-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Qd4ed8N6tV4IAP+QGcuNAZUwu7CLciUAyup8Owfvvc8Qo6R7pyETeDvraIz1xivR oSt/Ry9p1zlqmMeph8naDg== 0000950124-95-000898.txt : 199507120000950124-95-000898.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950124-95-000898 CONFORMED SUBMISSION TYPE: DEF 14C PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950420 FILED AS OF DATE: 19950328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSI ENERGY INC CENTRAL INDEX KEY: 0000081020 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 350594457 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14C SEC ACT: 1934 Act SEC FILE NUMBER: 001-03543 FILM NUMBER: 95523663 BUSINESS ADDRESS: STREET 1: 1000 E MAIN ST CITY: PLAINFIELD STATE: IN ZIP: 46168 BUSINESS PHONE: 3178399611 FORMER COMPANY: FORMER CONFORMED NAME: PUBLIC SERVICE CO OF INDIANA INC DATE OF NAME CHANGE: 19900509 DEF 14C 1 INFORMATION STATEMENT 1 SCHEDULE 14C (RULE 14C-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14C INFORMATION INFORMATION STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant / / Filed by a party other than the registrant /X/ Check the appropriate box: / / Preliminary information statement /X/ Definitive information statement PSI Energy, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) Bowne of Chicago, Inc. - -------------------------------------------------------------------------------- (Name of Person(s) Filing Information Statement) Payment of filing fee (Check the appropriate box): /X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14c-5(g) / / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transactions applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:1 - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registrations statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: - -------------------------------------------------------------------------------- (2) Form, schedule or registration statement no.: - -------------------------------------------------------------------------------- (3) Filing party: - -------------------------------------------------------------------------------- (4) Date filed: - -------------------------------------------------------------------------------- - --------------- 1 Set forth the amount on which the filing fee is calculated and state how it was determined. 2 PSI ENERGY, INC. 1000 EAST MAIN STREET PLAINFIELD, INDIANA 46168 --------------------------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 20, 1995 TO THE SHAREHOLDERS OF PSI ENERGY, INC.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PSI Energy, Inc. will be held at the Cincinnati Club Building, 30 Garfield Place, Cincinnati, Ohio, on Thursday, April 20, 1995 at 10:00 a.m., Eastern Daylight Saving Time, for the purposes of: (1) amending the Amended Articles of Consolidation to permit the shareholders, in addition to the directors, to amend the bylaws; (2) the election of seven directors; and transacting such other business as may legally come before the meeting. Only shareholders of record at the close of business on Tuesday, February 21, 1995, will be entitled to vote at the meeting and at any adjournment thereof. Proxies will not be solicited for this meeting and you are requested not to send us a proxy. Shareholders are welcome to attend the meeting in person and cast their votes by ballot on the issues presented at the meeting. PSI ENERGY, INC. BY CHERYL M. FOLEY, SECRETARY Dated: March 29, 1995 3 PSI ENERGY, INC. 1000 EAST MAIN STREET PLAINFIELD, INDIANA 46168 (317) 839-9611 INFORMATION STATEMENT INTRODUCTION This Information Statement is being mailed on or about March 29, 1995 to the shareholders of PSI Energy, Inc., an Indiana corporation ("PSI Energy"), in connection with its Annual Meeting of Shareholders to be held on April 20, 1995, or any adjournment or postponement of such meeting (the "Annual Meeting"). The Annual Report to Shareholders of CINergy Corp., a Delaware corporation (the "Company"), including financial statements, for the year ended December 31, 1994 accompanies the mailing of this Information Statement. On June 1, 1988, PSI Energy, through a restructuring, became the operating subsidiary of PSI Resources, Inc. ("PSI"). In the restructuring, all outstanding shares of PSI Energy's common stock were exchanged for common stock of PSI. Effective October 24, 1994 (the "Effective Date"), the business combination (the "Merger") of PSI and The Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), was consummated and the Company became the holding company for PSI Energy and CG&E. Pursuant to the Merger, the former common stock holders of PSI and CG&E became holders of common stock of the Company. PSI Energy is an operating utility primarily engaged in providing electric service in north central, central, and southern Indiana. 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 ("Union Light"), in adjacent areas in Kentucky. The Company also owns all the stock of CINergy Services, Inc. ("CINergy Services") and CINergy Investments, Inc. ("CINergy Investments"). CINergy Services provides management, financial, administrative, engineering, legal and other services to the Company, PSI Energy, CG&E and CINergy Investments. The Company conducts its non-regulated businesses through CINergy Investments and its subsidiaries. As a result of the Merger, the Company became the owner of all of the 53,913,701 outstanding shares of PSI Energy's common stock. There remain outstanding 5,117,737 shares of PSI Energy's cumulative preferred stock as of the close of business on February 21, 1995 which also have certain voting rights as described herein. Since the Company's ownership represents more than 96% of the total votes that could be cast at the Annual Meeting, and since shareholders do not have cumulative voting rights and the Company intends to vote in favor of the proposals contained herein, approval of the matters set forth herein is assured. Therefore, the Board of Directors of PSI Energy (the "Board") considered it inappropriate to solicit proxies for the Annual Meeting. Please be advised, therefore, that this is only an Information Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. However, if you wish to vote your shares of cumulative preferred stock you may do so by attending the meeting in person and casting your vote by a ballot which will be provided for that purpose. 4 VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS Only holders of record of PSI Energy's voting securities at the close of business on February 21, 1995 (the "Record Date") will be entitled to vote at the Annual Meeting. The outstanding voting securities of PSI Energy are divided into two classes: common stock and cumulative preferred stock. The class of cumulative preferred stock has been further issued in six series. The shares outstanding as of the Record Date, and the vote to which each share is entitled, are as follows:
CLASS SHARES OUTSTANDING VOTES PER SHARE --------------------------------------------- ------------------ --------------- Common Stock (without par value) 53,913,701 1 vote Cumulative Preferred Stock Par Value $100 per share 799,812 1 vote Par Value $25 per share 4,317,925 1/4 vote
As noted above, the Company owns all the outstanding common stock of PSI Energy. No person or group is known by management of PSI Energy to be the beneficial owner of more than 5% of PSI Energy's cumulative preferred class of stock. The only person or group known by management of PSI Energy to be the beneficial owner of more than 5% of any series of PSI Energy's cumulative preferred stock as of December 31, 1994, is set forth in the following table. This information is based on the most recently available report filed with the Securities and Exchange Commission pursuant to the requirements of Regulation 13D-G under the Securities Exchange Act of 1934 (the "1934 Act") and transmitted to management of PSI Energy or the Company by the filing person.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS ----------------------------------------------- ----------------------- -------- Cumulative Preferred Stock Series 7.44% (par value $25 per share) Wellington Management Company 400,000 shares(1) 10.00% 75 State Street Boston, Massachusetts 02109
- ------------ (1) Holder reports having shared dispositive power with respect to all shares, and sole voting, shared voting, and sole dispositive powers with respect to none of these shares. 2 5 SECURITY OWNERSHIP OF MANAGEMENT The beneficial ownership of the outstanding shares of the Company's common stock held by each director-nominee and named executive officer (as the latter is defined on page 12), and of units equal to one share of the Company's common stock paid as compensation to non-employee directors, as of December 31, 1994 is set forth in the following table.
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP(2) UNITS(3) ------------------------------------------ -------------------------- -------- James K. Baker 13,605 shares Michael G. Browning 18,835 shares 2,172 John A. Hillenbrand, II 28,259 shares 1,878 J. Wayne Leonard 60,259 shares John M. Mutz 13,992 shares Jon D. Noland 66,621 shares Jackson H. Randolph 23,549 shares James E. Rogers 212,147 shares Van P. Smith 17,390 shares All directors and executive officers as a 615,595 shares group (representing 0.40% of the class)
- ------------ (1) No individual listed beneficially owned more than 0.14% of the outstanding shares of common stock. (2) Includes shares which the individual listed has the right to acquire within 60 days pursuant to the exercise of stock options in the following amounts: Mr. Baker -- 12,787; Mr. Browning -- 12,787; Mr. Hillenbrand -- 12,787; Mr. Leonard -- 51,150; Mr. Mutz -- 12,787; Mr. Noland -- 51,150; Mr. Rogers -- 179,025; and Mr. Smith -- 12,787. (3) Each unit represents one share of the Company's common stock credited to the account of the respective directors as of December 31, 1994 under the Company's Directors' Deferred Compensation Plan. BUSINESS TO COME BEFORE THE MEETING The only items of business expected to be presented at the Annual Meeting are (i) a proposal to amend the Amended Articles of Consolidation to permit the shareholders of PSI Energy to amend the bylaws of PSI Energy (defined as "the Corporation" below under the subheading Proposed Amendment of Amended Articles of Consolidation) and (ii) the election of seven directors to serve until the next annual meeting of shareholders and until their successors are duly chosen and qualified. Proposed Amendment of Amended Articles of Consolidation The Board has unanimously approved, and recommends that the shareholders vote to approve, an amendment to the Amended Articles of Consolidation (the "Articles") to assure that the shareholders of the Corporation, in addition to the directors of the Corporation, have the capability to amend the bylaws of the Corporation. 3 6 To accomplish this under the Indiana Business Corporation Act, it will be necessary to delete existing Division L(V) of the Articles in its entirety and amend Division L(V) to provide in its entirety as follows: "The bylaws of the Corporation may be altered, amended or repealed, in whole or in part, and new bylaws may be adopted, at any annual, regular or special meeting of the shareholders of the Corporation or at any annual, regular or special meeting of the board of directors of the Corporation by the affirmative vote of a majority of the board of directors; provided, however, that the board of directors of the Corporation may not unilaterally amend any bylaws which were amended by the affirmative vote of the shareholders of the Corporation within the preceding twenty-four months." Currently, the bylaws of the Corporation may be amended only by the Board. This amendment to the Articles will permit the shareholders to amend the bylaws as well, thus affording the shareholders the opportunity to be more involved in and to exert more control over the corporate procedures and other matters governed by the bylaws of the Corporation. The proposed amendment to the Articles must be approved by a majority of the votes cast by holders of the outstanding shares of common and cumulative preferred stock, voting together. In tabulating the vote, abstentions and broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote. The Company intends to vote all of the outstanding shares of common stock of PSI Energy in favor of the foregoing amendment to the Articles and, since the Company's ownership of such common stock represents over 96% of the voting power of PSI Energy, the adoption of the foregoing amendment by PSI Energy's shareholders is assured. Election of Directors Effective March 3, 1995, by resolution adopted by the Board, the bylaws of PSI Energy were amended to provide that the Board consist of not less than one and not more than seven persons. Previously, the bylaws of PSI Energy had provided that the Board shall consist of not less than nine nor more than fifteen persons and the Board had consisted of twelve directors. The Board has set the size of the Board at seven and has nominated the individuals listed below for election as directors, all of whom are presently members of the Board and, with the exception of Mr. Randolph, were elected by shareholders at the 1994 annual meeting. Mr. Randolph became a director of PSI Energy as of the Effective Date. All of the proposed nominees have signified their willingness to serve, if elected. The Board would like to acknowledge Messrs. Hugh A. Barker, Kenneth M. Duberstein, Emerson Kampen, J. Wayne Leonard, and Melvin Perelman, each of whom is presently a director but not standing for re-election as a director at the Annual Meeting. The Board would also like to acknowledge Mr. Robert L. Thompson who retired from the Board as of the Effective Date. Their advice and support have been sincerely appreciated. Directors will be elected at the Annual Meeting by a plurality of the votes cast. In tabulating the vote, abstentions and broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote. The Company intends to vote all of the outstanding shares of common stock of PSI Energy in favor of nominees set forth below and, since the Company's ownership of such common stock represents over 96% of the voting power of PSI Energy, the election of such nominees is assured. 4 7 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 the past five years and no such individual holds another position or office with the Company or any of its subsidiaries. - ----------------------------------------------------------------------------------------------- JAMES K. BAKER Director since 1986. Age 63 Mr. Baker is Chairman of the Board of Arvin Industries, Inc., which is engaged in the manufacturing of automotive parts. He is a director of NBD Bancorp, Inc., Space Industries International, Inc., Tokheim Corporation, GEON Company, and Amcast Industrial Corp. - ----------------------------------------------------------------------------------------------- MICHAEL G. BROWNING Director since 1990. Age 48 Mr. Browning is Chairman and President of Browning Investments, Inc., which is engaged in real estate ventures. Until December 30, 1994, he was also President of Browning Real Estate, Inc., the general partner of various real estate investment partnerships. Mr. Browning is a director of Conseco, Inc. - ----------------------------------------------------------------------------------------------- JOHN A. HILLENBRAND, II Director since 1985. Age 63 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. - ----------------------------------------------------------------------------------------------- JOHN M. MUTZ Director since 1991. Age 59 Member -- Executive Committee Mr. Mutz has served as President of PSI Energy since October 1994. He was President of PSI from October 1993 until October 1994. Prior to joining PSI, Mr. Mutz was president of the Lilly Endowment, Inc., in Indianapolis, from 1989 to 1993 and previously served as lieutenant governor of the State of Indiana from 1981 to 1988. While in office, he was president of the Indiana Senate, headed up the Department of Commerce and the Department of Employment and Training Services, and served as Commissioner of Agriculture. Mr. Mutz is a director of ADESA Corporation, CCP Insurance, Inc., and National City Bank, Indiana. - -----------------------------------------------------------------------------------------------
5 8 - ----------------------------------------------------------------------------------------------- JACKSON H. RANDOLPH Director since 1994. Age 64 Chairman -- Executive Committee Mr. Randolph has served as Chairman of the Board and Chief Executive Officer of the Company, PSI Energy, CINergy Investments, CINergy Services and CG&E since October 1994 (and of Union Light since January 1995). He was Chairman of the Board, President and Chief Executive Officer of CG&E from May 1993 until October 1994 (and of Union Light from June 1993 until January 1995); previously he served as President and Chief Executive Officer of CG&E and Union Light. Mr. Randolph is a director of Cincinnati Financial Corporation, PNC Bank Corp., and PNC Bank, Ohio, N.A. - ----------------------------------------------------------------------------------------------- JAMES E. ROGERS Director since 1988. Age 47 Member -- Executive Committee Mr. Rogers has served as Vice Chairman, President and Chief Operating Officer of the Company and CINergy Services, and Vice Chairman and Chief Operating Officer of PSI Energy, CINergy Investments, and CG&E since October 1994 (and Vice Chairman and Chief Operating Officer of Union Light since January 1995). He was Chairman and Chief Executive Officer of PSI from October 1993 until October 1994; during the years 1988-1993, he was Chairman, President and Chief Executive Officer. Mr. Rogers was also Chairman, President and Chief Executive Officer of PSI Energy from October 1988 until October 1994. He is a director of Bankers Life Holding Corporation, Duke Realty Investments, Inc., and NBD Bank, N.A. - ----------------------------------------------------------------------------------------------- VAN P. SMITH Director since 1986. Age 66 Mr. Smith is Chairman of Ontario Corporation which is engaged in the manufacturing of aircraft engine components. He is a director of each of the subsidiaries of Ontario Corporation, Lilly Industries, Inc., Meridian Insurance Group, Inc., and Meridian Mutual Insurance Co. - -----------------------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD During the year ended December 31, 1994, the Board held seven meetings. All directors except Emerson Kampen attended more than 75% of the aggregate number of Board and committee meetings which they were eligible to attend. Committees of the boards of directors of PSI and PSI Energy were as follows: the Audit Committee, which met twice during 1994, whose principal functions were to recommend to the Board a firm of independent certified public accountants to conduct audits of the accounts and affairs of PSI and PSI Energy; to review the scope and results of audits, as well as the accounting procedures, internal controls, and accounting and financial reporting policies and practices of PSI 6 9 and PSI Energy, with the independent certified public accountants; and to make such reports and recommendations to the Board as it deemed appropriate; the Compensation and Nominating Committee, which met four times during 1994, whose principal functions were to establish PSI's and PSI Energy's compensation philosophy, the compensation of the chief executive officer and all other executive officers, and fees of directors; to recommend and administer compensation plans for all executive officers and key employees; to establish qualifications desired in prospective nominees to the Board; and to make recommendations to the Board of persons to fill vacancies on the Board; and the Executive Committee; the Finance Committee; and the Public Policy Committee. Effective March 3, 1995, by resolutions adopted by the Board, all former committees of the Board were dissolved and a new Executive Committee was formed, and all powers previously vested in any former committee of the Board were vested in the Executive Committee. The Executive Committee is the only standing committee of the Board. The Executive Committee is empowered to exercise, in the intervals between Board meetings, the full powers of the Board in the management of the business and affairs of PSI Energy, including the power to declare dividends and distributions in a manner consistent with the Indiana Business Corporation Act. The number of Executive Committee members is fixed at three; the members are Jackson H. Randolph, James E. Rogers, and John M. Mutz. DIRECTORS' COMPENSATION Effective March 3, 1995, the Board approved a recommended decrease in directors' retainer and meeting attendance fees. Under the revised arrangement, directors who are not employees (the "non-employee directors") will receive an annual retainer fee of $8,000 plus a fee of $1,000 for each Board meeting attended; however, any director of PSI Energy who also serves as a director of the Company or any of its affiliates shall neither receive such annual retainer fee, nor any compensation for attendance at any Board meeting that is held concurrently or consecutively with a meeting of the Company's board of directors. Each nominee as a non-employee director of PSI Energy (Messrs. Baker, Browning, Hillenbrand, and Smith) is currently also a director of the Company. Directors who are also employees of the Company or any of its subsidiaries (Messrs. Mutz, Randolph, and Rogers) will 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 Company common stock. If deferred in such units, the stock will be distributed to the director at the time of retirement from the appropriate board. Amounts deferred in cash will be paid at the same time. Under the Company's Retirement Plan for Directors, non-employee directors with five or more years of service will receive annual compensation in an amount equal to the annual Board fees in effect at the time of termination of service as a director, paid for as many years as the director served on the Board. This plan covers non-employee directors serving on the boards of directors of the Company, CINergy Services, 7 10 CG&E or PSI Energy. Prior service by non-employee directors of CG&E, PSI, or PSI Energy as of the Effective Date will be credited under this plan. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION In 1994 the executive compensation program of PSI was administered by the Compensation and Nominating Committee (the "PSI Committee") of the Board. The PSI Committee established PSI Energy's compensation philosophy and the compensation of the Chief Executive Officer and all other executive officers prior to the Effective Date. After the Effective Date, it is the responsibility of the Compensation Committee of the Company's board of directors (the "CINergy Committee") to establish the compensation for the Chief Executive Officer and all other executive officers. The PSI Committee also administered compensation plans for all executive officers and key employees. The PSI Committee was composed of Messrs. Van P. Smith (Chairman), Michael G. Browning, Kenneth M. Duberstein, and Melvin Perlman, each of whom was an independent, non-employee director of PSI. The CINergy Committee is composed of Messrs. Smith (Chairman), Browning, George C. Juilfs, and John J. Schiff, Jr., each of whom is an independent, non-employee director of the Company. Compensation Philosophy PSI's executive compensation philosophy sought to provide a total compensation program that would attract, retain, and motivate the high quality employees needed to provide superior service to its customers and to maximize returns to its shareholders. PSI's executive compensation program sought to link executive and shareholder interests through both cash-based and equity-based incentive plans, in order to reward both corporate and individual performance and balance short-term and long-term considerations. It was PSI's goal to provide the opportunity for its executive officers, including its chief executive officer, to earn total compensation that was commensurate with their contribution to the success of PSI and that was above the 50th percentile level of comparable utilities based on revenue and trending toward the pay practices of a broader range of American companies with comparable revenue. PSI's executive compensation program consisted of three components: base salary, annual cash incentive opportunities, and long-term equity-based incentive opportunities. Under the terms of the Merger Agreement, certain executive compensation and benefit plans of PSI and PSI Energy were to be adopted and implemented by the Company as of the Effective Date. On October 18, 1994, the Company adopted, effective as of the Effective Date, the Stock Option Plan, Performance Shares Plan, Annual Incentive Plan, and Executive Supplemental Life Insurance Program (the "Board approved plans"). Each of these plans is substantially similar to its predecessor PSI or PSI Energy plan. Each PSI or PSI Energy predecessor plan was merged into and became a part of the Company plan which bears the same name. The Company has retained an independent compensation and benefits consulting firm to conduct a study of existing executive compensation program structures and to assist the CINergy Committee as it formulates an integrated Company compensation philosophy, including the elements of compensation and the mix of base salary, annual and long-term incentives. The consulting firm will also advise as to the 8 11 retention, modification, or replacement of the Board approved plans and as to plan design and administration generally. Annual Cash Incentive Plan For 1994, PSI executive officers were eligible for incentives under PSI's Annual Incentive Plan. Approximately 140 key PSI employees participated in the plan in 1994 and were granted cash awards to the extent that certain pre-determined corporate and individual goals were attained during that year. Graduated standards for achievement were developed to encourage each employee's contribution. The potential awards ranged from 6.5% to 55% of the annual salary of the participant (including deferred compensation) depending upon the achievement levels and the participant's position. The PSI Committee reviewed and approved both the plan goals at the beginning of the year and the achievements at the end of the year. In 1994, PSI's plan used a combination of corporate and individual goals. Achievement of corporate goals accounted for 50% of the total possible award while achievement of individual goals constituted the remainder. The portion of the payout in March, 1995, attributable to the corporate goals was based on 1994 achievement in two areas: (1) operating income so as to maximize PSI's return on equity; and (2) fuel cost per million BTU. The operating income goal accounted for 37.5% and the fuel cost goal constituted 12.5% of the total possible award. In 1994, incentive awards for each executive officer who was a PSI employee reflected individual achievement as well as PSI's attainment of its corporate goals. Individual performance goals for each PSI executive varied from executive to executive; however, all related to the achievement of PSI's overall strategic mission of becoming a premier general energy services company. For each executive officer who was a PSI employee, the PSI Committee assessed the extent to which each person contributed toward the accomplishment of PSI's mission in 1994. Although its determinations were subjective, the PSI Committee believed that its assessment accurately measured the performance of each executive officer. Based upon the extraordinary efforts of the executive officers in 1994 leading to the consummation of the Merger, the PSI Committee determined that the maximum available award was payable. For 1995, the Company's Annual Incentive Plan will use a combination of corporate and individual goals. Corporate goals will account for 50% of the total possible award and achievement of individual goals will make up the balance. The corporate goals for 1995 will be based in two areas: (1) earnings per share; and (2) non-fuel O&M merger savings. The earnings per share goal will account for 37.5% and the merger savings goal will constitute 12.5% of the total possible award. For 1995, approximately 400 key employees will participate in the plan. The potential awards will range up to a maximum of 55% of the participant's annual salary, depending upon the achievement levels and the participant's position. Other Compensation Decisions The PSI Committee, at its discretion, could award other forms of compensation in recognition of outstanding service to PSI or any of its subsidiaries. Consistent with that philosophy, the PSI Committee approved in 1994 special performance awards for Messrs. Rogers and Leonard (as set forth in footnotes to 9 12 the Summary Compensation Table) for exemplary performance associated with consummation of the Merger. Long-Term Incentive Plan and Stock Option Plan The Company's Performance Shares Plan (the "Performance Shares Plan") is a long-term incentive plan developed to reward officers and other key employees for contributing to long-term success by achieving corporate and individual goals approved by the CINergy Committee. The executive officers named in the compensation tables participate in this plan (on a prorated basis through December 31, 1994 for Mr. Noland), and the same corporate and individual goals used in the Company's Annual Incentive Plan are applicable to this plan. The potential award opportunities are established in the same manner as the Annual Incentive Plan, with the minimum award opportunities ranging from 13.33% to 36.66% of annual salary for the full performance cycle. Performance cycles consist of overlapping four year periods. Because the former PSI Energy Performance Shares Plan was merged into the Company's Performance Shares Plan on the Effective Date, the then existing PSI Energy performance cycles of 1992-1995 and 1994-1997 are the current performance cycles under the Company's plan. The Company's executive officers and other key employees are also eligible for grants under the Company's Stock Option Plan. The Plan is designed to align executive compensation with shareholder interests. Both non-qualified and incentive stock options have been granted under the plan. 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. Chief Executive Officer Mr. Randolph's 1994 base salary was determined pursuant to an employment agreement with the Company dated December 11, 1992, as amended and restated as of the Effective Date (see Employment Agreements and Severance Arrangements on page 17). For 1994, Mr. Randolph also received incentive compensation under the CG&E Key Employee Annual Incentive Plan (replaced by the Company's Annual Incentive Plan as of the Effective Date) in the amount of $255,750, of which 57% was based on achievement of CG&E goals and 43% was based upon the CG&E Management Compensation Committee's determination of his achievement of individual goals. Mr. Randolph also was granted an option to purchase 250,000 shares of the Company's common stock on the Effective Date at a price of $22.875. Mr. Roger's 1994 base salary was determined pursuant to an employment agreement with PSI Energy dated May 17, 1990 as modified prior to February 17, 1993, which agreement was superseded by an employment agreement with the Company as amended and restated July 2, 1993, but effective as of the Effective Date (see Employment Agreements and Severance Arrangements on page 17). For 1994, Mr. Rogers also received incentive compensation under PSI's Annual Incentive Plan in the amount of $265,729, of which 50% was based on achievement of PSI corporate goals and the balance was based upon the PSI Committee's determination of his individual goal achievement. Mr. Rogers also was granted an option to purchase 250,000 shares of the Company's common stock on the Effective Date at a price of $22.875. 10 13 Summary The CINergy Committee is reviewing the compensation philosophies of PSI and CG&E in order to determine the CINergy Committee's philosophy. Although its philosophy has not been finalized, it is the intent of the CINergy Committee to emphasize incentive compensation, both short-term and long-term, in order to tie the interests of the executive officers and the Company's shareholders. It is anticipated that base salary, annual cash incentives, and long-term incentives will play an integral part in executive compensation in the future. Although the Company currently has adopted executive compensation plans identical to those previously available at PSI and PSI Energy, the CINergy Committee is reviewing those plans in order to determine the types of plans which will complement its executive compensation philosophy. The 1993 Omnibus Budget Reconciliation Act ("OBRA") became law in August 1993 for compensation earned in 1994 and later. Under the law, income tax deductions of publicly traded companies may be limited to the extent total compensation (including base salary, annual bonus, restricted stock awards, stock option exercises and non-qualified benefits) for certain executive officers exceeds $1 million in any one year. Under OBRA, the deduction limit does not apply to payments which qualify as "performance based" or compensation which is payable under a written contract that was in effect before February 17, 1993. The CINergy Committee will review the application of OBRA to future compensation; however, it intends to compensate executives on performance achieved, both corporate and individual. Prior to the Merger, the PSI Compensation and Nominating Committee was composed of Messrs. Browning, Duberstein, Perelman and Smith. The CINergy Compensation Committee is composed of Messrs. Smith, Browning, Juilfs and Schiff. Messrs. Juilfs and Schiff join in this Report as it relates to the Company. The tables which follow, and accompanying footnotes, reflect the decisions covered by the above discussion. Van P. Smith Michael G. Browning George C. Juilfs John J. Schiff, Jr. Kenneth M. Duberstein Melvin Perelman 11 14 SUMMARY COMPENSATION TABLE The following table sets forth the total compensation paid to PSI Energy's chief executive officer and to each of its additional four most highly compensated executive officers (the "named executive officers") for services to the Company and its subsidiaries, including PSI Energy, during the calendar years ended December 31, 1994, 1993 and 1992. The data presented includes, for Mr. Randolph, compensation paid by CG&E and its subsidiaries and, for the remaining named executive officers, compensation paid by PSI and its subsidiaries, for the periods prior to the Merger.
LONG-TERM COMPENSATION ------------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS --------------------------------------- ------------------------- --------- (A) (B) (C) (D) (E) (F) (G) (H) (I) NAME OTHER RESTRICTED SECURITIES AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS(1) COMPENSATION POSITION YEAR ($) ($) ($) ($) (#) ($) ($) - --------------------- ---- ------- ------- ------------ ---------- ------------ --------- ------------ Jackson H. Randolph 1994 470,000 255,750 5,719 0 250,000 0 92,724(2) Chairman and CEO 1993 425,000 200,000 3,512 0 0 0 84,886 1992 425,000 150,000 3,096 0 0 0 61,292 James E. Rogers 1994 433,144 265,729 64,417 0 250,000 273,720 285,393(2) Vice Chairman 1993 402,408 239,324 0 0 0 193,618 83,968 and COO 1992 385,008 239,254 0 0 0 150,287 118,998 John M Mutz(3) 1994 342,380 136,952 3,001 0 100,000 11,436 6,097(3) President 1993 81,250 31,281 0 0 0 0 250,334 Jon D. Noland(4) 1994 240,266 77,125 1,660 0 0 95,714 55,112(5) Executive 1993 230,092 77,311 0 0 0 81,399 8,129 Vice President 1992 220,904 70,468 0 0 0 63,192 11,770 J. Wayne Leonard 1994 211,208 79,203 32,146 0 100,000 81,132 93,555(5) Senior Vice 1993 187,168 92,568 0 0 0 62,210 6,762 President 1992 181,128 57,780 0 0 0 48,313 9,518 and CFO
- ------------- (1) The amounts appearing in this column are the values of the shares and cash paid out under the Company's Performance Shares Plan as successor to PSI Energy's Performance Shares Plan. 1994 amounts were earned by the named executive officers during the four-year cycle from 1990 through 1993 under the PSI Energy Performance Shares Plan, and were paid in substantially equal installments in 1994 and 1995. (2) For 1994, amount includes for Messrs. Randolph and Rogers, respectively: a deferred compensation award in the amount of $50,000 pursuant to the terms of each officer's Deferred Compensation Agreement; employer matching contributions under the CG&E and PSI 401(k) Plans of $3,969 and $8,896; above-market interest on amounts deferred pursuant to the Deferred Compensation Agreements of $21,211 and $14,559; and benefits under Split Dollar Life Insurance Agreements of $17,544 and $16,933. Also includes for Mr. Rogers for 1994 insurance premiums paid with respect to executive and group-term life insurance, a special performance award, and relocation compensation in the amounts of $4,530, $120,500, and $69,975, respectively. (3) Mr. Mutz served as President of PSI from October 4, 1993 through the Effective Date, at which time he became President of PSI Energy. Prior to October 4, 1993, Mr. Mutz served as a non-employee director of PSI and PSI Energy and was otherwise unaffiliated with the companies. For 1994, amount set forth as All Other Compensation consists entirely of insurance premiums paid with respect to executive and group-term insurance. (4) Mr. Noland retired effective January 1, 1995. (5) For 1994, amount includes for Messrs. Noland and Leonard, respectively: insurance premiums paid with respect to executive and group-term life insurance of $4,207 and $920; and employer matching contributions under the PSI 401(k) Plan of $8,896 and $7,935. Also includes for Mr. Noland supplemental life insurance of $42,009, and for Mr. Leonard a special performance award and relocation compensation in the amounts of $50,000 and $34,700, respectively. 12 15 OPTION/SAR GRANTS TABLE The following table sets forth information concerning individual grants of options to purchase the Company's common stock made to the named executive officers during 1994.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM - -------------------------------------------------------------------------------------- ---------------------- (A) (B) (C) (D) (E) (F) (G) NUMBER OF % SECURITIES OF TOTAL UNDERLYING OPTIONS/SARS EXERCISE OPTIONS/SARS GRANTED TO OR BASE GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10% NAME (#) FISCAL YEAR ($/SH) DATE ($) ($) - ----------------------------- ------------ ------------ -------- ---------- --------- --------- Jackson H. Randolph 250,000 20.83% 22.875 10/24/2004 1,579,985 3,491,354 James E. Rogers 250,000 20.83% 22.875 10/24/2004 1,579,985 3,491,354 John J. Mutz 100,000 8.33% 22.875 10/24/2004 631,994 1,396,542 Jon D. Noland 0 N/A N/A N/A N/A N/A J. Wayne Leonard 100,000 8.33% 22.875 10/24/2004 631,994 1,396,542
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE The following table sets forth information concerning stock options held by the named executive officers during 1994. During 1994, none of the named executive officers exercised any stock options. The table shows the numbers of shares for which options were held as of December 31, 1994, and the values for "in-the-money" options, which represent the positive spread between the exercise prices of outstanding stock options and the market price of the shares as of December 31, 1994, which was $23.50 per share.
(A) (B) (C) (D) (E) VALUE OF NUMBER OF UNEXERCISED SECURITIES UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS AT FY-END FY-END (#) ($) SHARES ACQUIRED VALUE ---------------------- ----------------- ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/ NAME (#) ($) UNEXERCISABLE UNEXERCISABLE - ---------------------------- ---------------- -------- ---------------------- ----------------- Jackson H. Randolph 0 N/A 0/250,000 0/156,250 James E. Rogers 0 N/A 179,025/250,000 1,931,823/156,250 John M. Mutz 0 N/A 12,787/100,000 92,694/62,500 Jon D. Noland 0 N/A 51,150/0 355,150/0 J. Wayne Leonard 0 N/A 51,150/100,000 355,150/62,500
13 16 LONG-TERM INCENTIVE PLAN AWARDS TABLE The following table sets forth the potential payouts of awards granted under the Performance Shares Plan to the named executive officers during 1994.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS ---------------------------------- (A) (B) (C) (D) (E) (F) NUMBER OF SHARES, PERFORMANCE OR UNITS OR OTHER OTHER PERIOD THRESHOLD TARGET MAXIMUM RIGHTS UNTIL MATURATION SHARES SHARES SHARES NAME (#) OR PAYOUT (#) (#) (#) - --------------------------- ------------------ ---------------- --------- ------ ------- Jackson H. Randolph 6,139 1994-1997 (1) 12,278 (1) James E. Rogers 7,510 1994-1997 (1) 15,020 (1) John M. Mutz 3,452 1994-1997 (1) 6,905 (1) Jon D. Noland 568 1994-1997 (1) 1,136 (1) J. Wayne Leonard 2,327 1994-1997 (1) 4,653 (1)
- ------------ (1) The number of performance shares of the Company's common stock contingently granted is calculated by determining the award opportunity in dollars for the performance cycle and dividing this by the per share price of the common stock at the time of the grant. For the 1994 through 1997 performance period, the award opportunity for participants is measured in terms of percentages ranging from 13.33% to 36.66% of annual earnings. The performance shares vest based upon the achievement of long-term corporate and individual goals established by the Company's board of directors at the beginning of the performance period and measured at the end of the cycle. The actual size of an award is determined by multiplying the amount contingently granted by a weighted calculation reflecting the extent to which the aggregate of the pre-established goals has been met. For the 1994 through 1997 performance period, an award of approximately twice the number of shares as contingently granted will be made if the aggregate of the pre-established goals are met. There is no minimum (threshold) award and the Company's board of directors may enhance the target award in recognition of exemplary performance or achievement as to individual goals. Awards are made in cash and Company common stock over a two-year period immediately following each performance cycle. The amount of an award that is generally paid in cash is equal to the amount of federal, state and local income taxes due on each installment, plus, with respect to the second installment, dividends otherwise payable on such installment. PENSION BENEFITS The primary pension benefits payable at retirement to each of the named executive officers are provided pursuant to the terms of either CG&E's non-contributory management pension plan (the "CG&E Pension Plan") or PSI Energy's non-contributory pension plan (the "PSI Energy Pension Plan"). Mr. Randolph is covered under the terms of the CG&E Pension Plan. Messrs. Rogers, Mutz, Noland and Leonard are covered under the terms of the PSI Energy Pension Plan. Under the terms of the CG&E Pension Plan, the retirement income payable to a pensioner is 1.3% of final average pay plus 0.35% of final average pay in excess of covered compensation, times the number of years of credited service through 30 years, plus 0.1% of final average pay times the number of years of 14 17 credited service over 30 years. Final average pay is the average annual salary, based on July 1 pay rates, during the employee's five consecutive calendar years producing the highest such average within the last 10 calendar years immediately preceding retirement. Covered compensation is the average social security taxable wage base over a 35-year period. Mr. Randolph is also a vested participant in CG&E's Supplemental Executive Retirement Plan which upon his retirement, death or disability will provide benefits for a period of 15 years in an annual amount equal to 75% of his highest annual compensation, reduced by social security benefits and by amounts received from the CG&E Pension Plan. The following pension plan table illustrates the estimated annual benefits payable to Mr. Randolph at normal retirement age 65 for the years of service indicated under the terms of the CG&E Pension Plan and the supplemental plan. Compensation utilized to determine benefits under the plans includes salary and bonus as set forth within the respective columns of the summary compensation table. Mr. Randolph's estimated credited years of service at normal retirement age 65 are 37 years.
YEARS OF SERVICE ---------------------------------------------------- COMPENSATION 15 20 25 30 OR MORE - ----------------------------------------- -------- -------- -------- ---------- $200,000................................. $ 75,000 $100,000 $125,000 $150,000 225,000................................. 84,375 112,500 140,625 168,750 250,000................................. 93,750 125,000 156,250 187,500 300,000................................. 112,500 150,000 187,500 225,000 350,000................................. 131,250 175,000 218,750 262,500 400,000................................. 150,000 200,000 250,000 300,000 450,000................................. 168,750 225,000 281,250 337,500 550,000................................. 206,250 275,000 343,750 412,500 650,000................................. 243,750 325,000 406,250 487,500 750,000................................. 281,250 375,000 468,750 562,500 850,000................................. 318,750 425,000 531,250 637,500 950,000................................. 356,250 475,000 593,750 712,500
The PSI Energy Pension Plan covers all of its employees who meet certain minimum age and service requirements. Compensation utilized to determine benefits under the PSI Energy Pension Plan includes substantially all salaries and annual incentive compensation, including deferred compensation for Mr. Rogers. PSI Energy Pension Plan benefits are determined under a final average pay formula with consideration of years of service to a maximum of 30, age at retirement and the applicable average social security wage base. PSI Energy also maintains an Excess Benefit Plan, in which Messrs. Rogers, Mutz, Noland, and Leonard participate, designed to restore pension benefits to those individuals whose benefits under the PSI Energy Pension Plan would otherwise exceed the limits imposed by the Internal Revenue Code of 1986, as amended (the "Code"). 15 18 The following pension plan table illustrates the estimated annual benefits payable as a straight-life annuity under both plans to participants who retire at age 62. Such benefits are not subject to any deduction for social security or other offset amounts.
YEARS OF SERVICE ------------------------------------------------------------------------------- COMPENSATION 5 10 15 20 25 30 35 - --------------------- ------- -------- -------- -------- -------- -------- -------- $200,000............. $15,270 $ 30,550 $ 45,820 $ 61,090 $ 76,360 $ 91,640 $106,910 225,000............. 17,270 34,550 51,820 69,090 86,360 103,640 120,910 250,000............. 19,270 38,550 57,820 77,090 96,360 115,640 134,910 300,000............. 23,270 46,550 69,820 93,090 116,360 139,640 162,910 400,000............. 31,270 62,550 93,820 125,090 156,360 187,640 218,910 450,000............. 35,270 70,550 105,820 141,090 176,360 211,640 246,910 550,000............. 43,270 86,550 129,820 173,090 216,360 259,640 302,910 650,000............. 51,270 102,550 153,820 205,090 256,360 307,640 358,910 750,000............. 59,270 118,550 177,820 237,090 296,360 355,640 414,910 850,000............. 67,270 134,550 201,820 269,090 336,360 403,640 470,910 950,000............. 75,270 150,550 225,820 301,090 376,360 451,640 526,910
The estimated credited years of service at age 62 for the executive officers covered under the terms of the PSI Energy Pension Plan are as follows: Mr. Rogers, 21.44 years; Mr. Mutz, 3.39 years; and Mr. Leonard, 30 years. Mr. Noland retired effective January 1, 1995 with 11.53 credited years of service. Messrs. Rogers, Mutz and Noland also participate in the PSI Energy Supplemental Retirement Plan, which is designed to provide coverage to employees, designated by the Board, who will not otherwise qualify for full retirement benefits under the PSI Energy Plan. The benefit provided by the PSI Energy Supplemental Retirement Plan will be an amount equal to that which a covered employee with maximum permitted years of participation (30 years) would have received under the PSI Energy Plan, reduced by the actual benefit provided by the PSI Energy Plan and the Excess Benefit Plan, and further reduced by benefits the covered employee will be eligible to receive from retirement plans from previous self-employment and from previous employers. Under the PSI Energy Supplemental Retirement Plan, the annual retirement benefit payable to Mr. Noland is $38,418, and the estimated annual benefit payable at age 62 is $140,000 for Mr. Rogers and $39,375 for Mr. Mutz. The Company has an Executive Supplemental Life Insurance Program, which provides key management personnel, including the named executive officers, with either post-retirement life insurance coverage or deferred compensation. A participant in the program may elect either to continue life insurance coverage after retirement or to receive the total amount of coverage in the form of deferred compensation payable in 10 equal annual installments beginning at age 62 or retirement, whichever is later. An employee who elects to receive deferred compensation will receive, at the later of age 62 or retirement only deferred compensation payments, and his or her life insurance coverage will be cancelled at that time. Coverage is $50,000 for participants with annual base salaries of less than $100,000; $100,000 for participants with annual base salaries between $100,000 and $200,000; and $150,000 for participants with annual base salaries over $200,000. The annual retirement benefit payable to Mr. Noland, and the estimated annual benefit 16 19 payable, at the later of age 62 or retirement, to each of the remaining four named executive officers, is $15,000 per year over ten years. EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS The Company entered into individual employment agreements with Mr. Randolph and Mr. Rogers (each sometimes hereinafter individually referred to as the "Executive") as of the Effective Date. Pursuant to his employment agreement, Mr. Randolph will serve as Chairman and Chief Executive Officer of the Company until November 30, 1995, and then will retire from the position of Chief Executive Officer but will continue to serve as Chairman of the Board of the Company until November 30, 2000. Mr. Rogers will serve as Vice Chairman, President and Chief Operating Officer of the Company until November 30, 1995, and thereafter will serve as Vice Chairman, President and Chief Executive Officer. Mr. Rogers' agreement is for a term of three years; however, on each annual anniversary date it may, with notice, be automatically extended for an additional year. During the terms of their agreements, Messrs. Randolph and Rogers will receive minimum annual base salaries of $465,000 and $422,722, respectively. Each will also be paid an annual incentive cash award of up to 55% of his annual salary pursuant to the Company's Annual Incentive Plan, and will be eligible to participate in all other incentive, stock option, performance award, savings, retirement and welfare plans applicable generally to Company employees and executives. If the Executive's employment terminates 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. 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 Performance Shares Plan and Executive Supplemental Life Insurance Program, (c) the value of all deferred compensation and all executive life insurance benefits whether or not then vested or payable and (d) medical and welfare benefits for 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 pursuant to which he will serve as President of, and will be nominated for election as a director of, PSI Energy until October 4, 1998. Commencing October 4, 1996, the term of the employment agreement may be extended for one additional year upon mutual agreement. During the term of his agreement, Mr. Mutz will receive a minimum annual base salary of $330,000, will be eligible to receive an annual incentive cash award of up to 40% of his annual base salary pursuant to the Company's Annual Incentive Plan, will be eligible to participate in all other incentive, stock option, 17 20 performance award, savings, retirement and welfare plans applicable generally to Company employees and executives, and will receive other fringe benefits. In connection with his participation in the PSI Energy Supplemental Retirement Plan, Mr. Mutz's employment agreement provides that he will be vested in his benefit (calculated including a profession transition allowance of $250,000 paid in 1993) at a rate of 20% per year of service beginning in 1994 without offset for other retirement benefits, and will be guaranteed a benefit thereunder based on its current terms even if the plan subsequently is amended to reduce benefits or is terminated. If Mr. Mutz's employment is terminated as a result of death, for cause or by him without good reason, he or his beneficiary will be paid a lump sum cash amount equal to (a) his unpaid annual base salary through the termination date, (b) a pro rata portion of his Annual Incentive Plan award, (c) his vested accrued benefits under the Performance Shares Plan, the PSI Energy Pension Plan, the Excess Benefit Plan and the Supplemental Retirement Plan and (d) any unpaid deferred compensation (including accrued interest or earnings) and unpaid accrued vacation pay. If, instead, Mr. Mutz's employment is terminated prior to a change in control (as defined) without cause or by him for good reason, he will be paid (a) a lump sum cash amount equal to the present value of his annual base salary and maximum 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 he would have been entitled had he remained in employment until the end of the term of the agreement under the Company's Performance Shares Plan and Executive Supplemental Life Insurance Program, and PSI Energy's Pension Plan, Excess Benefit Plan, and Supplemental Retirement Plan, (c) the value of all deferred compensation and all executive life insurance benefits whether or not then vested or payable and (d) continued medical and welfare benefits through the end of the term of the agreement. If Mr. Mutz's employment is terminated after a change in control he 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, he will be provided life, disability, accident and health insurance benefits for 36 months, reduced to the extent comparable benefits are received, without cost, by him. Mr. Randolph has a severance agreement with the Company which provides that if, within three years after the Effective Date he terminates his employment for good cause or his employment is terminated by the Company other than for disability or cause, the Company will pay him a cash amount equal to 300% of his annualized compensation for the most recent five years ending before the Effective Date, less $1,000, plus a cash "gross-up" payment equal to the federal excise tax due on such amount, if any. DEFERRED COMPENSATION AGREEMENTS Mr. Randolph and CG&E, and Mr. Rogers and PSI and PSI Energy, have entered into deferred compensation agreements effective as of January 1, 1992 (the "Deferred Compensation Agreements") pursuant to which, in lieu of granting to each executive officer a cash increase in base salary, each executive officer was credited with a $50,000 base salary increase in the form of deferred compensation. Such amount 18 21 will be deferred annually, in the case of both Mr. Randolph and Mr. Rogers, for a five-year period beginning January 1, 1992 and ending December 31, 1996, and in the case of Mr. Rogers, for an additional five-year period beginning January 1, 1997 and ending December 31, 2001. The Deferred Compensation Agreements were assumed by the Company as of the Effective Date. In general, Mr. Randolph's Deferred Compensation Agreement provides that if his employment terminates for any reason, other than death or disability, prior to January 1, 1997, he will receive the total amount of his deferred income plus interest. If Mr. Randolph's employment terminates on or after January 1, 1997, he will receive an annual cash benefit of $179,000 payable for a 15-year period beginning January 2001. Proportional benefits are payable to Mr. Randolph in the event his employment is terminated for death or disability prior to January 1, 1997. In general, Mr. Rogers' Deferred Compensation Agreement provides that if his employment terminates for any reason, other than death, prior to January 1, 1997, he will receive a lump sum cash payment equal to the total amount deferred for the first five-year period described above plus interest. If Mr. Rogers' employment terminates for any reason, other than death, on or after January 1, 1997, 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, increasing to $554,400 per year if payment commences in January 2010. Comparable amounts are payable to Mr. Rogers in the event his employment is terminated for disability prior to January 1, 1997 or if Mr. Rogers dies (i) prior to January 1, 1997 while employed or disabled, or (ii) on or after January 1, 1997 but before commencement of payment of the 15-year payments described above; provided, however, if Mr. Rogers becomes disabled prior to the completion of the first award period, the amounts paid will be proportionately reduced based on the ratio of the amount deferred to the date of disability to the total amount that would have been deferred to the end of the first award period. In addition, if Mr. Rogers' employment terminates for any reason, other than death or disability, on or after January 1, 1997, but before January 1, 2002, he will receive a lump sum cash payment equal to the total amount deferred during the second five-year period described above plus interest. Additionally, if Mr. Rogers' employment terminates for any reason, other than death or disability, on or after January 1, 2002, 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, increasing to $247,000 per year if payment begins in January 2010. Provided that Mr. Rogers is employed on January 1, 1997, comparable amounts are payable to Mr. Rogers in the event his employment is terminated for disability prior to January 1, 2002 or if Mr. Rogers 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. RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS The independent public accountants for the Company and its subsidiaries, including PSI Energy, for the year 1994 were Arthur Andersen LLP, with offices both in Cincinnati, Ohio and Indianapolis, Indiana. Upon recommendation of the Audit Committee of the Company's board of directors, this board 19 22 employed on January 25, 1995 Arthur Andersen LLP as independent public accountants for the Company and its subsidiaries for the year 1995. 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 BY SHAREHOLDERS In order to be considered for inclusion in PSI Energy's Information Statement for the 1996 Annual Meeting of Shareholders, proposals from shareholders must be received by the Secretary of the Company at 139 East Fourth Street, Cincinnati, Ohio 45202 not later than November 30, 1995. By Order of the Board of Directors CHERYL M. FOLEY Secretary Dated: March 29, 1995 20 -----END PRIVACY-ENHANCED MESSAGE-----