depreciation 3,982,686
6,077,420
Construction work in progress 226,362
Total utility plant 6,303,782
Other Assets
Regulatory assets 1,033,651
Investments in unconsolidated subsidiaries 502,623
Other 438,699
1,974,973
$ 9,437,617
2
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1998
(unaudited)
(dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 917,760
Accrued taxes 206,361
Accrued interest 49,011
Notes payable and other short-term obligations 1,185,486
Long-term debt due within one year 186,000
Other 98,848
----------
2,643,466
Non-Current Liabilities
Long-term debt 2,210,488
Deferred income taxes 1,095,884
Unamortized investment tax credits 159,030
Accrued pension and other postretirement benefit costs 305,269
Other 388,483
4,159,154
Total liabilities 6,802,620
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 92,648
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding
shares - 158,547,701 at September 30, 1998 1,585
Paid-in capital 1,600,776
Retained earnings 943,647
Accumulated other comprehensive loss (3,659)
----------
Total common stock equity 2,542,349
$9,437,617
3
<PAGE>
CINERGY CORP.
CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED
SEPTEMBER 30, 1998
(unaudited)
(in thousands, except per share amounts)
Operating Revenues
Electric $4,720,684
Gas 830,318
Other 56,568
5,607,570
Operating Expenses
Fuel and purchased and exchanged power 2,760,717
Gas purchased 608,748
Other operation and maintenance 991,075
Depreciation and amortization 318,205
Taxes other than income taxes 270,037
----------
4,948,782
Operating Income 658,788
Equity in Earnings of Unconsolidated Subsidiaries 50,922
Other Income and (Expenses) - Net (18,088)
Interest 240,933
Income Before Taxes 450,689
Income Taxes 142,518
Preferred Dividend Requirements of Subsidiaries 8,104
Net Income $ 300,067
Average Common Shares Outstanding 158,007
Earnings Per Common Share $1.90
Earnings Per Common Share - Assuming Dilution $1.90
Dividends Declared Per Common Share $1.80
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income Equity
Twelve Months Ended September 30, 1998
Balance at October 1, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
Comprehensive income
Net income 300,067 $300,067 300,067
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (39) (39)
Minimum pension liability
adjustment (1,133) (1,133)
--------
Other comprehensive loss
total (1,172) (1,172)
--------
Comprehensive income total $298,895
Issuance of 868,572 shares of
common stock - net 8 29,084 29,092
Treasury shares purchased (3) (6,728) (6,731)
Treasury shares reissued 3 6,771 6,774
Dividends on common stock (284,296) (284,296)
Other 122 4,414 4,536
------ ---------- ---------- ------- ----------
Balance at September 30, 1998 $1,585 $1,600,776 $ 943,647 $(3,659) $2,542,349
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<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
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 3,226,030
<TOTAL-CURRENT-ASSETS> 41,710
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 11,603
<TOTAL-ASSETS> 3,279,343
<COMMON> 1,585
<CAPITAL-SURPLUS-PAID-IN> 1,600,776
<RETAINED-EARNINGS> 939,988
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,542,349
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 733,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,994
<TOT-CAPITALIZATION-AND-LIAB> 3,279,343
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (8,016)
<OTHER-OPERATING-EXPENSES> 4,954
<TOTAL-OPERATING-EXPENSES> (3,062)
<OPERATING-INCOME-LOSS> 3,062
<OTHER-INCOME-NET> 333,444
<INCOME-BEFORE-INTEREST-EXPEN> 336,506
<TOTAL-INTEREST-EXPENSE> 36,439
<NET-INCOME> 300,067
0
<EARNINGS-AVAILABLE-FOR-COMM> 300,067
<COMMON-STOCK-DIVIDENDS> 284,296
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
FINANCIAL STATEMENTS
TWELVE MONTHS ENDED SEPTEMBER 30, 1998
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
(Unaudited)
Pages 1 through 5
Note:
Pro forma adjustments are not included with the following financial statements
since the authorization requested herein does not have a material effect on the
components of the financial statements presented.
<PAGE>
CINERGY CORP.
BALANCE SHEET
AT SEPTEMBER 30, 1998
(unaudited)
(dollars in thousands)
ASSETS
Current Assets
Cash and temporary cash investments $ 272
Notes receivable from affiliated companies 5,433
Accounts receivable - net 969
Accounts receivable from affiliated companies 22,269
Taxes receivable 4,596
Prepayments and other 4,171
----------
41,710
Other Assets
Investments in consolidated subsidiaries 3,232,883
Investments in unconsolidated subsidiaries (6,853)
Other 11,603
3,279,343
$3,284,714
Page 2 of 5
<PAGE>
CINERGY CORP.
BALANCE SHEET
AT SEPTEMBER 30, 1998
(unaudited)
(dollars in thousands)
LIABILITIES AND SHAREHOLDER EQUITY
Current Liabilities
Notes payable $ 733,000
Accounts payable 3,859
----------
736,859
Non-Current Liabilities 135
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
158,547,701 at September 30, 1998 1,585
Paid-in capital 1,600,776
Retained earnings 943,647
Accumulated other comprehensive loss (3,659)
----------
Total common stock equity 2,542,349
$3,279,343
Page 3 of 5
<PAGE>
CINERGY CORP.
STATEMENT OF INCOME
TWELVE MONTHS ENDED
SEPTEMBER 30, 1998
(unaudited)
(dollars in thousands, except per share amounts)
Operating Expenses
Other operation and maintenance $ 4,626
Taxes other than income taxes 328
--------
4,954
Operating Loss (4,954)
Equity in Subsidiaries 343,135
Equity in Earnings of Unconsolidated Subsidiaries (2,913)
Other Income and (Expenses) - Net (6,778)
Interest 36,439
Income Before Taxes 292,051
Income Taxes (8,016)
Net Income $300,067
Page 4 of 5
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
STATEMENT OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income Equity
Twelve Months Ended September 30, 1998
Balance at October 1, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
Comprehensive income
Net income 300,067 $300,067 300,067
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (39) (39)
Minimum pension liability
adjustment (1,133) (1,133)
--------
Other comprehensive loss
total (1,172) (1,172)
--------
Comprehensive income total $298,895
Issuance of 868,572 shares of
common stock - net 8 29,084 29,092
Treasury shares purchased (3) (6,728) (6,731)
Treasury shares reissued 3 6,771 6,774
Dividends on common stock (284,296) (284,296)
Other 122 4,414 4,536
------ ---------- ---------- ------- ----------
Balance at September 30, 1998 $1,585 $1,600,776 $ 943,647 $(3,659) $2,542,349
</TABLE>
Page 5 of 5
<TABLE> <S> <C>
<ARTICLE> OPUR1
<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
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,303,782
<OTHER-PROPERTY-AND-INVEST> 502,623
<TOTAL-CURRENT-ASSETS> 1,158,862
<TOTAL-DEFERRED-CHARGES> 1,033,651
<OTHER-ASSETS> 438,699
<TOTAL-ASSETS> 9,437,617
<COMMON> 1,585
<CAPITAL-SURPLUS-PAID-IN> 1,600,776
<RETAINED-EARNINGS> 939,988
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,542,349
0
92,648
<LONG-TERM-DEBT-NET> 2,210,488
<SHORT-TERM-NOTES> 1,185,486
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 186,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,220,646
<TOT-CAPITALIZATION-AND-LIAB> 9,437,617
<GROSS-OPERATING-REVENUE> 5,607,570
<INCOME-TAX-EXPENSE> 142,518
<OTHER-OPERATING-EXPENSES> 4,948,782
<TOTAL-OPERATING-EXPENSES> 5,091,300
<OPERATING-INCOME-LOSS> 516,270
<OTHER-INCOME-NET> 32,834
<INCOME-BEFORE-INTEREST-EXPEN> 549,104
<TOTAL-INTEREST-EXPENSE> 240,933
<NET-INCOME> 308,171
8,104
<EARNINGS-AVAILABLE-FOR-COMM> 300,067
<COMMON-STOCK-DIVIDENDS> 284,296
<TOTAL-INTEREST-ON-BONDS> 180,366
<CASH-FLOW-OPERATIONS> 771,911
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
