File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(Name of company or companies filing this statement and
addresses of principal executive offices)
Allegheny Energy, Inc.
(Name of top registered holding company parent of each
applicant or declarant)
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
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Item No. 1. Description of Proposed Transaction
Allegheny Energy, Inc. (AE or the Company), Hagerstown,
Maryland, a registered holding company under the Public
Utility Holding Company Act of 1935, proposes, from time to
time through December 31, 2010, to grant Incentive Stock
Options, Nonqualified Stock Options, Performance Awards and
Restricted Stock (collectively, "Awards"), and to issue up
to 10 million shares of its common stock, par value $1.25
per share ("Common Stock"), pursuant to the Allegheny
Energy, Inc. 1998 Long-Term Incentive Plan (the "Plan") as
described herein.
The AE Board of Directors has adopted the Plan, subject
to shareholder approval. The purpose of the Plan is to
maximize the long-term success of AE, to ensure a balanced
emphasis on both current and long-term performance, to
enhance Plan participants' identification with shareholders'
interests, and to facilitate the attraction and retention of
highly competent key individuals.
The Management Review and Director Affairs Committee of
the Board of Directors of the Company (the "Committee") will
administer the Plan. The Committee will consist of not less
than two directors who are not employees of AE or its
subsidiaries. The Committee will have exclusive authority
to interpret the Plan. The Plan permits the Committee to
grant, in its discretion, Awards to directors of the Company
or certain of its subsidiaries and those employees, as
determined by the Committee, who have an impact on the long-
term performance and success of the Company. The Committee
has the exclusive authority to determine, in its sole
discretion, those to whom awards would be granted at any
time, as well as the type, size and other terms and
conditions of each granted award, subject only to the
parameters in the Plan. The Committee may
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make grants under any or a combination of all of the various categories of
awards that are authorized under the Plan. Under certain
conditions, the Committee can delegate authority under the
Plan to officers or employees of the Company, and the full
Board of Directors can exercise authority conferred upon the
Committee.
Any Awards granted pursuant to the Plan will, unless
otherwise provided in the Plan or the related award
agreement or otherwise determined by the Committee, be
subject to complete or partial forfeiture if the recipient
ceases to render substantial services on a regular basis to
AE or its subsidiaries during a designated period of time
following the grant. Rights to an award may also be
forfeited if the recipient engages in certain conduct
detrimental to the Company's best interests. All Awards
become vested and unforfeitable, however, upon the
occurrence of a change in control of AE (as defined in the
Plan). Shares of Common Stock subject to terminated,
expired, surrendered or forfeited awards become available
again for issuance under the Plan.
Nonqualified Stock Options entitle the grantee to
purchase, not more than ten years after the grant, up to the
number of shares of Common Stock specified in the grant at a
price set by the Committee at the time the grant is made.
The price cannot be less than fair market value on the date
of grant.
Stock Options designated by the Committee as Incentive
Stock Options are intended to comply with Section 422 of the
Internal Revenue Code and may be granted only to employees.
The aggregate amount (calculated on the basis of the fair
market value of Common Stock at the time of each grant) of
the interest of any grantee in Incentive Stock Options that
may vest in a calendar year may not exceed $100,000.
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Restricted Stock awards are grants of shares of Common
Stock held by the Company for the benefit of the grantee
without payment of consideration by the grantee. The
Committee will establish a restriction period for each
award. The grantee's right to transfer the shares is
subject to restrictions, but during the restriction period,
except as may be otherwise provided in the applicable award
agreement, the grantee will be entitled to dividends paid on
the Restricted Stock and will have the right to vote the
shares.
Performance Awards are grants of rights to receive a
payment of cash and/or shares of Common Stock contingent
upon the extent to which certain predetermined performance
targets have been met during an Award Period. The
performance targets may include such goals related to the
performance of the Company and/or the performance of a
participant as may be established by the Committee in its
discretion.
The Committee has the discretion to establish a
dividend equivalent account (i.e. an account to which
amounts are credited equal to the dividends the option
holder would receive if the option were exercised) with
respect to any option. The Committee also has the authority
to specify that a participant can be granted a reload option
(i.e. an option that is intended to replace shares of Common
Stock used by the recipient to pay the exercise price of
and/or withholding taxes on a previously granted option).
Common Stock used for awards under the Plan may be
authorized but unissued Common Stock or Common Stock
purchased on the open market, in private transactions or
otherwise. The Company proposes to make a total of 10
million shares of Common Stock available for grants under
the Plan. The number of shares available for issuance under
the Plan
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are subject to anti-dilution adjustments upon the
occurrence of significant corporate events. In general,
the maximum number of shares of Common Stock that may be the
subject of any award to a grantee during any calendar year
is 600,000, provided, however, that in applying this limit,
if an award is intended to be earned over more than one
calendar year, the shares subject to that award shall be
allocated to the first calendar year in which they may be
earned (without regard to any provisions of the Plan
regarding acceleration of vesting).
The Plan has no fixed expiration date. However, for
the purpose of awarding incentive stock options under
Section 422 of the Internal Revenue Code, the Incentive Plan
will expire ten years from its effective date. Certain
provisions of the Plan relating to performance-based awards
under Section 162(m) of the Internal Revenue Code will
expire on the fifth anniversary of the Plan's effective
date. The Board of Directors of the Company may terminate
or amend the Plan at any time, but may not, without
stockholder approval, increase the total number of shares of
Common Stock available for grants.
Annual Meeting.
Approval of the Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock
represented in person or by proxy at the annual meeting,
scheduled to be held on May 14, 1998. AE intends to solicit
proxies from its shareholders to approve the proposed plan.
AE may employ professional proxy solicitors to assist in the
solicitation of proxies, and may pay their expenses and
compensation for such assistance in an amount not to exceed
$20,000. Attached hereto as Exhibit I are forms of letters
of solicitation proposed to be used and forms of all other
documents proposed to be transmitted with such letters of
solicitation.
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Proxy Solicitation.
AE requests that its declaration with respect to the
solicitation of proxies for voting and expenditures of money
and other considerations in connection therewith be
permitted to become effective forthwith as provided in Rule
62(d). Proxies will be solicited by mail and may be
solicited by a professional solicitor, officers, directors
and regular employees of subsidiaries of AE personally, by
telephone or facsimile. AE may reimburse persons holding
stock in their names or the names of their nominees for
their expenses in sending solicitation materials to their
principals. The cost of the solicitation and annual meeting
is not expected to exceed $445,000.
Except as described herein, no associate company or
affiliate of AE or any affiliate of any such associate
company has any material interest, directly or indirectly,
in the proposed transaction.
Item 2. Fees, Commission and Expenses,
Including Expenses of Annual Meeting of Stockholders
The following estimated fees and expenses are
expected to be incurred by AE in connection with the annual
meeting, including the proposed proxy solicitation:
Transfer Agent Fee for
Shareholders' Meeting,
including mailing costs $101,000
Proxy Solicitation $ 20,000
Printing $ 40,000
Broker Mailings $250,000
Legal Fees $ 25,000
Miscellaneous $ 9,000
________
TOTAL $445,000
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Item 3. Applicable Statutory Provisions
The applicant is informed by counsel that the proposed
transactions, in whole or in part, may be subject to
Sections 6(a), 7 and 12(e) of the Public Utility Holding
Company Act of 1935 and Rules 62 and 65 thereunder.
Item 4. Regulatory Approval
The Company believes that no commission other than
the Securities and Exchange Commission has jurisdiction over
the proposed transactions.
Item 5. Procedure
It is requested that the Commission's order
granting this Application or Declaration be issued as soon
as possible given the proposed timetable with respect to the
annual meeting of shareholders. There should be no
recommended decision by a hearing officer or by any other
responsible officer of the Commission and no 30-day waiting
period between the issuance of the Commission's Order and
its effective date. The Division of Investment Management
may assist in the preparation of the Commission's decision
unless the Division opposes the matters covered by this
Application or Declaration.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
B. Allegheny Energy, Inc. 1998
Long-Term Incentive Plan (to
be filed by amendment).
F. Opinion of counsel.
H. Proposed SEC Notice.
I. Forms of Notice of Annual Meeting,
Proxy Statement and Proxy (to
be filed by amendment).
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(b) Financial Statements
None.
Item 7. Information as to Environmental Effects.
(a) For the reasons set forth in
Item 1, the authorization applied for
herein does not require major federal
action significantly affecting the
quality of the human environment for
purposes of Section 102(2)(C) of the
National Environmental Policy Act (42
U.S.C. 4232(2)(C)).
(b) Not applicable.
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SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned company has
duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: March 12, 1998 ALLEGHENY ENERGY, INC.
/s/ Carol G. Russ
By: Carol G. Russ
Counsel
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EXHIBIT F
March 12, 1998
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Referring to the Application or Declaration on Form U-1
contemporaneously filed by Allegheny Energy, Inc. (AE) under the
Public Utility Holding Company Act of 1935 with respect to the
proposed issuance of stock under a stock option plan of AE, all
as described in the Application or Declaration of which this
Opinion is a part, I have examined such documents and questions
of law as I deemed necessary to enable me to render this opinion.
I understand that the actions taken in connection with
the proposed issuance of stock under the stock option plan will
be in accordance with the Application or Declaration; that all
amendments necessary to complete the above-mentioned Application
or Declaration will be filed with the Commission; that the Board
of Directors of AE will take appropriate action to declare the
issuance of stock under the stock option plan advisable; that the
Board of Directors will submit said stock option plan to a
meeting of the stockholders to take action thereon; and that all
other necessary corporate action by the Board of Directors and
officers of AE in connection with the issuance has been or will
be taken prior thereto.
Based upon the foregoing, I am of the opinion that
(1) AE is a validly organized and duly existing
corporation; and
(2) when (a) the said Application or Declaration is
permitted to become effective, (b) the above-mentioned
action shall have been duly taken, (c) the proposed
transaction is consummated in accordance therewith, and
(d) the stockholders of AE shall have approved said
stock option plan,
(i) all state laws applicable to said
proposed transaction will have been complied with;
(ii) the 10 million shares of common
stock, par value $1.25 each, to be issued under
the stock option plan will be validly issued,
fully paid and nonassessable and the holders
thereof will be entitled to the rights and
privileges appertaining thereto set forth in the
charter of AE, as amended; and
(iii) the consummation of proposed
transaction will not violate the legal rights of
the holders of any of the securities issued by AE
or by any associate of affiliate company of any of
them.
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Securities and Exchange Commission
March 12, 1998
Page 2
This opinion does not relate to State Blue Sky or
securities laws.
I consent to the use of this Opinion as part of the
Application or Declaration to which it is appended, which is
filed by AE.
Very truly yours,
/s/ Carol G. Russ
Carol G. Russ
Counsel
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EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
)
Allegheny Energy, Inc. )
Notice of Proposed Stock Option )
Plan )
Allegheny Energy, Inc. (AE or the Company), 10435 Downsville
Pike, Hagerstown, Maryland, a registered holding company under
the Public Utility Holding Company Act of 1935, proposes, from
time to time through December 31, 2010, to grant Incentive Stock
Options, Nonqualified Stock Options, Performance Awards and
Restricted Stock (collectively, "Awards"), and to issue up to 10
million shares of its common stock, par value $1.25 per share
("Common Stock"), pursuant to the Allegheny Energy, Inc. 1998
Long-Term Incentive Plan (the "Plan") as described herein.
The AE Board of Directors has adopted the Plan, subject to
shareholder approval. The purpose of the Plan is to maximize the
long-term success of AE, to ensure a balanced emphasis on both
current and long-term performance, to enhance Plan participants'
identification with shareholders' interests, and to facilitate
the attraction and retention of highly competent key individuals.
The Management Review and Director Affairs Committee of the
Board of Directors of the Company (the "Committee") will
administer the Plan. The Committee will consist of not less than
two directors who are not employees of AE or its subsidiaries.
The Committee will have exclusive authority to interpret the
Plan. The Plan permits the Committee to grant, in its
discretion, Awards to directors of the Company or certain of its
subsidiaries and those employees, as determined by the Committee,
who have an impact on the long-term performance and success of
the Company. The Committee has the exclusive authority to
determine, in its sole discretion, those to whom awards would be
granted at any time, as well as the type, size and other terms
and conditions of each granted award, subject only to the
parameters in the Plan. The Committee may make grants under any
or a combination of all of the various categories of awards that
are authorized under the Plan. Under certain conditions, the
Committee can delegate authority under the Plan to officers or
employees of the Company, and the full Board of Directors can
exercise authority conferred upon the Committee.
Any Awards granted pursuant to the Plan will, unless
otherwise provided in the Plan or the related award agreement or
otherwise determined by the Committee, be subject to complete or
partial forfeiture if the recipient ceases to render substantial
services on a regular basis to AE or its subsidiaries during a
designated period of time following the grant. Rights to an
award may also be forfeited if the recipient engages in certain
conduct detrimental to the Company's best interests. All Awards
become vested and unforfeitable, however, upon the occurrence of
a change in control of AE (as defined in the Plan). Shares of
Common Stock subject to terminated, expired, surrendered or
forfeited awards become available again for issuance under the
Plan.
Nonqualified Stock Options entitle the grantee to purchase,
not more than ten years after the grant, up to the number of
shares of Common Stock
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specified in the grant at a price set by
the Committee at the time the grant is made. The price cannot be
less than fair market value on the date of grant.
Stock Options designated by the Committee as Incentive Stock
Options are intended to comply with Section 422 of the Internal
Revenue Code and may be granted only to employees. The aggregate
amount (calculated on the basis of the fair market value of
Common Stock at the time of each grant) of the interest of any
grantee in Incentive Stock Options that may vest in a calendar
year may not exceed $100,000.
Restricted Stock awards are grants of shares of Common Stock
held by the Company for the benefit of the grantee without
payment of consideration by the grantee. The Committee will
establish a restriction period for each award. The grantee's
right to transfer the shares is subject to restrictions, but
during the restriction period, except as may be otherwise
provided in the applicable award agreement, the grantee will be
entitled to dividends paid on the Restricted Stock and will have
the right to vote the shares.
Performance Awards are grants of rights to receive a payment
of cash and/or shares of Common Stock contingent upon the extent
to which certain predetermined performance targets have been met
during an Award Period. The performance targets may include such
goals related to the performance of the Company and/or the
performance of a participant as may be established by the
Committee in its discretion.
The Committee has the discretion to establish a dividend
equivalent account (i.e. an account to which amounts are credited
equal to the dividends the option holder would receive if the
option were exercised) with respect to any option. The Committee
also has the authority to specify that a participant can be
granted a reload option (i.e. an option that is intended to
replace shares of Common Stock used by the recipient to pay the
exercise price of and/or withholding taxes on a previously
granted option).
Common Stock used for awards under the Plan may be
authorized but unissued Common Stock or Common Stock purchased on
the open market, in private transactions or otherwise. The
Company proposes to make a total of 10 million shares of Common
Stock available for grants under the Plan. The number of shares
available for issuance under the Plan are subject to anti-
dilution adjustments upon the occurrence of significant corporate
events. In general, the maximum number of shares of Common
Stock that may be the subject of any award to a grantee during
any calendar year is 600,000, provided, however, that in applying
this limit, if an award is intended to be earned over more than
one calendar year, the shares subject to that award shall be
allocated to the first calendar year in which they may be earned
(without regard to any provisions of the Plan regarding
acceleration of vesting).
The Plan has no fixed expiration date. However, for the
purpose of awarding incentive stock options under Section 422 of
the Internal Revenue Code, the Incentive Plan will expire ten
years from its effective date. Certain provisions of the Plan
relating to performance-based awards under Section 162(m) of the
Internal Revenue Code will expire on the fifth anniversary of the
Plan's effective date. The Board of Directors of the Company may
terminate or amend the Plan at any time, but may not, without
stockholder approval, increase the total number of shares of
Common Stock available for grants.
Annual Meeting.
Approval of the Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented
in person or by proxy at
2
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the annual meeting, scheduled to be held
on May 14, 1998. AE intends to solicit proxies from its
shareholders to approve the proposed plan. AE may employ
professional proxy solicitors to assist in the solicitation of
proxies, and may pay their expenses and compensation for such
assistance in an amount not to exceed $20,000. Attached hereto
as Exhibit I are forms of letters of solicitation proposed to be
used and forms of all other documents proposed to be transmitted
with such letters of solicitation.
Proxy Solicitation.
AE requests that its declaration with respect to the
solicitation of proxies for voting and expenditures of money and
other considerations in connection therewith be permitted to
become effective forthwith as provided in Rule 62(d). Proxies
will be solicited by mail and may be solicited by a professional
solicitor, officers, directors and regular employees of
subsidiaries of AE personally, by telephone or facsimile. AE may
reimburse persons holding stock in their names or the names of
their nominees for their expenses in sending solicitation
materials to their principals. The cost of the solicitation and
annual meeting is not expected to exceed $445,000.
Except as described herein, no associate company or
affiliate of AE or any affiliate of any such associate company
has any material interest, directly or indirectly, in the
proposed transaction.
The application and any amendments thereto are available for
public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a
hearing should submit their views in writing by ,
1998, to the Secretary, Securities and Exchange Commission,
Washington, DC 20549, and serve a copy on the Applicant at
the address specified above. Proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be
filed with the request. Any request for a hearing shall
identify specifically the issues of fact or law that are disputed.
A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued
in this matter. After said date, the application, as filed or as
it may be amended, may be granted.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
