File No. 70-
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET
WASHINGTON, D.C. 20549
__________________________________________
FORM U-1 APPLICATION-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)
Julia S. Janson/Senior Counsel & Corporate Secretary
George Dwight II/Senior Counsel
Cinergy Corp.
139 East Fourth Street, 25 Atrium Two
Cincinnati, Ohio 45202
(Name and address of agents for service)
<PAGE>
Item 1. Description of Proposed Transactions
A. 1995 & 1996 Plan Orders; Requested Authorization
By orders dated December 1, 1995 (HCAR No. 26422, File No. 70-8705)
("1995 Order") and April 17, 1996 (HCAR No. 26505, File No. 70-8807) ("1996
Order"), the Commission authorized Cinergy Corp. ("Cinergy"), a Delaware
corporation and registered holding company under the Public Utility Holding
Company Act of 1935 ("Act"), to issue and sell, from time to time through
December 31, 2000, a total of approximately 30 million shares of Cinergy's
common stock, $0.01 par value per share ("Common Stock"), under various
stock-based employee and director plans of Cinergy and its subsidiaries.
More specifically, the 1995 Order authorized Cinergy to issue and
sell, from time to time through December 31, 2000, up to 22,386,696 shares
of Common Stock under various benefit plans of Cinergy and its
subsidiaries, namely, the Cinergy Corp. Dividend Reinvestment and Stock
Purchase Plan, the Cinergy Corp. Employee Stock Purchase and Savings Plan,
the Cinergy Corp. Performance Shares Plan, the Cinergy Corp. Stock Option
Plan, the Cinergy Corp. Directors' Deferred Compensation Plan, the PSI
Energy, Inc. ("PSI") Union Employees' 401(k) Savings Plan, the PSI Energy,
Inc. Employees' 401(k) Savings Plan, The Cincinnati Gas & Electric Company
("CG&E") Deferred Compensation and Investment Plan and The Cincinnati Gas &
Electric Company Savings Incentive Plan. The 1996 Order authorized Cinergy
to issue and sell, from time to time through December 31, 2000, up to 7
million shares of Common Stock under the Cinergy Corp. Long-Term Incentive
Compensation Plan./1/
Effective January 1, 1998, the PSI Energy, Inc. Union Employees'
401(k) Savings Plan was amended, restated and renamed the Cinergy Corp.
Union Employees' 401(k) Plan, The Cincinnati Gas & Electric Company Savings
Incentive Plan was amended, restated and renamed the Cinergy Corp. Union
Employees' Savings Incentive Plan, and the PSI Energy, Inc. Employees'
401(k) Savings Plan was amended, restated and renamed the Cinergy Corp.
Non-Union Employees' 401(k) Plan and The Cincinnati Gas & Electric Company
Deferred Compensation and Investment Plan was merged into the Cinergy Corp.
Non-Union Employees' 401(k) Plan. In addition, since the 1995 Order, the
Cinergy Corp. Performance Shares Plan has been terminated.
As of August 31, 2000, Cinergy had 600,000,000 shares of Common
Stock authorized for issuance and 158,924,941 shares were outstanding.
Since registering under the Act, Cinergy has issued approximately 3.8
million shares of Common Stock under the plans referred to above.
Cinergy now requests authorization to issue and sell up to 50
million shares of Common Stock, from time to time over a 10-year period
commencing with the date of the Commission's order herein ("Authorization
Period"), under the following plans (collectively, "Plans"): the Cinergy
Corp. Dividend Reinvestment and Stock Purchase Plan, the Cinergy Corp.
Employee Stock Purchase and Savings Plan, the Cinergy Corp. Stock Option
Plan, the Cinergy Corp. Directors' Deferred Compensation Plan, the Cinergy
Corp. Long-Term Incentive Compensation Plan, the Cinergy Corp. Union
Employees' 401(k) Plan, the Cinergy Corp. Union Employees' Savings
Incentive Plan and the Cinergy Corp. Non-Union Employees' 401(k) Plan.
Shares of Common Stock issued under the Plans from time to time
over the Authorization Period may be authorized and previously unissued
shares or previously issued shares re-acquired by Cinergy in open market
transactions. In addition, under the Stock Option Plan and the Long-Term
Incentive Compensation Plan, plan participants may purchase shares of
Common Stock under certain circumstances by, among other means, exchanging
shares of Common Stock, and accordingly, Cinergy also requests
authorization, to the extent required under the Act, to acquire such shares
of Common Stock from plan participants.
Cinergy proposes to apply proceeds of any shares sold for cash to
general corporate purposes, including repayment of outstanding indebtedness
and investments in subsidiaries, except that, without further authorization
from the Commission, Cinergy will not apply any such proceeds to acquire
exempt wholesale generators (as defined in section 32 of the Act, "EWGs")
or foreign utility companies (as defined in section 33 of the Act,
"FUCOs").
The terms of the Plans are summarized below. Such summaries are
qualified in their entirety by the full text of the Plans, which are
incorporated by reference herein (see Item 6 below).
Terms of the Plans Dividend Reinvestment and Stock Purchase Plan
All holders of record of Cinergy Common Stock, PSI cumulative
preferred stock or CG&E cumulative preferred stock ("Eligible Securities")
may participate in the Cinergy Corp. Dividend Reinvestment and Stock
Purchase Plan ("DRIP"). Participants have three options for reinvestment
of dividends in additional shares of Common Stock: (1) automatically
invest in Common Stock all of the participant's cash dividends on all
certificated shares of that class, as well as all of the cash dividends on
Common Stock purchased pursuant to the DRIP ("Plan Shares") and any
optional cash payments made by the participant; (2) automatically invest
all of the participant's cash dividends on only the number of certificated
shares specified on the authorization form, as well as all of the cash
dividends on Plan Shares, and any optional cash payments made by the
participant; and (3) invest optional cash payments, and reinvest all cash
dividends on Plan Shares, in shares of Common Stock and remit directly to
the plan participant cash dividends on all certificated shares. A
participant may change the method of participation at any time by
completing an account change request and returning it to the plan
administrator. Under any of the reinvestment options, participants may
make optional cash payments from time to time of not less than $25 for any
investment date and not more than $100,000 in any calendar year. The
investment date for optional cash payments and cash dividends is the 15th
day of each month. There are no brokerage or other fees on purchases. All
costs of administering the DRIP are paid by Cinergy. However, charges will
be incurred by plan participants who direct the plan administrator to sell
their shares on withdrawal.
When purchases of shares of Common Stock are made from authorized
but unissued shares, the purchase price will be the average of the high and
low prices of Common Stock as reported by the "New York Stock
Exchange-Composite Transactions" as published in The Wall Street Journal
(the "NYSE-Composite Transactions") for the appropriate investment date, or
if no trading in Common Stock occurs on the New York Stock Exchange
("NYSE") on that date, the next preceding date on which such trading
occurred. When the source of Common Stock purchased for any investment
date is the open market, the purchase price will be the weighted average
price, excluding brokerage commissions, of such shares. The purchases will
be made on the NYSE or in negotiated transactions.
If Cinergy elects to meet the requirements of participants by
purchasing shares of Common Stock on the open market, an independent agent
or agents appointed by Cinergy ("Independent Agent") will act on behalf of
the participants in purchasing such shares, and Cinergy will pay all
administrative costs associated therewith, including brokerage fees and
commissions. The In dependent Agent will determine the exact volume,
timing and price of such purchases, based on the amount of reinvested
dividends, optional cash payments received, market conditions, and
requirements of applicable federal securities laws. The Independent Agent
will also sell shares of Common Stock on behalf of plan participants.
There is no discount program under the DRIP.
A participant may direct that all or a portion of his/her shares be
sold or withdrawn, or that his/her participation in the DRIP terminate, by
submitting to Cinergy an appropriately executed account change request form
or other written notification. Requests for withdrawal and/or termination
will normally be processed by Cinergy within five business days following
receipt of a written request signed by the participant. If a participant
requests that shares be sold, Cinergy will combine such shares with shares
for which requests to sell were received from other participants during
that week, and will then place a market order with the Independent Agent.
Proceeds from any sale, less applicable brokerage commissions, will be
remitted to the participant following settlement through a broker, in
accordance with applicable settlement rules. The sale price for shares
sold through withdrawal or termination will be the market price of Common
Stock at the time of sale. If shares sold are combined with shares for
which requests to sell were received from other participants, the sale
price will be the average price for all shares sold.
A participant will be entitled to request in writing and receive a
certificate representing the full shares of Common Stock credited to
his/her account. Whether the participant requests to sell the shares in
his/her account or elects to receive certificates for the full shares in
his/her account, the participant's interest in fractional shares will be
paid in cash.
Cinergy reserves the right to suspend, modify or terminate the DRIP
or to combine the plan into a new DRIP. All participants will receive
notification of any such suspension, modification, termination or
combination.
Any shares of Common Stock distributed by Cinergy as a stock
dividend on shares credited to a participant's account, or as a split of
these shares, will be credited to the participant's account. Each
participant has a right to vote the shares credited to such participant's
account. Proxy cards will be distributed to participants and all Plan
Shares will be voted in the manner indicated in the proxy card. If a
participant does not return a valid proxy card, the shares of Common Stock
held in such participant's account will not be voted.
Existing shareholders are notified of the existence of the DRIP
through letters and inserts with financial reports and dividend checks.
Eligible persons expressing an interest in the DRIP will receive a
prospectus and related enrollment materials. No solicitations of the
general public are planned at this time.
Employee Stock Purchase and Savings Plan
The Cinergy Corp. Employee Stock Purchase and Savings Plan ("Stock
Purchase Plan") is an employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), in which eligible
employees may be granted the right to purchase shares of Common Stock.
Under the Stock Purchase Plan, only authorized but unissued shares Common
Stock may be issued to eligible employees. The Stock Purchase plan is
administered by a committee ("Plan Committee") of the Cinergy Board of
Directors ("Cinergy Board"), the members of which are ineligible to
participant therein.
Employees of Cinergy or any of its subsidiaries who meet the
eligibility requirements may participate in the Stock Purchase Plan.
Generally, the eligibility requirements are that an employee must be
employed by Cinergy or any of its subsidiaries (collectively, "Cinergy
Companies" and individually a "Cinergy Company") and must normally work at
least 20 hours a week and five months a year. Full officers of Cinergy,
Cinergy Services, Inc., CG&E and PSI, as well as employees who receive a
grant of a stock option or stock appreciation right under the Cinergy Corp.
Stock Option Plan, are not eligible to participate in the Stock Purchase
Plan.
Each offering for sale of Common Stock under the Stock Purchase
Plan will have a term of 26 months ("Offering Period") commencing and
ending on dates determined by the Plan Committee. The initial offering of
Common Stock under the Stock Purchase Plan was a continuation of an
offering period under a predecessor plan, which was merged into the Stock
Purchase Plan in October 1994. The initial offering ended on December 31,
1996. Two more offerings have been made (January 1, 1997 through February
28, 1999 and March 1, 1999 through April 30, 2001).
The purchase price per share of Common Stock under the Stock
Purchase Plan is equal to the fair market value of a share of Common Stock
on the first day of the Offering period less 5 percent. For this purpose,
the fair market value of a share of Common Stock is equal to the average of
the high and low sales prices of a share of Common Stock as reported by the
NYSE-Composite Transactions for the first day of the Offering period or, if
no trading in Common Stock occurs on the NYSE on that day, the last day
prior to the first day of the Offering Period on which such trading in
Common Stock does occur.
An eligible employee must accumulate funds to purchase Common Stock
under the Stock Purchase plan by authorizing the appropriate Cinergy
Company to deduct an amount from each paycheck and deposit that amount in
an interest earning account. On the purchase date (the last day of the
Offering Period), the employee may apply some or all of the total amount of
deposits made to the account plus accrued interest to the purchase of
shares of Cinergy Common Stock or may receive the balance of the account in
cash or any combination thereof.
The maximum number of shares of Common Stock that an eligible
employee may purchase in an Offering Period is equal to: (1) the sum of (a)
10 percent of his or her annual base compensation as of the first day of
the second calendar month preceding the first day of the relevant Offering
Period multiplied by 26/12ths plus (b) the amount of interest earned on the
employee's account during the relevant Offering Period divided by (2) the
purchase price. No employee may participate in the Stock Purchase Plan if
(i) participation would permit the employee's rights to purchase shares of
Common Stock under all employee stock purchase plans of Cinergy Companies
to accrue at a rate exceeding $25,000 of fair market value of such shares
(determined at the time such right is granted) for each calendar year
during which such right is outstanding at any time; or (ii) the employee
owns, immediately after his or her participation commences, stock
possessing 5 percent or more of the total combined voting power or value of
all classes of stock of any Cinergy Company.
At any time by action of the Cinergy Board or the Plan Committee,
Cinergy may amend, suspend or terminate the Stock Purchase Plan, or modify
the terms of participation in any offering thereunder, subject to certain
exceptions. No such action may, without the approval of Cinergy's
shareholders, (1) increase the maximum number of shares of Common Stock
that may be offered or the maximum number of shares of Common Stock that
each eligible employee may purchase, (2) extend the maximum term of an
Offering Period beyond 26 months, (3) decrease the purchase price, (4)
materially expand the eligibility requirements or (5) materially increase
benefits.
Stock Option Plan
The Cinergy Corp. Stock Option Plan ("Stock Option Plan") is a
stock option plan in which non-employee directors and eligible employees of
the Cinergy Companies may be granted incentive stock options, non-qualified
stock options, stock appreciation rights and/or cash awards granted in
connection with non-qualified stock options to reimburse an optionee for
the income taxes imposed upon the exercise of such an option. Shares of
Common Stock issuable under the Stock Option Plan consist, at Cinergy's
discretion, of authorized but unissued shares and/or shares purchased on
behalf of plan participants on the open market. The Stock Option Plan is
administered by the Plan Committee, which grants stock options, stock
appreciation rights and cash awards to eligible employees selected by it.
In addition, the Cinergy Board may perform any function of the Committee
except where Committee action is required under Section 162(m) of the Code.
Employees of Cinergy or any of its subsidiaries who are officers or
are employed in a significant executive, supervisory, administrative,
operational or professional capacity or who have the potential to
contribute to the future success of Cinergy or its subsidiaries are
eligible to receive awards under the Stock Option Plan. Non-employee
directors are also eligible to receive awards under the plan.
Concurrently with the granting of any stock option, the Plan
Committee will establish the exercise price per share of Common Stock
subject to the stock option, which in no event will be less than 100
percent of the fair market value per share of Common Stock on the date of
the grant. For this purpose, fair market value will be determined based on
the average of the high and low sales prices of a share of Common Stock on
the date of grant (or on the preceding trading day if the date of grant is
not a trading day) as reported by the NYSE-Composite Transactions. Also at
the time of grant, the Plan Committee will establish the period of time
(not to exceed ten years) during which the stock option will be
exercisable. Stock options granted to eligible employees may be
exercisable in full at any time, or in installments at specified times,
during the term of the stock option. The foregoing notwithstanding, except
in connection with a change in control, no stock option will be exercisable
in whole or in part for the first twelve months after the date of grant.
Each non-employee director was granted, at the consummation of the
Cinergy merger in October 1994, a non-qualified stock option to acquire
12,500 shares of Common Stock at an exercise price per share equal to the
average of the high and low sales prices of a share of Common Stock on
October 25, 1994 (the initial trading date of the Common Stock) as reported
by the NYSE-Composite Transactions. Each person who is elected for the
first time to be a non-employee director (other than persons who were
previously employees of CG&E or PSI) will be granted, as of the first Board
meeting held on or after the date he or she becomes a non-employee
director, a non-qualified stock option to acquire 12,500 shares of Common
Stock at an exercise price per share equal to the average of the high and
low sales price of a share of Common Stock as reported on the
NYSE-Composite Transactions on the date he or she first becomes a
non-employee director. Effective December 1, 1999, the Plan was amended to
allow non-employee directors to be eligible for other awards under the
Plan. On December 14, 1999, each non-employee director was granted a
non-qualified stock option to acquire 10,000 shares of Common Stock at an
exercise price equal to the average of the high and low sales price of a
share of Cinergy Common Stock on December 14, 1999 as reported on the
NYSE-Composite Transactions. Each non-qualified stock option granted to a
non-employee director will have a term of ten years and will become
exercisable with respect to 20 percent of the shares of Common Stock
subject thereto on each of the first five anniversaries of the grant date.
Non-employee directors are not eligible to receive any additional awards.
Shares of Common Stock acquired by non-employee directors and
eligible employees pursuant to the exercise of stock options may be
purchased with (i) cash, (ii) a stock exchange or swap using shares of
Common Stock already owned by the optionee or owned jointly by the optionee
and his or her spouse (with the spouse's permission), (iii) a
broker-financed transaction, (iv) by withholding from the shares of Common
Stock issued on exercise, shares of Common Stock whose value equals the
purchase price, (v) any other legal consideration that the Plan Committee
deems appropriate, or (vi) any combination of these methods.
Any awardee (other than a non-employee director) who has been
granted a stock option may be granted a stock appreciation right, which
entitles the awardee to receive, upon surrender of all or a portion of the
stock option, an amount equal to the excess of the fair market value of a
share of Common Stock on the date of the exercise of the stock appreciation
right over the exercise price per share of the stock option, multiplied by
the number of shares of Common Stock with respect to which the s tock
option has been surrendered. The right to exercise a stock appreciation
right terminates to the extent an awardee exercises the stock option to
which it is attached. Payment by the respective Cinergy Company of the
amount receivable by an awardee upon the exercise of a stock appreciation
right may be made, as determined by the Plan Committee, by the delivery of
whole shares of Common Stock, cash or any combination of shares of Common
Stock and cash. In no event may a stock appreciation right be exercised
more than ten years after the date of the grant of the tandem stock option.
To the extent a stock appreciation right is exercised, the tandem stock
option will be deemed to have been exercised.
A cash award is a right granted to an awardee who has been granted
a non-qualified stock option to receive a cash payment, at the times and in
the amounts determined by the Plan Committee, that is intended to reimburse
the awardee for all or a portion of the federal, state and local income
taxes imposed upon the awardee as a consequence of the exercise of the
non-qualified stock option.
In general, the Cinergy Board may at any time alter, amend, suspend
or terminate the Stock Option Plan, except that, without the approval of
Cinergy's shareholders, no such action may (1) increase the maximum number
of shares of Common Stock that may be issued in respect of awards, (2)
change the class of employees eligible to participate, or (3) cause the
plan non longer to comply with applicable rules under the Securities and
Exchange Act of 1934, as amended, or other applicable requirements.
Without the consent of the awardee, no amendment or termination of the
Stock Option Plan may adversely affect any stock option, stock appreciation
right or cash award previously granted.
4. Directors' Deferred Compensation Plan
Cinergy's Directors' Deferred Compensation Plan ("Directors' Plan")
allows each non-employee director to defer fees for serving as a
non-employee director, and to have such fees accrued as cash or theoretical
units of shares of Common Stock. Shares of Common Stock offered under the
Directors' Plan consist, at Cinergy's discretion, of authorized but
unissued shares and/or shares purchased on behalf of plan participants on
the open market. The Directors' Plan is administered by the Plan
Committee.
All non-employee directors may participate in the Directors' Plan.
On an annual basis, on or before July 1, a non-employee director may elect
to defer the receipt of all or a specified portion of his or her fees
payable for succeeding years.
Cinergy's Secretary will establish and maintain a separate
recordkeeping account for each participant to which all deferred fees for
that participant will be credited. At the time a deferral election is
made, a participant may elect to have all or a portion of the deferred fees
credited to his or her account as units, each representing a share of
Common Stock, or as cash. Deferred fees that are credited to a
participant's account as units will be deemed to be invested in that number
of hypothetical shares of Common Stock obtained by dividing the dollar
amount of the deferred fees by the closing price per share of Common Stock
as reported by the NYSE-Composite Transactions for the date the fees would
have been otherwise paid to the participant. From time to time thereafter,
additional units will be credited to the participant's account to reflect
any dividend or other distribution the participant would have received if
the participant had been the record owner of that number of shares of
Common Stock equal to the number of unites credited to his or her account
as of the dividend record date or as of the relevant date for any other
distribution. Deferred fees that are credited to a participant's account
hypothetically as cash will be credited with interest at a rate, adjusted
quarterly, equal to the per annum rate equivalent to the quoted interest
rate, in effect on the first business day of any calendar quarter, for a
one-year certificate of deposit of a principal amount of $100,000 as quoted
in The Wall Street Journal. Interest credited to a participant's account
will accrue, compounded quarterly, at the same rate as that described in
the preceding sentence.
At the time a participant first makes an election to defer the
receipt of fees under the Directors' Plan, the participant may elect that
the deferred fees, together with associated earnings, be distributed in a
single payment or in equal annual installments over a period of two to ten
years. At the participant's election, a distribution will be made, or in
the case of installment payments distributions will begin, on the firs
business day of the year immediately following the year during which the
participant (1) ceases to be a member of the board of directors of Cinergy
or any of its subsidiaries, or (2) attains the social security retirement
age. Subsequent installments, if any, will be distributed on the first
business day of each following year.
To the extent deferred fees have been treated as if invested in
Common Stock, distributions from the Directors' Plan will be made, as
determined by Cinergy, in the form of newly issued whole shares of Common
Stock purchased on the open market, and cash in lieu of fractional shares.
If the participant has elected a single payment distribution, the number of
shares of Common Stock to be distributed will equal the number of whole
units credited to the participant's account as of the last business day of
the year immediately preceding the year during which the distribution is to
be made. The participant will also receive a cash payment equal to the
fair market value, as of such day, of a fractional number of shares of
Common Stock equal to any fraction of a unit credited to the participant's
account. If the participant has elected installment payments, the number
of shares of Common Stock to be distributed will equal the number of units
credited to the participant's account on the day preceding the date of
payment of an installment, divided by the number of installments remaining
to be paid. No fractional shares of Common Stock will be distributed; the
participant will receive a cash payment, computed by Cinergy's Treasurer,
equal to the fair market value, as of the day preceding the date of payment
of the installment, of a fractional number of shares of Common Stock equal
to any fraction of a unit to which the participant is entitled on the
installment date. To the extent deferred fees have been credited as cash
to a participant's account, distributions will be made in the form of cash.
If the participant has elected a single payment distribution, the amount of
the distribution will equal the amount of cash credited to the
participant's account as of the last business day of the year immediately
preceding the year of the distribution. If the participant has elected
installment payments, the amount of each installment payment will equal the
amount of cash credited to the participant's account as of the day
preceding the date the installment is to be made, divided by the number of
installments remaining to be paid. Amounts held in the participant's
account pending distribution will continue to accrue interest at the
applicable rate.
In general, the Cinergy Board may at any time alter, amend, modify,
revoke or terminate the Directors' Plan, or suspend payment of benefits
thereunder.
5. Long-Term Incentive Compensation Plan
The Cinergy Corp. Long-Term Incentive Compensation Plan ("LTIP")
provides for the grant from time to time to selected eligible employees of
stock-related awards of six general types: (1) option to purchase shares
of Common Stock ("Options")/2/; (2) rights to receive, upon exercise, the
appreciation in fair market value of shares of Common Stock ("Stock
Appreciation Rights" or "SARs")/3/; (3) outright grants of shares of Common
Stock, subject to transfer restrictions and risk of forfeiture for a
specified restriction period ("Restricted Stock") and which may, but need
not, be conditioned upon the attainment of specified Performance Measures
(defined below); (4) rights to receive (a) shares of Common Stock, or in
lieu of all or any portion of those shares, their fair market value
("Performance Shares") or (b) a specified dollar amount or, in lieu of all
or any portion of that amount, shares of Common Stock having the same fair
market value ("Performance Awards"), both conditional upon the attainment
during a specified performance period of specified Performance Measures;
(5) rights to receive shares of Common Stock or cash or other property
equal in value to dividends paid with respect to a specified number of
shares of Common Stock, and which may, but need not, be conditioned upon
the attainment of specified Performance Measures ("Dividend Equivalents");
and (6) other stock-based awards which are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or
related to, shares of Common Stock ("Other Stock-Based Awards"). Shares
used for awards under the Plan may be authorized but unissued shares of
Common Stock or shares of Cinergy commons tock purchased on the open
market, in private transactions or otherwise.
The LTIP is administered by the Compensation Committee, all of
whose members will be non-employee members of the Cinergy Board who are
disinterested persons within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934.
The group of employees of Cinergy and its subsidiaries eligible to
receive awards under the LTIP consists of officers, employees who are
employed in a significant executive, supervisory, administrative,
operational or professional capacity, and employees who have the potential
to contribute to the future success of the Cinergy holding company system.
Either the Compensation Committee or the Cinergy Board may determine those
eligible employees to whom awards may 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 LTIP. In that regard, no employee may be
granted Options for more than 500,000 shares of Common Stock or SARs during
any calendar year. In addition, no employee may receive awards of
Restricted Stock, Dividend Equivalents, Performance Shares, Performance
Awards and Other Stock-Based Awards having an aggregate value as of their
respective dates of grants in excess of $3 million in any calendar year.
The Compensation Committee may make grants to employees under any or a
combination of all of the various categories of awards that are authorized
under the LTIP. In addition, the Compensation Committee has delegated to
Cinergy's Chief Executive Officer authority to grant stock options,
performance shares, and restricted stock awards to employees under the
LTIP, subject to certain restrictions. The CEO may make grants up to
75,000 shares in stock options per individual grant, performance shares
awards valued up to $500,000 per individual grant, and restricted stock
awards valued up to $500,000 per individual grant. The value of the
performance shares awards and restricted stock awards are determined as of
the date of grant.
"Performance Measures" are criteria and objectives determined by
the Compensation Committee which (1) in the case of Performance Shares,
Performance Awards or Dividend Equivalents, the attainment of which during
the applicable performance period would be a precondition to settlement of
the award, and (2) in the case of Restricted Stock, the failure to obtain
which would cause forfeiture of the award and/or which if met during the
otherwise applicable restriction period would cause an early termination of
the restriction period. Performance Measures applicable to any award to an
employee who is, or is determined by the Compensation Committee as likely
to become, a "covered employee" within the meaning of Code Section 162(m)
will be established in writing within the period prescribed by that section
and shall be limited to criteria and objectives related to (1) Cinergy's or
one of its subsidiary's performance, efficiency or profitability, including
stock price, total shareholder return, market share, sales, earnings per
share, costs, net operating income, cash flow, fuel cost per million BTU,
costs per kilowatt hour, retained earnings or return on equity; and/or (2)
a covered employee's performance, which criteria shall be based on
objective or, with respect to separate awards under the LTIP, subjective
performance criteria pertaining to a covered employee's individual effort
as to enhancement of either individual performance or achievement or
attainment of the performance, efficiency of profitability of Cinergy and
its subsidiaries. In addition, the Compensation Committee may impose any
other subjective or objective criteria it may approve from time to time for
the purpose of reducing the amount otherwise payable upon settlement of
Dividend Equivalents, Performance Shares of Performance Awards or for the
purpose of increasing the number of shares of Restricted Stock that would
otherwise be forfeited during the applicable restriction period. Except in
the case of such a covered employee, if the Compensation Committee
determines that a change in the business, operations, corporate or capital
structure of Cinergy or any of its subsidiaries, or the manner in which it
conducts its business, or other events or circumstances render the
Performance Measures unsuitable, the Compensation Committee may modify such
Performance Measures in whole or in part as the Compensation Committee
deems appropriate and equitable.
Under the LTIP, the Compensation Committee may grant Options that
entitle the optionee to purchase shares of Cinergy Common Stock at a price
equal to the fair market value on the date of grant i.e., the average of
the high and low sales prices of a common share on the d ate of grant (or
on the preceding trading day if that date was not a trading date) as
reported by the NYSE-Composite Transactions. Any Options granted must be
evidenced by a written agreement. The option price is payable at the time
of exercise (1) in cash or cash equivalents, (2) via a stock exchange or
stock swap using shares of Common Stock already owned by the optionee or
owned jointly by the optionee and his or her spouse (with the spouse's
permission), (3) by a broker-financed transaction (for any employee,
officer or director), (4) by withholding from the shares of Common Stock
issued on exercise, shares of Common Stock whose value equals the purchase
price, (5) with any other legal consideration that the Compensation
Committee deems appropriate, or (6) by any combination of these methods.
Payment of the exercise price of any Nonqualified Stock Option may
also be made in whole or in part in the form of shares of Restricted Stock
or other shares of Common Stock that are subject to risk of forfeiture or
restriction on transfer. When paid with such consideration, unless
otherwise determined by the Compensation Committee on or after the date of
the grant, shares of Common Stock received by the optionee upon the
exercise of the NSO are subject to the same risks of forfeiture or
restrictions on transfer applied to the consideration surrendered by the
optionee. However, such risks of forfeiture and restrictions on transfer
shall apply only to the same number of shares of Common Stock surrendered
by the optionee. The Compensation Committee has the authority to specify
at the time the Options are granted that shares of Common Stock will not be
accepted in payment of the option price until they have been owned by the
optionee for a specified period; however, the LTIP does not require any
such holding period and would permit immediate sequential exchanges of
shares of Common Stock at the time of exercise of the Options.
No Option may be exercised more than ten years from the date of
grant. Successive grants may be made to the same optionee regardless of
whether Options previously granted to him or her remain unexercised.
Any SARs granted under the LTIP must be evidenced by a written
agreement. In the case of Freestanding SARs, the written agreement would
specify the number of SARs granted, the term of the SARs (which may not
exceed ten years from the date of grant), and the time or times at which
the SARs will first become exercisable. In the case of Tandem SARs, the
written agreement would specify the Option and the number of shares to
which the SAR relates and the term of the SAR (which may not exceed that of
the related Option). Freestanding SARs may (but need not) be made
immediately exercisable. A Tandem SAR generally will be exercisable during
its term only when and to the extent the related Option is exercisable.
During the lifetime of the grantee of either type of SAR, the SAR would be
exercisable only by the grantee or the grantee's legal representative.
For each Freestanding SAR subsequently exercised, the holder would
become entitled to receive the excess of fair market value of a share of
Common Stock on the date of exercise over its value on the date the SAR was
granted. Exercise of a Tandem SAR would entitle the holder to receive the
excess of the aggregate fair market value on the exercise date of the
number of optioned shares of Common Stock with respect to which the SAR is
being exercised over their aggregate fair market value on the date the
related Option was granted. Exercise of a Tandem SAR would have the effect
of reducing the number of shares covered by the related Option by the
number with respect to which the SAR is exercised, and exercise of the
related Option would have the equivalent effect upon a Tandem SAR.
Exercised SARs may be settled in cash or whole shares of Common Stock
(valued at the date of exercise), unless the applicable SAR agreement
further limits the form of settlement. If the form of settlement is not
specified in the SAR agreement, the holder, at the time of exercise, may
request the form he or she wishes to receive, but the Compensation
Committee will have the ultimate authority, in its discretion, to approve
or disapprove any such request. In the absence of such a request, the
Compensation Committee also would determine the form of settlement.
A grant of Restricted Stock involves the immediate transfer by
Cinergy to an employee of ownership of a specific number of shares of
Common Stock subject to a risk of forfeiture for a specified restriction
period and which may further be conditioned upon the attainment of
specified Performance Measures. During the applicable restriction period,
the awardee of Restricted Stock would have all the voting, dividend and
other rights of a record holder of a share of Common Stock, except that the
shares would be nontransferable and any noncash dividends or other
distributions paid upon the shares would be held by Cinergy and would be
subject to transfer restrictions and risk of forfeiture to the same extent
as the shares themselves. Upon the expiration of the applicable
restriction period and (if applicable) the attainment of the relevant
Performance Measures, full legal title to the shares of Common Stock
covered by the grant of Restricted Stock will thereupon vest in the
employee without additional consideration or in consideration of a payment
by the employee equal to or less than the fair market value of such.
Restricted Stock must be subject to a "substantial risk of
forfeiture" within the meaning of Code Section 83 for a period of time to
be determined by the Compensation Committee. An example would be a
provision that the Restricted Stock would be forfeited if the employee
ceased to serve Cinergy as an officer or other key employee during a
specified period of years. In order to enforce these forfeiture
provisions, the transferability of Restricted Stock will be prohibited or
restricted in a manner and to the extent prescribed by the Compensation
Committee for the period during which the forfeiture provisions are to
continue.
Any grant of a Performance Share or a Performance Award will be
evidenced by a written agreement. An employee will be given one or more
Performance Measures to meet within a specified performance period. If by
the end of the performance period the employee has achieved the specified
Performance Measures, the employee will be deemed to have fully earned the
Performance Shares or Performance Awards. To the extent earned, the
Performance Shares or Performance Awards will be paid to the employee at
the time and in the manner determined by the Compensation Committee in cash
and/or shares of Common Stock.
Any award of Dividend Equivalents will be evidenced by a written
agreement. The agreement shall set forth the circumstances (including any
applicable Performance Measures) under which, and specify the number if any
of, shares of Common Stock or the amount of cash that shall then become
payable to the awardee. The Compensation Committee shall determine the
timing of the award.
The Compensation Committee may grant Other Stock-Based Awards
(awards other than Dividend Equivalents, Options, Performance Shares,
Performance Awards, Restricted Stock or SARs). Other Stock-Based Awards
shall be evidenced by a written agreement or by other methods determined by
the Compensation Committee. The agreement shall set forth the
circumstances (including any applicable Performance Measures) under which,
and specify the number of shares of Common Stock if any or the amount of
cash that shall then become payable to the awardee. The Compensation
Committee shall determine the timing of the award.
The LTIP is intended to be of indefinite duration. However, the
provisions of the Code currently applicable to ISOs would not permit the
grant of ISOs under the LTIP after the tenth anniversary of its effective
date.
At any time by action of the Cinergy Board, Cinergy may amend or
terminate the LTIP in whole or in part, except that certain provisions
thereof relating to the effects of a "change in control" of Cinergy may not
be amended for three years following a change in control. In addition,
without the approval of Cinergy's shareholders, no such action may, inter
alia, (1) increase the maximum number of shares of Cinergy Common Stock
that may be issued in respect of awards under the LTIP, or (2) change the
class of employees eligible to participate in the LTIP.
6. 401(k) Plans
Cinergy sponsors three 401(k) plans, which involve the issuance of
shares of Common Stock to participating employees. Although the plans
differ as to the group of eligible employees, the fundamental, substantive
terms of the plans are identical. The group of employees eligible to
participate in the Cinergy Union Employees' 401(k) Plan consists of those
employees of Cinergy and its subsidiaries whose employment positions are
covered by a collective bargaining agreement between their employer and
Local No. 1393 of the International Brotherhood of Electrical Workers that
provides for participation in the plan. The group of employees eligible to
participate in the Cinergy Union Employees' Savings Incentive Plan consists
of those employees of Cinergy and its subsidiaries whose employment
positions are covered by collective bargaining agreements between their
employer and Local No. 1347 of the International Brotherhood of Electrical
Workers, Local Nos. 12049 and 14214 of the United Steelworkers of America,
and the Independent Utilities Union that provide for participation in the
plan. The group of employees eligible to participate in the Cinergy
Non-Union Employees' 401(k) Plan consists of all exempt and non-exempt,
non-union employees of Cinergy and its subsidiaries.
The three plans are mirror 401(k) plans, which use a passive
enrollment feature. All new employees are automatically enrolled in the
applicable plan on their first day of work, subject to an opt-out
provision. The initial contribution is 1% of pay on a before-tax basis.
Employees may increase the contribution percentage, invest in different
funds, or cancel participation.
Each plan accepts before-tax and after-tax contributions. Subject
to the initial automatic enrollment, employee contributions are invested
according to employee instructions. An employee may contribute up to 15%
of the employee's pay. One of 15 investment options is a Cinergy Common
Stock fund. Contributions invested in the Cinergy Common Stock fund are
used to purchase authorized and unissued shares of Common Stock or shares
of Common Stock on the open market, as determined by Cinergy. Cinergy also
matches, in Common Stock, employee's before-tax contribution in two
components: (1) a base match equal to $.60 for every dollar an eligible
employee contributes, up to the first 5% of compensation, and (2) a
potential incentive match equal to $.20 to $.40 for each dollar
contributed, up to the first 5% of compensation. The amount of the
incentive match depends on the level of annual corporate goals achieved.
Shares of Common Stock acquired under the plans are priced at the average
of the high and low prices as reported by the NYSE-Composite Transactions
on the trading day immediately preceding their acquisition.
Item 2. Fees, Commissions and Expenses
The fees, commissions, and expenses paid or to be paid or incurred
by Applicant or any associate company thereof in connection with the
proposed transactions are estimated as follows:
Registration fees $250,000
Brokerage commissions $1,500,000
Miscellaneous $200,000
TOTAL $1,950,000
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a), 10 and 12(c)of the Act and Rules 42 and 54
thereunder 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 a 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 if paragraphs (a), (b) and (c) of Rule 53
are satisfied.
Cinergy currently does not meet the conditions of Rule 53(a). As
of June 30, 2000, Cinergy's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $721.9 million. This amount
is equal to approximately 66% of Cinergy's average "consolidated retained
earnings," also as defined in Rule 53(a)(1), for the four quarters ended
June 30, 2000, of approximately $1092.6 million, which exceeds the 50%
"safe harbor" limitation contained in the rule.
By order dated March 23, 1998 (HCAR No. 26848) ("1998 Order"), the
Commission authorized Cinergy to increase its aggregate investment in EWGs
and FUCOs to an amount equal to 100% of Cinergy's average "consolidated
retained earnings." By order dated June 23, 2000 (HCAR No. 27190) ("2000
Order"), the Commission granted Cinergy additional authorization to invest
in EWGs and FUCOs beyond that granted in the 1998 Order - specifically, $1
billion in addition to Cinergy's aggregate investment at the date of such
order. Although Cinergy's aggregate investment at June 30, 2000 exceeds
the 50% "safe harbor" limitation, this investment is below the limitation
authorized by the 1998 and 2000 Orders.
With respect to capitalization, there has been no material adverse
impact on Cinergy's consolidated capitalization resulting from Cinergy's
investments in EWGs and FUCOs. As of September 30, 1997, the most recent
period for which financial statement information was evaluated in the 1998
Order, Cinergy's consolidated capitalization consisted of 44.1% equity and
55.9% debt. As of June 30, 2000, Cinergy's consolidated capitalization
consisted of 42.4 % equity and 57.6% debt. These ratios are within
acceptable ranges, as further reflected by the fact that at June 30, 2000
Cinergy's senior unsecured debt was rated "investment grade" by all the
major rating agencies. The impact of the proposed transactions upon
Cinergy's consolidated capitalization would be to increase the relative
proportion comprised of equity.
With respect to earnings, Cinergy's interests in EWGs and FUCOs
have made consistent and significant contributions to Cinergy's
consolidated retained earnings, as reflected in the quarterly certificates
filed by Cinergy in Docket No. 70-9011. Although Cinergy's consolidated
earnings for the year ended December 31, 1997 were negatively affected by
Cinergy's 50% ownership interest in Midlands Electricity plc ("Midlands"),
a FUCO, this was solely as a result of the imposition by the United Kingdom
of a one-time, non-recurring windfall tax. Significantly, this tax did not
affect earnings from ongoing operations, and therefore would not have any
negative impact on earnings in future periods. In July 1999, Cinergy sold
all of its ownership in Midlands, realizing a substantial profit.
Cinergy satisfies all of the other conditions of paragraphs (a) and
(b) of Rule 53. With reference to Rule 53(a)(2), Cinergy maintains books
and records in conformity with, and otherwise adheres to, the requirements
thereof. With reference to Rule 53(a)(3), no more than 2% of the employees
of Cinergy's domestic public utility companies render services, at any one
time, directly or indirectly, to EWGs or FUCOs in which Cinergy directly or
indirectly holds an interest. With reference to Rule 53(a)(4), Cinergy
will concurrently provide a copy of this application to each regulator
referred to therein, and will otherwise comply with the requirements
thereof concerning the furnishing of information. With reference to Rule
53(b), none of the circumstances enumerated in subparagraphs (1), (2) and
(3) thereunder have occurred. Finally, Rule 53(c) by its terms is
inapplicable since the proposed transactions do not involve the issue or
sale of a security to finance the acquisition of an EWG or FUCO.
Item 4. Regulatory Approval
The proposed transactions are not subject to the jurisdiction of
any state or federal commission other than this Commission.
Item 5. Procedure
Applicant requests that the Commission issue an order as soon as
practicable after the expiration of the applicable public notice period
granting and permitting this Application-Declaration to become effective.
As noted in Item 1.A, the existing Commission authorization to issue shares
of Common Stock under the Plans expires at January 1, 2001, and therefore
Cinergy respectfully requests that the Commission issue its order prior to
such date.
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 (filed as an
exhibit to and hereby incorporated by reference from Cinergy's 1993 Form
10-K)
A-2 By-laws of Cinergy as amended on April 27, 2000 (filed
as an exhibit to and hereby incorporated by reference from Cinergy's March
31, 2000 Form 10-Q)
B-1 Cinergy Corp. Dividend Reinvestment and Stock Purchase
Plan (filed as an exhibit to and hereby incorporated by reference from
Registration Statement No. 33-55267)
B-2 Cinergy Corp. Employee Stock Purchase and Savings Plan
(filed as an exhibit to and hereby incorporated by reference from
Registration Statement No. 33-56091)
B-3 Amendment to Cinergy Corp. Employee Stock Purchase and
Savings Plan, adopted April 26, 1996, effective June 1, 1996 (filed as an
exhibit to and hereby incorporated by reference from Cinergy's June 30,
1996 Form 10-Q)
B-4 Amendment to Cinergy Corp. Employee Stock Purchase and
Savings Plan, adopted October 22, 1996, effective November 1, 1996 (filed
as an exhibit to and hereby incorporated by reference from Cinergy's
September 30, 1996 Form 10-Q)
B-5 Cinergy Corp. Stock Option Plan (filed as an exhibit
to and hereby incorporated by reference from Registration Statement No.
33-56093)
B-6 Amendment to Cinergy Corp. Stock Option Plan, amended
October 22, 1996, effective November 1, 1996 (filed as an exhibit to and
hereby incorporated by reference from Cinergy's September 30, 1996 Form
10-Q)
B-7 Cinergy Corp. Directors' Deferred Compensation Plan
(filed as an exhibit to and hereby incorporated by reference from
Registration Statement No. 33-56089)
B-8 Cinergy Corp. Long-Term Incentive Compensation Plan
(filed as an exhibit to and hereby incorporated by reference from
Declaration on Form U-1 filed in File No. 70-8807)
B-9 Cinergy Corp. Union Employees' 401(k) Plan (filed as
an exhibit to and hereby incorporated by reference from Cinergy's 1999 Form
10-K)
B-10 Amendment to Cinergy Corp. Union Employees' 401(k)
Plan, adopted December 10, 1999, effective December 1, 1999 (filed as an
exhibit to and hereby incorporated by reference from Cinergy's 1999 Form
10-K)
B-11 Cinergy Corp. Union Employees' Savings Incentive Plan
(filed as an exhibit to and hereby incorporated by reference from Cinergy's
1999 Form 10-K)
B-12 Amendment to Cinergy Corp. Union Employees' Savings
Incentive Plan, adopted December 10, 1999, effective December 1, 1999
(filed as an exhibit to and hereby incorporated by reference from Cinergy's
1999 Form 10-K)
B-13 Cinergy Corp. Non-Union Employees' 401(k) Plan (filed
as an exhibit to and hereby incorporated by reference from Cinergy's 1999
Form 10-K)
B-14 Amendment to Cinergy Corp. Non-Union Employees' 401(k)
Plan, adopted December 10, 1999, effective December 1, 1999 (filed as an
exhibit to and hereby incorporated by reference from Cinergy's 1999 Form
10-K)
C [see registration statements referenced in "B" above]
D Not applicable
E Not applicable
F-1 Preliminary Opinion of Counsel
G Form of Federal Register Notice
Financial Statements
FS-1 Cinergy Corp. Consolidated Financial Statements dated
June 30, 2000
FS-2 Cinergy Corp. Financial Statements dated June 30, 2000
FS-3 Cinergy Corp. Financial Data Schedules (included in
electronic submission only)
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute any
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 Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this Form U-1 to be
signed on its behalf by the officer indicated below.
Dated: September 29, 2000
Cinergy Corp.
By: /s/Wendy L. Aumiller
Assistant Treasurer
ENDNOTES
/1/ Cinergy also has been authorized by the Commission to issue shares of
Common Stock, from time to time through December 31, 2004, under certain
other plans pursuant to two orders issued in 1999 (HCAR No. 27001, April 8,
1999, & HCAR No. 27028, May 19, 1999). Cinergy proposes no changes to the
terms of these orders.
/2/ Options meeting the requirements of Section 422 of the Code and
intended to be afforded the federal tax treatment of Code Section 422
options ("Incentive Stock Options" or "ISOs"), as well as other Options
("Nonqualified Stock Options" or "NSOs"), may be awarded under the LTIP.
/3/ SARs granted under the LTIP may be awarded either in tandem with
Options ("Tandem SARs") or on a stand-alone basis ("Freestanding SARs")
