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. Introduction
Cinergy Corp. ("Cinergy"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act") seeks
authority to issue (or, in the case of shares purchased on the open market,
to acquire on behalf of plan participants) and sell, from time to time
through December 31, 2004, up to 75,000 shares of Cinergy common stock,
$.01 par value per share ("Common Stock"), under the employee stock
purchase plan described below. At December 31, 1998 Cinergy had issued and
outstanding 158,664,532 shares of Common Stock.
On December 16, 1998, Cinergy's Board of Directors approved
resolutions adopting the Cinergy Corp. Sharesave Scheme (the "Plan," see
copy filed as Exhibit B)for employees of Cinergy Global Power Services Ltd.
("CGPS"), an indirect wholly-owned subsidiary of Cinergy organized under
the laws of the United Kingdom ("UK"). The Plan is governed by and
conforms to UK law and has received preliminary approval from the Inland
Revenue, the UK taxation agency equivalent to the Internal Revenue Service.
The necessary documentation has been submitted to the Inland Revenue for
formal approval, which will be obtained before the Plan is implemented.
The Plan is a typical UK "sharesave scheme" permitting employees to
purchase parent company stock at a discount.
Cinergy proposes to use proceeds from sales of Common Stock under the
Plan for general corporate purposes.
B. Cinergy Global Power Services Ltd.
Cinergy has two direct wholly-owned nonutility subsidiaries, Cinergy
Investments, Inc. and Cinergy Global Resources, Inc. ("CGR"), which
function as holding companies for Cinergy's domestic and foreign nonutility
subsidiaries, respectively. Formed in 1997 as a direct wholly-owned
subsidiary of CGR, CGPS provides project development, asset management and
other centralized services on CGR's behalf in connection with potential and
actual investments in foreign utility companies ("FUCOs") and exempt
wholesale generators ("EWGs"). At year-end 1998 Cinergy, through CGR, had
ownership interests in eight FUCOs and one foreign EWG.
CGPS provides the following services on behalf of CGR in respect of
associate FUCOs, EWGs and related project parent companies (the level and
combination of which varies from project to project):
Project Development Activities: This core activity involves
identifying, bidding on and developing investment prospects, hiring
advisers, and preparing or assisting in the preparation, review and
negotiation of project bidding, development, investment/financing,
operational and commercial contracts, documents and filings.
Asset Management Services: CGPS also provides asset management
services by which, after financial closing and acquisition of the project
investment, the project investment is managed, i.e., advice is given to the
specific Cinergy investing entity and further support services may be
provided, e.g., negotiation of additional investment or disposal of the
investment.
On-Site Technical Services: Third, after financial closing, CGPS may
also provide operational and maintenance and other technical and support
services directly to or on behalf of the in-country asset-owning entity
(i.e., the FUCO itself or the EWG that directly holds the eligible
facility). This is more likely to occur in cases where Cinergy owns a
controlling interest in the project company.
CGPS had 35 employees at year-end 1998, working in the following
areas: (i) project development/asset management, (ii) finance and (iii)
company administration. The bulk of the employees fall into the project
development/asset management function. Both those employees and the
finance staff may provide any combination of project development, asset
management and in-country services. The company administration staff
generally provide only internal support services.
C. UK Sharesave Scheme
The Plan will be administered by a three-person committee (the "Plan
Committee") initially comprised of two CGPS officers and one Cinergy
officer. Subject to certain conditions and restrictions, all current and
future employees of CGPS will be eligible to participate in the Plan.
Both authorized and unissued shares of Common Stock and previously
issued shares of Common Stock acquired by Cinergy on the open market, in
negotiated transactions or otherwise may be issued and sold to CGPS
employees pursuant to the Plan.
Each participating employee in the Plan will be granted a right (an
"Option") to acquire shares of Common Stock at a discount of up to 20% of
market value, by entering into a savings contract ("Savings Contract") to
save between 10 and 250 pounds sterling per month over either a three or
five year period. Each participant will make monthly contributions to a
savings account ("Savings Account") which will be initially administered by
Computershare Services plc as agent for the Royal Bank of Scotland (the
"Savings Carrier").
The Plan has three main attractions for participants. First, Options
are granted at a discount up to 20% of the market value of the Common
Stock. Second, any gains on the exercise of the Options will be tax-free
for the participant. Third, participants that make monthly contributions
for the entire three or five year savings period will be entitled to
receive a tax-free bonus.
Under the Plan, and after it has been approved by the Inland Revenue
(the UK taxation agency referred to above), the Plan Committee will invite
applications ("Date of Invitation") from eligible employees to apply to
enter into three and/or five year Savings Contracts. Each offering period
will make available both three and five year Savings Contracts, although an
employee that elects to participate may do so only via a single Savings
Contract three or five years with respect to that offering period. The
invitation will state the US dollar price per share of Common Stock (the
"Option Price") at which participating employees may acquire shares of
Common Stock upon the exercise of Options. The Option Price will be set at
a discount of up to 20% (the maximum permitted under UK law) of the average
of the high and low sales prices of the Common Stock as reported on the New
York Stock Exchange on the most recent trading date preceding the Date of
Invitation. The actual size of the discount will be determined by the Plan
Committee in its discretion, provided that the size of the discount will be
identical for both the three and five year Savings Contracts for that
offering period. The invitation will also direct each participant to
choose the amount of its monthly contribution to the Plan, with a minimum
of 10 pounds sterling and a maximum of 250 pounds sterling per month.
In each subsequent year in which the Plan is in effect, the Plan
Committee may determine to initiate a new offering period for three and
five year Savings Contracts, and each eligible employee may be granted
Options thereunder, notwithstanding concurrent or prior participation
by the employee in one or more additional Savings Contracts relating to
separate offering periods, provided that in respect of all Savings
Contracts in which the employee is participating, that particular
employee's contributions do not exceed 250 pounds sterling in total in any
one month.
Within 14 days of the Date of Invitation, eligible employees that wish
to participate in the Plan must submit their applications for the grant of
Options under the Plan. Each application must specify whether the employee
wishes to enter into a three or five year Savings Contract and the amount
of the monthly contribution (from 10 to 250 pounds sterling), via a payroll
deduction, that the employee wishes to make for the duration of that
Savings Contract.
Within 29 days after the Date of Invitation, the Plan Committee will
grant to each eligible employee who has submitted a valid application an
Option reflecting the terms requested in the application.
At the end of the Savings Contract (the "Maturity Date"), a tax-free
bonus will be payable by the Savings Carrier which, for the initial
offering period, will be equal to 2.75 or 7.5 monthly salary payments,
depending on whether the employee has opted for a three or five year
Savings Contract, respectively. The tax-free bonus will be added to the
savings accumulated in the Savings Account through the monthly payroll
deductions. For any offering period, the Plan Committee has the discretion
(which it must exercise at the time the Options are granted) to permit
those employees who have opted for five year Savings Contracts to leave
their accumulated savings in their Savings Accounts for an additional two
years, thereby earning a tax-free bonus payable at the end of the seventh
year equivalent to 13.5 monthly contributions from salary.
Generally, the Options will not be exercisable until the six-month
period commencing with the end of the three or five year Savings Contract
that the employee has chosen. Upon exercise of the Option, the employee
will be entitled to purchase the largest whole number of shares of Common
Stock (with any residual funds to be returned to the employee) at the
then-current exchange rate, determined by the sum of (a) the employee's
total monthly contributions for the period of the Savings Contract and (b)
the bonus payments described above (collectively, "Exercise Price"),
divided by the Option Price.
Notwithstanding the general rule that Options may be exercised only at
the end of the Savings Contract, there are certain circumstances in which
employees may exercise Options prior to the end of the three or five year
Savings Contract. For example, subject to certain conditions, if the
participant leaves the employment of CGPS due to retirement, ill health,
death, severance or other "good leaver" circumstances (as specified in the
Plan), or if Cinergy is subject to a change in control or liquidation or
similar events, a participant may in either case exercise his Option(s), to
the extent of his accumulated savings to that date together with interest
thereon (provided the Savings Account has been open for at least 12 months)
at the rate of 3% per annum. No bonus, however, will be payable in that
situation.
Participants are not required to exercise Options upon maturity of the
Savings Contracts. In the event the Option Price is higher than the market
value of the Common Stock on the Maturity Date, i.e., the Options are
"underwater", participants may withdraw the amounts accrued in their
respective Savings Accounts to that date, together with their matching
bonus payments.
The Plan has a ten years' duration. At any time, by action of the
Cinergy Board or the Plan Committee, Cinergy may alter, amend or terminate
the Plan, provided that no amendment shall become effective without
approval of the Inland Revenue.
All administrative costs of the Plan will be borne by Cinergy.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses that have been or will be incurred,
directly or indirectly, by Cinergy or any of its associate companies in
connection with the proposed transactions are not expected to exceed
approximately $37,000, comprised of administrative costs of approximately
$10,000 and legal fees and expenses of Herbert Smith (a firm of UK
soliciters) of approximately $27,000.
Item 3. Applicable Statutory Provisions
Sections 6(a) and 7 and rules 42 and 54 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 EWG or 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 such exhibit, even if the entire amount of
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 will
have an immaterial effect 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, 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 U.S. state or federal regulatory agency other than the Commission
under the Act has jurisdiction over the proposed transactions. As
mentioned in Item 1, the Inland Revenue, the United Kingdom equivalent of
the Internal Revenue Service, must approve the terms of the Plan prior to
its implementation.
Item 5. Procedure
Cinergy requests that the Commission issue and publish as soon as
practicable the requisite notice under Rule 23 with respect to the filing
of this application, and that the Commission issue an order granting the
authority requested herein as soon as practicable after expiration of the
public notice period.
Applicant 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 (Exhibit to
Cinergy's 1993 Form 10-K in File No. 1-11377 and hereby incorporated by
reference)
A-2 By-Laws of Cinergy, as amended (Exhibit A-2 to
Declaration in File No. 70-9439 and hereby incorporated by reference)
B Cinergy Corp. UK Sharesave Scheme for employees of
Cinergy Global Power Services Ltd.
C Not applicable
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 (Exhibit H to Declaration in File No. 70-9439 and hereby incorporated
by reference)
(b) Financial Statements:
FS-1 Cinergy Pro Forma Consolidated Financial Statements,
dated September 30, 1998 (incorporated by reference from Financial
Statement FS-1 in File No. 70-9439)
FS-2 Cinergy Pro Forma Financial Statements, dated September
30, 1998 (incorporated by reference from Financial Statement FS-2 in File
No. 70-9439)
FS-3 Cinergy Consolidated Financial Data Schedule
(incorporated by reference from Financial Data Schedule FS-3 in File No.
70-9439)
FS-4 Cinergy Financial Data Schedule (incorporated by
reference from Financial Data Schedule FS-4 in File No. 70-9439)
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 28, 1999
CINERGY CORP.
By: /s/William L. Sheafer
Vice President and Treasurer
Exhibit B
CINERGY CORP.
_____________________________________________________
RULES
of the
1998 CINERGY CORP.
SHARESAVE SCHEME
_____________________________________________________
Adopted by a resolution of the Directors on December 16, 1998 and approved
by the Inland Revenue under the Income and Corporation Taxes Act 1988 on
_____________, 1998 under reference SRS )
Herbert Smith
Exchange House
Primrose Street
London EC2A 2HS
Tel: 0171 374-8000
Fax: 0171 496-0043
Ref: 281
Date: 24th June 1998
<PAGE>
CINERGY CORP.
SHARESAVE SCHEME
CONTENTS
PAGE
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. APPLICATION FOR OPTIONS. . . . . . . . . . . . . . . . . . . . . . . .6
3. GRANT OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4. NUMBER OF SHARES IN RESPECT OF WHICH OPTIONS MAY BE GRANTED . . . . . 8
5. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS. . . . . . . . . . . . . . . .9
6. TAKEOVER, RECONSTRUCTION AND AMALGAMATION, AND LIQUIDATION . . . . .12
7. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . 14
8. TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. ALTERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
RULES OF THE CINERGY CORP. SHARESAVE SCHEME
1. DEFINITIONS
1.1 In this Scheme, the following words and expressions shall bear, unless
the context otherwise requires, the meanings set forth below:
"Appropriate Period" the limit given by Paragraph 15(2) of Schedule 9
to the Taxes Act;
"Associated Company" an associated company of the Company within
the meaning that expression bears in Section 187(2) of the Taxes Act;
"Bonus Date" where Repayments under the Savings Contract made in
connection with an Option are taken as including the 7 year bonus, the
earliest date on which the 7 year bonus is payable and, in any other
case, the earliest date on which any other bonus is payable under such
Savings Contract;
"the Committee" the Sharesave Committee of the Company as appointed
by the Company by resolution on [ ] 1998;
"Close Company" a close company as defined in Section 414(1) of the
Taxes Act as varied by Paragraph 8 of Schedule 9 to the Taxes Act;
"the Company" Cinergy Corp. (registered under the laws of the State
of Delaware in the United States of America);
"Continuous Service" the meaning given to "continuous employment"
in the Employment Rights Act 1996;
"Control" the meaning given by Section 840 of the Taxes Act;
"Date of Grant" the date on which an option is granted;
"Date of Invitation" the date on which the Grantor invites
applications for Options;
"Dealing Day" any day on which the New York Stock Exchange is open
for the transaction of business;
"Eligible Employee" any individual who: (A) (1) is an employee of a
Participating Company or an executive director of a Participating
Company, the latter on terms which require him to devote at least 25
hours a week (excluding meal breaks) to his duties; and (2)is
chargeable to tax in respect of his office or employment under Case
I of Schedule E of the Taxes Act; and (3) has such qualifying period
(if any) of Continuous Service (being a period commencing not earlier
than five years prior to the Date of Grant) as the Committee may
determine; or (B)any other employee (including an executive director)
or category of employees whom the Committee may approve;
"Employees' Share Scheme" the meaning given by Section 743 of the
Companies Act 1985;
"Exercise Price" The US dollar equivalent at the applicable exchange
rate at the date of exercise of the amount of Repayment under the
Savings Contract entered into. Such US dollar equivalent to be used
to acquire up to the maximum shares possible at the date of exercise
at the Option price;
"Grantor" in relation to any Option, the Committee or the Trustee as
the case may be being the person by whom the Option is to be or was
granted pursuant to Rule 2.1;
"the New York Stock Exchange" New York Stock Exchange;
"Market Value" in relation to a Share on any day which is listed on
the New York Stock Exchange, its middle market quotation;
"Material Interest" the meaning given by Section 187(3) of the Taxes
Act;
"Maximum Contribution" the lesser of: such maximum monthly
contribution as may be permitted pursuant to Paragraph 24 of Schedule
9 to the Taxes Act; or such maximum monthly contribution as may be
determined from time to time by the Committee;
"Member of a Consortium" the meaning given by Section 187(7) of the
Taxes Act;
"Minimum Contribution" the minimum Monthly Contribution allowed by the
Committee being an amount which is not less than the minimum Monthly
Contribution permitted under the Savings Contract and not greater than
10 pounds sterling per month;
"Monthly Contributions" monthly contributions agreed to be paid by
a Participant under the Savings Contract made in connection with his
Option;
"Option" a right to purchase Shares under the Scheme which is
either subsisting or (where the context so admits or requires) is
proposed to be granted;
"Option Price" the US dollar price per Share, as determined by the
Grantor, at which an Eligible Employee may acquire Shares upon the
exercise of an Option being not less than 80 per cent. of the Market
Value on the Date of Grant but subject to any adjustment pursuant to
Rule 10;
"Participant" a director or employee, or former director or employee,
to whom an Option has been granted, or (where the context so admits or
requires) the personal representatives of any such person;
"Participating Company" (A) the Company; and (B) any other company
which is under the Control of the Company, is a Subsidiary of the
Company and is for the time being designated by the Committee as a
Participating Company;
"Repayment" in relation to a Savings Contract, the aggregate of the
36 or 60 Monthly Contributions which the Participant has agreed to
make and any bonus due at the Bonus Date;
"Savings Contract" a contract under a certified contractual savings
scheme (within the meaning of Section 326 of the Taxes Act) approved
by the Inland Revenue for the purpose of Schedule 9 to the Taxes Act;
"the Scheme" this Cinergy Corp. Sharesave Scheme in its present
form or as from time to time amended in accordance with the provisions
hereof;
"Share" a share in the capital of Company which satisfies the
conditions specified in Paragraphs 10 to 14 (inclusive) of Schedule
9 to the Taxes Act;
"Specified Age" 63 years of age;
"Subsidiary" the meaning given by Sections 736 and 736A of the
Companies Act 1985;
"Taxes Act" the Income and Corporation Taxes Act 1988;
"Trustee" the trustee or trustees for the time being of any qualifying
employee share ownership trust established by the Company pursuant to
Schedule 5 to the Finance Act 1989 or any similar employees' share
trust.
1.2 In this Scheme, unless the context requires otherwise:
(A) the headings are inserted for convenience only and do not affect
the interpretation of any Rule;
(B) a reference to a Rule is a reference to a Rule of this Scheme;
(C) a reference to a statute or statutory provision includes a
reference:
(1) to that statute or provision as from time to time
consolidated, modified, re-enacted or replaced by any
statute or statutory provision;
(2) to any repealed statute or statutory provision which it
re-enacts (with or without modification); and
(3) to any subordinate legislation made under it;
(D) words in the singular include the plural, and vice versa;
(E) a reference to the masculine shall be treated as a reference to
the feminine, and vice versa;
(F) if a period of time is specified and starts from a given day or
the day of an act or event, it is to be calculated exclusive of
that day;
(G) a reference to "a year" shall be a period calculated by reference
to a previous or subsequent anniversary of a particular date.
2. APPLICATION FOR OPTIONS
2.1 The Committee or, with the prior written approval of the Committee,
the Trustee may, from time to time, invite applications for Options
from all Eligible Employees, and any such invitation shall be in
writing and shall include details of:
(A) eligibility;
(B) the minimum Monthly Contribution payable;
(C) the Maximum Contribution payable;
(D) the period (or periods) the Savings Contracts are available;
(E) if a 5 year Savings Contract is taken out, whether, for the
purpose of determining the number of Shares over which the Option
is to be granted, the Repayment under the Savings Contract may
be taken as including either the 5 year or the 7 year bonus;
(F) the date by which applications made pursuant to Rule 2.3 must be
received (being neither earlier than 14 days nor later than 25
days after the Date of Invitation).
2.2 An application for an Option must incorporate or be accompanied
by a proposal for a Savings Contract.
2.3 An application for an Option shall be in writing in such form as
the Grantor may from time to time prescribe save that it shall
provide for the applicant to state:
(A) the Monthly Contributions (being a multiple of 1 pound sterling
and not less than the Minimum Monthly Contribution) to be made in
connection with the Option for which application is made;
(B) that his proposed Monthly Contributions (when taken together
with any Monthly Contributions he makes under any other
Savings Contract) will not exceed the Maximum Contribution;
(C) if Eligible Employees may enter into a three or a five year
Savings Contract, his choice in that respect;
(D) if Eligible Employees may elect for the Repayment under a
five year Savings Contract to be taken as including either
the five year or the seven year bonus, his election in that
respect.
2.4 Each application for an Option shall provide that, in the event of
excess applications, each application shall be deemed to have been
modified or withdrawn in accordance with the steps taken by the
Grantor to scale down applications pursuant to Rule 3.
2.5 Proposals for a Savings Contract shall be limited to such building
society, bank or European financial institution as the Committee may
designate.
2.6 Each application shall be deemed to be for an Option over the largest
whole number of Shares which can be acquired at the Option Price with
the Repayment under the Savings Contract entered into in connection
with the Option. For this purpose the number of Shares should be
determined by reference to the UK/US exchange rate on the date of
exercise of the Option.
3. GRANT OF OPTIONS
3.1 No Option shall be granted to any person if:
(A) at the Date of Grant that person shall have ceased to be an
Eligible Employee; or
(B) that person has, or has had at any time within the 12 month
period preceding the Date of Grant, a Material Interest in the
issued ordinary share capital of a Close Company which is the
Company or a company which has Control of the Company or is a
Member of a Consortium which owns the Company.
3.2 Within 30 days of the earliest Dealing Day by reference to which the
Option Price was fixed (which date shall be within an Invitation
Period) the Grantor may, subject to Rule 3 above, grant to each
Eligible Employee who has submitted a valid application, an Option in
respect of the number of Shares for which application has been deemed
to be made under Rule 2.6.
3.3 The Company shall issue to each Participant an option certificate in
such form (not inconsistent with the provisions of the Scheme) as the
Committee may from time to time prescribe. Each such certificate
shall specify the Date of Grant of the Option, the number and class
of Shares over which the Option is granted, the Option Price and the
Bonus Date.
3.4 Except as otherwise provided in these Rules, every Option shall be
personal to the Participant to whom it is granted and shall not be
transferable.
3.5 No amount shall be paid in respect of the grant of an Option.
4. NUMBER OF SHARES IN RESPECT OF WHICH OPTIONS MAY BE GRANTED
4.1 The maximum number of shares which may be allocated under the Scheme
at the Date of Grant shall not exceed [ ] percent of
the issued ordinary share capital of the Company on
[ ].
4.2 The limit in Rule 5.1 shall be increased, if necessary, at the date
of exercise to ensure that the total contributions of the Participants
under the Savings Contracts may be used to acquire up to the maximum
number of Shares possible at the UK/US dollar exchange rate prevailing
at the date of exercise at the Option Price.
4.3 In determining the above limits no account shall be taken of:
(A) any Shares where the right to acquire such shares was released,
lapsed or otherwise became incapable of exercise;
(B) any Shares where the interest in such Shares was forfeited or
otherwise became incapable of vesting; or
(C) any Shares which are comprised in options granted or awards made
to replace grants or awards originally made under the scheme of
another company.
4.4 References in this Rule to the "allocation" of Shares shall mean:
(A) in the case of any share option scheme:
(i) the placing by the Committee or the Trustee of unissued
shares under the option; and
(ii) insofar as not taken into account under (i) above, any
subscription for Shares which are issued for the purpose of
satisfying any Option; and
(B) in relation to other types of Employees' Share Scheme, shall mean
the issue and allotment of shares and references to "allocated"
shall be construed accordingly.
5. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS
5.1 (A) Save as provided in Rules 6.2, 6.3, 6.4, 6.5 and Rule
7, an Option shall not be exercised earlier than the
Bonus Date under the Savings Contract entered into in
connection therewith.
(B) Save as provided in Rule 6.2, an Option shall not be
exercised later than 6 months after the Bonus Date
under the Savings Contract entered into in connection
therewith.
(C) Save as provided in Rules 6.2, 6.3 and 6.4, an Option
may only be exercised by a Participant whilst he is a
director or employee of a Participating Company.
(D) An Option may not be exercised by a Participant if he
has, or has had at any time within the 12 month period
preceding the date of exercise, a Material Interest in
the issued ordinary share capital of a Close Company
which is the Company or a company which has Control of
the Company or is a Member of a Consortium which owns
the Company, nor may an Option be exercised by the
personal representatives of a deceased Participant if
the Participant had such a Material Interest at the
date of his death.
5.2 An Option may be exercised by the personal representatives of a
deceased Participant:
(A) within 12 months following the date of his death if such death
occurs before the Bonus Date;
(B) within 12 months following the Bonus Date in the event of his
death within 6 months after the Bonus Date.
5.3 An Option may be exercised by a Participant within 6 months following
his ceasing to hold the office or employment by virtue of which he is
eligible to participate in the Scheme by reason of:
(A) injury or disability; or
(B) redundancy within the meaning of the Employment Rights Act 1996;
or
(C) retirement on reaching the Specified Age or any other age at
which he is bound to retire in accordance with the terms of his
contract of employment; or
(D) his office or employment being in a company of which the Company
ceases to have Control; or
(E) the transfer of his contract of employment (which relates to a
business or part of a business) to a person who is neither an
Associated Company nor a company of which the Company has
Control; or
(F) any other reason other than dismissal for gross misconduct,
serious breach or non-observance of his contract of employment
or failure or refusal to carry out the duties assigned to him
thereunder, if such cessation of office or employment is more
than 3 years after the Date of Grant.
5.4 If, at the Bonus Date, a Participant holds an office or employment in
a company which is not a Participating Company but which is:-
(A) an Associated Company of the Company (but not because it was
demerged by the Company); or
(B) a company of which the Company has Control,
his Option may be exercised within six months of such Bonus Date.
5.5 An Option may be exercised by a Participant within 6 months following
the date he reaches the Specified Age if he continues after that date
to hold the office or employment by virtue of which he is eligible to
participate in the Scheme.
5.6 No person shall be treated for the purposes of Rule 6.3 as ceasing to
hold an office or employment by virtue of which that person is
eligible to participate in the Scheme until that person ceases to hold
any office or employment in the Company or any Associated Company or
any company of which the Company has Control.
5.7 An Option granted to a Participant shall lapse upon the occurrence of
the earliest of the following:
(A) subject to (B) below, 6 months after the Bonus Date under the
Savings Contract entered into in connection with the Option;
(B) where the Participant dies before the Bonus Date, 12 months after
the date of death, and where the Participant dies in the period
of 6 months after the Bonus Date, 12 months after the Bonus Date;
(C) the expiry of any of the 6 month periods specified in Rule 6.3(A)
to (F), save that if at the time any of such applicable periods
expire, time is running under the 12 month periods specified in
Rule 6.2, the Option shall not lapse by reason of this Rule 6.7
until the expiry of the relevant 12 month period in Rule 6.2;
(D) the expiry of any of the periods specified in Rules 7.3 to 7.5,
save where an Option is released in consideration of the grant
of a New Option over New Shares in the Acquiring Company (during
one of the periods specified in Rules 6.3 and 6.4) pursuant to
Rule 7.4;
(E) the Participant ceasing to hold any office or employment with a
Participating Company or any Associated Company for any reason
other than those specified in Rule 6.3 or as a result of his
death;
(F) subject to Rule 7.5, the passing of an effective resolution, or
the making of an order by the Court, for the winding-up of the
Company;
(G) the Participant being deprived (otherwise than on death) of the
legal or beneficial ownership of the Option by operation of law,
or doing anything or omitting to do anything which causes him to
be so deprived; and
(H) before an Option has become capable of being exercised, the
Participant giving notice that he intends to stop paying Monthly
Contributions, or being deemed under the terms of the Savings
Contract to have given such notice, or making an application for
Repayment of the Monthly Contributions.
6. TAKEOVER, RECONSTRUCTION AND AMALGAMATION, AND
LIQUIDATION
6.1 If any person obtains Control of the Company as a result of making an
offer to acquire Shares which is either unconditional or is made on
a condition such that if it is satisfied the person making the offer
will have Control of the Company, an Option may be exercised within
6 months of the time when the person making the offer has obtained
Control of the Company and any condition subject to which the offer
is made has been satisfied or waived.
6.2 For the purpose of Rule 7.1 a person shall be deemed to have obtained
Control of the Company if he and others acting in concert with him
have together obtained Control of it.
6.3 If any person becomes bound or entitled to acquire Shares under
Sections 428 to 430F of the Companies Act 1985 an Option may be
exercised at any time when that person remains so bound or entitled
and thereafter the Option shall lapse unless before such date the
Optionholder has entered into an agreement pursuant to Rule 7.6.
6.4 If, under Section 425 of the Companies Act 1985, the Court sanctions
a compromise or arrangement proposed for the purposes of, or in
connection with, a scheme for the reconstruction of the Company or its
amalgamation with any other company or companies, an Option may be
exercised within 6 months of the Court sanctioning the compromise or
arrangement.
6.5 If a resolution for the voluntary winding-up of the Company is passed,
an Option may be exercised within 6 months from the date of the
passing of the resolution.
6.6 If any company ("the Acquiring Company"):
(A) obtains Control of the Company as a result of making -
(1) a general offer to acquire the whole of the issued ordinary
share capital of the Company is made on a condition such
that if it is satisfied the Acquiring Company will have
Control of the Company; or
(2) a general offer to acquire all the shares in the Company
which are of the same class as the Shares which may be
acquired by the exercise of Options, in either case ignoring
any Shares which are already owned by it or a member of the
same group of companies; or
(B) obtains Control of the Company in pursuance of a compromise or
arrangement sanctioned by the Court under Section 425 of the
Companies Act 1985; or
(C) becomes entitled to give notice under Section 429 of the
Companies Act 1985 that he desires to acquire Shares,
any Participant may at any time within the Appropriate Period, by
agreement with the Acquiring Company, release any Option granted
under the Scheme which has not lapsed ("the Old Option") in
consideration of the grant to him of an option ("the New Option")
which (for the purposes of Paragraph 15 of Schedule 9 to the
Taxes Act) is equivalent to the Old Option but relates to shares
in a different company (whether the Acquiring Company itself or
some other company falling within Paragraph 10(b) or (c) of
Schedule 9 to the Taxes Act).
6.7 The New Option shall not be regarded for the purposes of Rule 7.6 as
equivalent to the Old Option unless the conditions set out in
Paragraph 15(3) of Schedule 9 to the Taxes Act are satisfied. Where
the provisions of this Rule 7.7 apply, the provisions of the Scheme
shall be construed as if:
(A) the New Option were granted under the Scheme at the same time as
the Old Option; and
(B) except for the purposes of the definitions of "Participating
Company" and "Subsidiary" in Rule 1, the reference to Cinergy
Corp. in the definition of "the Company" in Rule 1 were a
reference to the different company mentioned in Rule 7.6.
7. MANNER OF EXERCISE
7.1 An Option may only be exercised during the periods specified in Rules
6 and 7, and only in US dollars to the extent possible to acquire up
to the maximum number of Shares at the Option Price on the date of
exercise with the US dollar equivalent at the applicable exchange rate
at the date of exercise of such UK Sterling monies not exceeding the
amount of the Repayment under the Savings Contract entered into in
connection therewith as at the date of such exercise. Any excess US
dollars or UK sterling monies exceeding the Exercise Price shall be
returned to the Participant. No account shall be taken of such part
(if any) of the Repayment of any Monthly Contribution, the due date
for the payment of which under the Savings Contract arises more than
one month after the date of the Repayment.
7.2 Subject to Rule 8.3, exercise shall be by the delivery to the
Secretary of the Company or other duly appointed agent, of an option
certificate stating the Option Price at which the Option may be
exercised on the date of exercise, the amount of proceeds of the
Savings Contract to be used to acquire the Shares, with the notice of
exercise in the prescribed form duly completed and signed by the
Participant (or by his duly authorised agent) together with any
remittance in US dollars for the Exercise Price payable to the Company
(as agent for the Trustee), or authority to the Company (as agent for
the Trustee) to withdraw and apply monies equal to the Exercise Price
from the Savings Contract, to acquire the Shares over which the Option
is to be exercised or in such other manner as may be determined by the
Committee. The effective date of exercise shall be the date of
delivery of the notice of exercise. Exchange conversion commissions
and charges may be paid for separately by the Participant.
7.3 The Exercise Price shall be payable to the Company for itself (and not
as agent for the Trustee) in respect of Options which are granted upon
the Company's determination that the Exercise Price shall be payable
to the Company for itself.
8. TRANSFER OF SHARES
8.1 Shares to be issued and allotted to the Participant pursuant to the
exercise of an Option shall be allotted within 28 days following the
effective date of exercise of the Option.
8.2 Subject to Rule 9.3, the Trustee shall transfer Shares to be
transferred pursuant to the exercise of an Option within 28 days
following the effective date of exercise of the Option.
8.3 Where the Exercise Price is payable to the Company for itself (and not
as agent for the Trustee) in accordance with Rule 8.3, the Company
shall issue and allot the Shares to the Participant within 28 days
following the date of effective exercise of that Option.
8.4 Shares to be issued pursuant to the Scheme will rank pari passu in all
respects with the Shares then in issue, except that they will not rank
for any rights attaching to Shares by reference to a record date
preceding the date of exercise.
8.5 Shares to be transferred pursuant to the Scheme will be transferred
free of all liens, charges and encumbrances and together with all
rights attaching thereto, except they will not rank for any rights
attaching to Shares by reference to a record date preceding the date
of exercise.
8.6 If and so long as the Shares are listed on the New York Stock
Exchange, the Company shall apply for a listing for any Shares issued
pursuant to the Scheme as soon as practicable after the allotment
thereof.
9. ADJUSTMENTS
9.1 The number of Shares over which an Option is granted, the Option Price
thereof shall be adjusted in such manner as the Committee or, if the
Trustee has at any time been the Grantor, the Committee and the
Trustee together shall determine following any capitalisation issue
(other than a scrip dividend), rights issue, subdivision,
consolidation, reduction of share capital or any other variation of
share capital of the Company to the intent that (as nearly as may be
without involving fractions of a Share or an Option Price calculated
to more than two places of decimals) the Exercise Price payable in
respect of an Option shall remain unchanged, provided that no
adjustment made pursuant to this Rule 10.1 shall be made without the
prior approval of the Inland Revenue.
9.2 Subject to Rule 10.3, an adjustment may be made under Rule 10.1 which
would have the effect of reducing the Option Price of unissued Shares
to less than the nominal value of a Share, but only if, and to the
extent that, the Committee shall be authorised to capitalise from the
reserves of the Company a sum equal to the amount by which the nominal
value of the Shares in respect of which the Option is exercisable
exceeds the adjusted Exercise Price, and so that on exercise of any
Option in respect of which the Option Price has been reduced, the
Committee shall capitalise and apply such sum (if any) as is necessary
to pay up the amount by which the aggregate nominal value of the
Shares in respect of which the Option is exercised exceeds the
Exercise Price for such Shares.
9.3 The Grantor may take such steps as it may consider necessary to notify
Participants of any adjustment made under this Rule 10 and to call in,
cancel, endorse, issue or reissue any option certificate consequent
upon such adjustment.
9.4 The Grantor may take such steps as it may consider necessary to notify
Participants of any adjustment made under this Rule 10 and to call in,
cancel, endorse, issue or reissue any option certificate consequent
upon such adjustment.
10. ADMINISTRATION
10.1 Any notice or other communication made under, or in connection with,
the Scheme may be given by personal delivery or by sending the same
by post, in the case of a company to its registered office and in the
case of an individual to his last known address, or, where he is a
director or employee of the Company or an Associated Company, either
to his last known address or to the address of the place of business
at which he performs the whole or substantially the whole of the
duties of his office or employment, and where a notice or other
communication is given by first-class post, it shall be deemed to have
been received 48 hours after it was put into the post properly
addressed and stamped.
10.2 The Company may distribute to Participants copies of any notice or
document normally sent by the Company to the holders of Shares.
10.3 If any option certificate shall be worn out, defaced or lost, it may
be replaced on such evidence being provided as the Grantor may
require.
10.4 The Company shall at all times procure that sufficient Shares are
available for transfer to satisfy all Options under which Shares may
be acquired.
10.5 The decision of the Grantor and/or Committee in any dispute relating
to an Option or the due exercise thereof or any other matter in
respect of the Scheme shall be final and conclusive.
10.6 The costs of introducing and administering the Scheme shall be borne
by the Company.
11. ALTERATIONS
11.1 Subject to Rule 12.2, the Committee may at any time alter or add to
all or any of the provisions of the Scheme in any respect, provided
that if an alteration or addition is made at a time when the Scheme
is approved by the Inland Revenue under Schedule 9 to the Taxes Act
it shall not have effect until it has been approved by the Inland
Revenue.
11.2 As soon as reasonably practicable after making any alteration or
addition under Rule 12.1, the Committee shall give written notice
thereof to any Participant affected thereby.
12. GENERAL
12.1 The Scheme shall terminate upon the tenth anniversary of the date of
its adoption or at any earlier time by the passing of a resolution by
the Committee or an ordinary resolution of the Company in general
meeting. Termination of the Scheme shall be without prejudice to the
subsisting rights of Participants.
12.2 The Company and any Subsidiary of the Company may provide money to the
trustees of any trust or any other person to enable them or him to
purchase Shares to be held for the purposes of the Scheme, or enter
into any guarantee or indemnity for these purposes, to the extent
permitted by Section 153 of the Companies Act 1985, provided that any
trust deed to be made for this purpose shall, at a time when the
Scheme is approved by the Inland Revenue under Schedule 9 to the Taxes
Act, have previously been submitted to the Inland Revenue.
12.3 The rights and obligations of any individual under the terms of his
office or employment with the Company, a Participating Company, a
Subsidiary of the Company, or an Associated Company shall not be
affected by his participation in the Scheme or any right which he may
have to participate therein, and an individual who participates
therein shall waive all and any rights to compensation or damages in
consequence of the termination of his office or employment with any
such company for any reason whatsoever insofar as those rights arise,
or may arise, from his ceasing to have rights under or being entitled
to exercise any Option under the Scheme as a result of such
termination, or from the loss or diminution in value of such rights
or entitlements.
12.4 These Rules shall be governed by and construed in accordance with the
law of England.
EXHIBIT F-1
January 27, 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"). Pursuant to
the rules and regulations of the Commission thereunder, 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 authority to issue (or, in the case
of shares purchased on the open market, to acquire on behalf of plan
participants) and sell, from time to time through December 31, 2004, up to
75,000 shares of Cinergy common stock, $.01 par value per share ("Common
Stock"), under the Cinergy Corp. Sharesave Scheme (the "Plan"), adopted by
Cinergy's Board of Directors on December 16, 1998 for employees of Cinergy
Global Power Services Ltd., an indirect wholly-owned subsidiary of Cinergy
organized under the laws of the United Kingdom. The Application states
that the Plan is governed by the laws of the United Kingdom and requires
approval from the Inland Revenue, an agency of the United Kingdom.
In connection with this opinion, I have reviewed the Application and
such documents, agreements, instruments and/or other materials with respect
to the Plan 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 Plan 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 Plan will be validly
issued, fully paid and non-assessable and the holders thereof will be
entitled to the rights and privileges appertaining thereto stated in
Cinergy's Certificate of Incorporation.
The consummation of the proposed transactions will not violate the
legal rights of the holders of any securities issued by Cinergy or any
associate company thereof.
I hereby consent to the use of this opinion in connection with the
Application.
Very truly yours,
/s/Jerome A. Vennemann
Associate General Counsel
Exhibit G/Form of Public Notice
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- _____________)
Cinergy Corp., a registered holding company ("Cinergy"), at 139 East
Fourth Street, Cincinnati, Ohio 45202, has filed a declaration under
sections 6(a) and 7 of the Act and rule 54 thereunder.
On December 16, 1998, Cinergy's Board of Directors approved
resolutions adopting the Cinergy Corp. Sharesave Scheme ("Plan") for
employees of Cinergy Global Power Services Ltd. ("CGPS"), an indirect
wholly-owned subsidiary of Cinergy organized under the laws of the United
Kingdom ("UK").
Cinergy has two direct wholly-owned nonutility subsidiaries, Cinergy
Investments, Inc. and Cinergy Global Resources, Inc. ("CGR"), which
function as holding companies for Cinergy's domestic and foreign nonutility
subsidiaries, respectively. Formed in 1997 as a direct wholly-owned
subsidiary of CGR, CGPS provides project development, asset management and
other centralized services on CGR's behalf in connection with potential and
actual investments in foreign utility companies ("FUCOs") and exempt
wholesale generators ("EWGs"). CGPS had 35 employees at year-end 1998,
working in project development/asset management, finance and company
administration, with the bulk of the employees falling in the project
development/asset management function.
Cinergy now seeks authority to issue (or, in the case of shares
purchased on the open market, to acquire on behalf of plan participants)
and sell, from time to time through December 31, 2004, up to 75,000 shares
of Cinergy common stock, $.01 par value per share ("Common Stock"), under
the Plan. Both authorized and unissued shares of Common Stock and
previously issued shares of Common Stock acquired by Cinergy on the open
market, in negotiated transactions or otherwise may be issued and sold to
CGPS employees pursuant to the Plan. Cinergy proposes to use proceeds from
sales of Common Stock under the Plan for general corporate purposes.
Cinergy states that the Plan is governed by and conforms to UK law and
has received preliminary approval from the Inland Revenue, the UK taxation
agency equivalent to the Internal Revenue Service. According to Cinergy,
the necessary documentation has been submitted to the Inland Revenue for
formal approval, which will be obtained before the Plan is implemented.
The Plan is a typical UK "sharesave scheme" permitting employees to
purchase parent company stock at a discount.
The Plan will be administered by a three-person committee ("Plan
Committee") initially comprised of two CGPS officers and one Cinergy
officer. Subject to certain conditions and restrictions, all current and
future employees of CGPS will be eligible to participate in the Plan.
Each participating employee in the Plan will be granted a right (an
"Option") to acquire shares of Common Stock at a discount of up to 20% of
market value, by entering into a savings contract ("Savings Contract") to
save between 10 and 250 pounds sterling per month over either a three or
five year period. Each participant will make monthly contributions to a
savings account ("Savings Account") which will be initially administered by
Computershare Services plc as agent for the Royal Bank of Scotland
("Savings Carrier").
Cinergy states that the Plan has three main attractions for
participants. First, Options are granted at a discount up to 20% of the
market value of the Common Stock. Second, any gains on the exercise of the
Options will be tax-free for the participant. Third, participants that
make monthly contributions for the entire three or five year savings period
will be entitled to receive a tax-free bonus.
Under the Plan, and after it has been approved by the Inland Revenue,
the Plan Committee will invite applications ("Date of Invitation") from
eligible employees to apply to enter into three and/or five year Savings
Contracts. Each offering period will make available both three and five
year Savings Contracts, although an employee that elects to participate may
do so only via a single Savings Contract three or five years with respect
to that offering period. The invitation will state the US dollar price per
share of Common Stock ("Option Price") at which participating employees may
acquire shares of Common Stock upon the exercise of Options. The Option
Price will be set at a discount of up to 20% (the maximum permitted under
UK law) of the average of the high and low sales prices of the Common Stock
as reported on the New York Stock Exchange on the most recent trading date
preceding the Date of Invitation. The actual size of the discount will be
determined by the Plan Committee in its discretion, provided that the size
of the discount will be identical for both the three and five year Savings
Contracts for that offering period. The invitation will also direct each
participant to choose the amount of its monthly contribution to the Plan,
with a minimum of 10 pounds sterling and a maximum of 250 pounds sterling
per month.
In each subsequent year in which the Plan is in effect, the Plan
Committee may determine to initiate a new offering period for three and
five year Savings Contracts, and each eligible employee may be granted
Options thereunder, notwithstanding concurrent or prior participation by
the employee in one or more additional Savings Contracts relating to
separate offering periods, provided that in respect of all Savings
Contracts in which the employee is participating, that particular
employee's contributions do not exceed 250 pounds sterling in total in any
one month.
Within 14 days of the Date of Invitation, eligible employees that wish
to participate in the Plan must submit their applications for the grant of
Options under the Plan. Each application must specify whether the employee
wishes to enter into a three or five year Savings Contract and the amount
of the monthly contribution (from 10 to 250 pounds sterling), via a payroll
deduction, that the employee wishes to make for the duration of that
Savings Contract.
Within 29 days after the Date of Invitation, the Plan Committee will
grant to each eligible employee who has submitted a valid application an
Option reflecting the terms requested in the application.
At the end of the Savings Contract ("Maturity Date"), a tax-free bonus
will be payable by the Savings Carrier which, for the initial offering
period, will be equal to 2.75 or 7.5 monthly salary payments, depending on
whether the employee has opted for a three or five year Savings Contract,
respectively. The tax-free bonus will be added to the savings accumulated
in the Savings Account through the monthly payroll deductions. For any
offering period, the Plan Committee has the discretion (which it must
exercise at the time the Options are granted) to permit those employees who
have opted for five year Savings Contracts to leave their accumulated
savings in their Savings Accounts for an additional two years, thereby
earning a tax-free bonus payable at the end of the seventh year equivalent
to 13.5 monthly contributions from salary.
Generally, the Options will not be exercisable until the six-month
period commencing with the end of the three or five year Savings Contract
that the employee has chosen. Upon exercise of the Option, the employee
will be entitled to purchase the largest whole number of shares of Common
Stock (with any residual funds to be returned to the employee) at the
then-current exchange rate, determined by the sum of (a) the employee's
total monthly contributions for the period of the Savings Contract and (b)
the bonus payments described above (collectively, "Exercise Price"),
divided by the Option Price.
Notwithstanding the general rule that Options may be exercised only at
the end of the Savings Contract, there are certain circumstances in which
employees may exercise Options prior to the end of the three or five year
Savings Contract. For example, subject to certain conditions, if the
participant leaves the employment of CGPS due to retirement, ill health,
death, severance or other "good leaver" circumstances (as specified in the
Plan), or if Cinergy is subject to a change in control or liquidation or
similar events, a participant may in either case exercise his Option(s), to
the extent of his accumulated savings to that date together with interest
thereon (provided the Savings Account has been open for at least 12 months)
at the rate of 3% per annum. No bonus will be payable in that situation,
however.
Participants are not required to exercise Options upon maturity of the
Savings Contracts. In the event the Option Price is higher than the market
value of the Common Stock on the Maturity Date, i.e., the Options are
"underwater", participants may withdraw the amounts accrued in their
respective Savings Accounts to that date, together with their matching
bonus payments.
The Plan has a ten years' duration. At any time, by action of the
Cinergy Board or the Plan Committee, Cinergy may alter, amend or terminate
the Plan, provided that no amendment shall become effective without
approval of the Inland Revenue. All administrative costs of the Plan will
be borne by Cinergy.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
