Filings Under the Public Utility Holding Company Act of 1935, as Amended (“Act”), 10422-10425 [E5-853]
Download as PDF
<![CDATA[
10422
Federal Register / Vol. 70, No. 41 / Thursday, March 3, 2005 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 35–27948]
Filings Under the Public Utility Holding
Company Act of 1935, as Amended
(‘‘Act’’)
February 25, 2005.
Notice is hereby given that the
following filing(s) has/have been made
with the Commission under provisions
of the Act and rules promulgated under
the Act. All interested persons are
referred to the application(s) and/or
declaration(s) for complete statements of
the proposed transaction(s) summarized
below. The application(s) and/or
declaration(s) and any amendment(s) is/
are available for public inspection
through the Commission’s Branch of
Public Reference.
Interested persons wishing to
comment or request a hearing on the
application(s) and/or declaration(s)
should submit their views in writing by
March 22, 2005, to the Secretary,
Securities and Exchange Commission,
Washington, DC 20549–0609, and serve
a copy on the relevant applicant(s) and/
or declarant(s) at the address(es)
specified below. Proof of service (by
affidavit or, in the case of an attorney at
law, by certificate) should be filed with
the request. Any request for hearing
should identify specifically the issues of
facts or law that are disputed. A person
who so requests will be notified of any
hearing, if ordered, and will receive a
copy of any notice or order issued in the
matter. After March 22, 2005, the
application(s) and/or declaration(s), as
filed or as amended, may be granted
and/or permitted to become effective.
American Electric Power Company,
Inc. (70–10283)
Order Authorizing Solicitation of
Proxies; Notice of Request To Distribute
Securities Under Proposed Amended
and Restated American Electric Power
System 2000 Long-Term Incentive Plan
American Electric Power Company,
Inc. (‘‘AEP’’), 1 Riverside Plaza,
Columbus, Ohio, 43215, a registered
holding company has filed a declaration
(‘‘Declaration’’) under sections 6(a), 7
and 12(e) of the Act and rules 23, 42, 54,
62 and 65 under the Act.
I. Requested Authority
AEP requests authority to: (1) Solicit
proxies with respect to the Amended
and Restated American Electric Power
System 2000 Long-Term Incentive Plan
(‘‘Plan’’) from the holders of its
outstanding common stock for action at
the annual meeting of AEP’s
VerDate jul<14>2003
16:38 Mar 02, 2005
Jkt 205001
shareholders scheduled to be held on
April 26, 2005; and (2) issue securities
under the Plan, if it is approved by
shareholders, including up to
19,200,000 shares of common stock
(‘‘Common Stock’’).
vote of a majority of the votes cast at the
annual meeting.
II. Order for Solicitation of Proxies
AEP has requested that an order be
issued authorizing commencement of
the solicitation of proxies from the
holders of the outstanding shares of its
common stock with respect to the Plan.
AEP is authorized to issue up to
15,700,000 shares of common stock
under the current Long-Term Incentive
Plan (‘‘Current Plan’’). AEP has issued
all but 3,754,150 shares of common
stock under the Current Plan. AEP
shareholders will be asked to approve
the following amendments to the
Current Plan: (1) The provision of an
additional 15,445,850 shares of
Common Stock for awards (which when
added to the 3,754,150 shares still
available for issuance under the Current
Plan establishes a new limit of
19,200,000 shares of Common Stock that
will be available for issuance under the
Plan); (2) an increase in the maximum
number of options and stock
appreciation rights that may be awarded
to a participant during any three
calendar year period from 1,650,000 to
2,000,000; (3) an increase in the
maximum number of restricted shares
that may be awarded to a participant
during any one calendar year from
330,000 to 400,000; (4) an increase in
the maximum amount of compensation
that may be payable to a participant
during any one calendar year under a
performance-based award from
$8,260,000 to $15,000,000; (5) an
increase in the maximum number of
performance share units that may be
earned by a participant during any one
calendar year from 330,000 to 400,000;
and (6) revised performance criteria.
AEP states that the Plan is designed
to allow for the grant of certain types of
awards that conform to the requirements
for tax deductible ‘‘performance-based’’
compensation under Section 162(m) of
the Internal Revenue Code (‘‘Code’’).
Shareholder approval of the Plan is
needed in order to maximize the
deductibility of the payments under the
Plan to AEP’s chief executive officer and
other four most highly compensated
officers under the provisions of Section
162(m), and to comply with the
requirements of the regulations issued
by the Internal Revenue Service
governing the deductibility of
individual compensation amounts in
excess of $1,000,000.
Approval of the proposed
amendments will require the affirmative
The purpose of the Plan is to promote
the interests of AEP and its shareholders
by strengthening AEP’s ability to attract,
motivate and retain employees and
directors, to align further the interests of
AEP’s management with the
shareholders, and to provide an
additional incentive for employees and
directors to promote the financial
success and growth of AEP. The Plan
provides for the grant of stock options,
including incentive stock options and
nonqualified stock options, stock
appreciation rights, restricted stock,
performance share awards, phantom
stock, and dividend equivalents to
employees and non-employee Directors.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
III. Description of the Plan and
Securities Issuable Under the Plan
A. Purpose of Plan
B. Reservation of Shares and
Administration of the Plan
The Common Stock that will be
issuable under the Plan will be made
available from authorized but unissued
shares and/or shares reacquired by AEP.
If any shares of Common Stock awarded
under the Plan are not issued and cease
to be issuable for any reason, the shares
will no longer be charged against the
maximum share limitation and may
again be made subject to awards under
the Plan. If certain corporate
reorganizations, recapitalizations, or any
similar corporate transactions affecting
AEP or the Common Stock, or stock
splits, stock dividends or other
distribution with respect to the
Common Stock occur, proportionate
adjustments may be made to the number
of shares available for grant under the
Plan, the applicable maximum share
limitations under the Plan, and the
number of shares and prices under
outstanding awards at the time of the
event.
The Plan will be administered by the
Human Resources Committee of AEP’s
Board of Directors (‘‘Committee’’).
However, for awards granted to nonemployee Directors, all rights, powers
and authorities vested in the Committee
under the Plan will be instead exercised
by the Board. Subject to limitations set
forth in the Plan, the Committee has the
authority to determine the persons to
whom awards are granted, the type,
timing, vesting and duration of the
awards, the number of shares, units or
other rights awarded and the exercise,
base or purchase price of an award.
The Plan has no fixed expiration date,
but no awards may be granted after
April 26, 2015. The Board may amend
E:\FR\FM\03MRN1.SGM
03MRN1
Federal Register / Vol. 70, No. 41 / Thursday, March 3, 2005 / Notices
the Plan, except that shareholder
approval is required for amendments
that would either: (1) Increase the
number of shares of Common Stock
reserved for issuance under the Plan; or
(2) allow the grant of options at an
exercise price below fair market value or
allow the repricing of options.
C. Stock Options
The Plan authorizes the grant of
nonqualified and incentive stock
options. Nonqualified stock options may
be granted to employees and nonemployee Directors, but incentive stock
options may only be granted to
employees. The exercise price of an
option may be determined by the
Committee, provided that the exercise
price per share of an option may not be
less than 100% of the fair market value
of a share of Common Stock on the date
of grant. The exercise price of an option
is payable by the participant in cash, or
at the discretion of the Committee, in
shares of Common Stock, or by any
other method approved by the
Committee. The terms of any Incentive
Stock Option shall comply with the
provisions of the Code. The maximum
number of shares of Common Stock that
may be granted under stock options to
any one participant during any three
calendar year period shall be limited to
2 million shares.
D. Stock Appreciation Rights
A stock appreciation right entitles the
holder, upon exercise, to receive a
payment based on the difference
between the base price of the stock
appreciation right and the fair market
value of a share of Common Stock on
the date of exercise, multiplied by the
number of shares as to which the stock
appreciation right will have been
exercised. A stock appreciation right
may be granted either separately or in
tandem with an option. If the stock
appreciation right is granted in tandem
with an option it will have a base price
per share equal to the per share exercise
price of the option, will be exercisable
only at the same time the related option
is exercisable, and will expire no later
than when the related option expires.
Exercise of the option or the stock
appreciation right results in the
cancellation of the same number of
shares under the tandem right. A stock
appreciation right granted without
relationship to an option will be
exercisable as determined by the
Committee. The base price assigned to
a stock appreciation right granted
without relationship to an option shall
not be less than 100% of the fair market
value of a share of Common Stock on
the date of grant. The maximum number
VerDate jul<14>2003
16:38 Mar 02, 2005
Jkt 205001
of shares of Common Stock that may be
subject to stock appreciation rights
granted to any one participant during
any three calendar year period shall be
limited to 2,000,000 shares. Stock
appreciation rights are payable in cash,
restricted or unrestricted shares of
Common Stock, or a combination
thereof, in the discretion of the
Committee.
E. Performance Awards
Performance awards are units
denominated in shares of Common
Stock or specified dollar amounts
(‘‘Performance Units’’). Performance
awards are payable upon the
achievement of performance criteria
established by the Committee at the
beginning of the performance period. At
the time of grant, the Committee
establishes the number of units, the
duration of the performance period, the
applicable performance criteria, and in
the case of Performance Units, the target
unit value or range of unit values for the
award. Performance awards are payable
in cash, restricted or unrestricted shares
of Common Stock, phantom stock or
options, or a combination thereof, in the
discretion of the Committee. The
maximum amount of compensation that
may be payable in any one calendar year
to any one participant designated to
receive an award intended to qualify
under Section 162(m) of the Code is
$15,000,000. The maximum number of
performance share units that may be
earned in any one calendar year by any
one participant intended to qualify
under Section 162(m) of the Code is
400,000 units.
F. Restricted Stock
An award of restricted stock
represents shares of Common Stock that
are issued subject to restrictions on
transfer and on incidents of ownership
and to forfeiture upon the occurrence of
certain events deemed appropriate by
the Committee. The Committee may, in
connection with an award of restricted
stock, require the payment of a specified
purchase price. During the period of
restriction, the participant will have the
rights of a shareholder of AEP,
including all voting and dividend rights,
unless otherwise determined by the
Committee. The maximum number of
shares of Common Stock that may be
subject to restricted stock awards
intended to qualify under Section
162(m) of the Code granted to any one
participant during any calendar year is
limited to 400,000 shares.
G. Phantom Stock
An award of phantom stock gives the
participant the right to receive payment
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
10423
at the end of a fixed vesting period
based on the value of a share of
Common Stock at the time of vesting.
Phantom stock units are subject to
restrictions and conditions to payment
as the Committee determines are
appropriate. An award of phantom stock
may be granted, at the discretion of the
Committee, together with an award of
dividend equivalent rights for the same
number of shares. Phantom stock
awards are payable in cash, restricted or
unrestricted shares of Common Stock,
options or a combination thereof.
H. Dividend Equivalents
Dividend equivalent awards entitle
the holder to a right to receive cash,
shares of Common Stock, or other
property equal in value to dividends
paid with respect to a specified number
of shares of Common Stock. Dividend
equivalents may be awarded on a freestanding basis or in connection with
another award, and may be paid
currently or on a deferred basis. The
Committee may provide that the
dividend equivalent award shall be paid
when accrued or shall be deemed to
have been reinvested in additional
shares of Common Stock or other
investment vehicles as the Committee
may specify, provided that dividend
equivalent awards (other than freestanding dividend equivalent awards)
shall be subject to all conditions and
restrictions of the underlying awards to
which they relate.
IV. Rule 54 Analysis
The proposed transactions are subject
to rule 54. Rule 54 provides that, in
determining whether to approve the
issue or sale of any securities for
purposes other than the acquisition of
any ‘‘exempt wholesale generator’’
(‘‘EWG’’) or ‘‘foreign utility company’’
(‘‘FUCO’’) or other transactions
unrelated to EWGs or FUCOs, the
Commission shall not consider the
effect of the capitalization or earnings of
subsidiaries of a registered holding
company that are EWGs or FUCOs if the
requirements of Rule 53(a), (b) and (c)
are satisfied. Under rule 53(a), the
Commission shall not make certain
specified findings under Section 7 and
12 of the Act in connection with a
proposal by a holding company to issue
securities for the purpose of acquiring
the securities of, or other interest in, an
EWG or to guarantee the securities of an
EWG, if each of the conditions in
paragraphs (a)(1) through (a)(4) are met,
provided that none of the conditions
specified in paragraph (b)(1) through
(b)(3) of rule 53 exists.
AEP currently meets all of the
conditions of rule 53(a). At September
E:\FR\FM\03MRN1.SGM
03MRN1
10424
Federal Register / Vol. 70, No. 41 / Thursday, March 3, 2005 / Notices
30, 2004, AEP’s ‘‘aggregate investment,’’
as defined in rule 53(a)(1), in EWGs and
FUCOs was approximately $332 million
or about 19.9% of AEP’s ‘‘consolidated
retained earnings,’’ also as defined in
rule 53(a)(1), for the four quarters ended
September 30, 2004 ($1.675 billion).1
AEP 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 to
render services to EWGs and FUCOs,
and the requirements of rule 53(a)(4)
concerning the submission of copies of
certain filings under the Act to retail
rate regulatory commissions. Further,
none of the circumstances described in
rule 53(b)(1) or (3) has occurred or is
continuing. AEP states that it meets the
requirements of Rule 53(c).
The circumstances described in rule
53(b)(2) have occurred. As a result of the
recording of a loss with respect to
impairment charges,2 AEP’s
consolidated retained earnings declined.
The average consolidated retained
earnings of AEP for the four quarterly
periods ended September 30, 2004, was
$1.695 billion, or a decrease of
approximately 24.8% from AEP’s
average consolidated retained earnings
for the four quarterly periods ended
September 30, 2003, of $2.226 billion. In
addition, AEP’s ‘‘aggregate investment’’
in EWGs and FUCOs as of September
30, 2004, exceeded 2% of the total
capital invested in utility operations.
AEP states that if the effect of the
capitalization and earnings of its EWGs
and FUCOs upon its holding company
system were considered, there would be
no basis for the Commission to withhold
or deny approval for the authority
sought in the Declaration. AEP states
that the proposed transactions would
not, by themselves or even considered
in conjunction with the effect of the
capitalization and earnings of AEP’s
EWGs and FUCOs, have a material
adverse effect on the financial integrity
of the AEP system, or an adverse impact
on AEP’s utility subsidiaries,3 their
customers or the ability of state
commissions to protect the public
utility customers. The Rule 53(c) Order
was predicated, in part, upon an
assessment of AEP’s overall financial
condition which took into account,
among other factors, AEP’s consolidated
capitalization ratio and the growth trend
in AEP’s retained earnings.
Since the date of the Rule 53(c) Order,
there has been an increase in AEP’s
consolidated equity capitalization ratio.
As of December 31, 1999, the most
recent period for which financial
statement information was evaluated in
the Rule 53(c) Order, AEP’s
consolidated capitalization (including
CSW on a pro forma basis) consisted of
61.3% debt, 37.3% common and
preferred equity, and 1.4% of certain
subsidiary obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely junior
subordinated debentures of the
subsidiaries (or $335 million principal
amount). However, as of September 30,
2004, AEP’s consolidated capitalization
consisted of 60.4% debt, and 39.6%
common and preferred equity
(consisting of common stock
representing 39%, and preferred stock
representing 0.6% (or $133 million
principal amount).
In addition, the Utility Subsidiaries,
which will have a significant influence
on the determination of the AEP
corporate rating, continue to show
strong financial statistics as measured
by the rating agencies. As of December
31, 1999 and September 30, 2004
Standard and Poor’s (‘‘S&P’’) rating of
secured debt for AEP’s Utility
Subsidiaries was as follows:
12 / 31 / 99
Appalachian Power Company .................................................................................................................................................
Columbus Southern Power Company .....................................................................................................................................
Indiana Michigan Power Company .........................................................................................................................................
Kentucky Power Company ......................................................................................................................................................
Ohio Power Company .............................................................................................................................................................
AEP Texas Central Company .................................................................................................................................................
Public Service Company of Oklahoma ...................................................................................................................................
Southwestern Electric Power Company ..................................................................................................................................
AEP Texas North Company ....................................................................................................................................................
9 / 30 / 04
A
A¥
A¥
A
A¥
A
AA¥
AA¥
A
BBB
BBB
BBB
BBB
BBB
BBB
BBB
BBB
BBB
AEP did not have a long-term debt
rating as of December 31, 1999. As of
September 30, 2004, S&P’s rating of
AEP’s unsecured debt was BBB.
V. Conclusion
AEP states that no State or other
Federal regulatory authority has
jurisdiction over the proposed
transactions. AEP states that the fees,
commissions and expenses to be paid or
incurred directly or indirectly, by it in
connection with the proposed
transactions are estimated to be as
follows, except as otherwise indicated:
1 With respect to rule 53(a)(1), however, the
Commission has determined that AEP’s financing of
investments in EWGs and FUCOs in an amount
greater than the amount that would otherwise be
allowed by rule 53(a)(1) would not have either of
the adverse effects set forth in rule 53(c). By order
dated June 14, 2000 (Holding Company Act Release
No. 27186), the Commission authorized AEP to
invest up to 100% of its consolidated retained
earnings, with consolidated retained earnings to be
calculated on the basis of the combined
consolidated retained earnings of AEP and Central
and South West Corporation (‘‘CSW’’)(‘‘Rule 53(c)
Order’’). The Rule 53(c) Order also authorized the
merger of AEP and CSW.
2 In the fourth quarter of 2003 AEP recorded pretax impairments of assets (including goodwill) and
investments totaling $1.4 billion that reflected
downturns in energy trading markets, projected
long-term decreases in electricity prices, and other
factors. The impairments consisted of $650 million
related to asset impairments, $70 million related to
investment value and other impairment losses, and
$711 million related to discontinued operations. Of
the discontinued operations, $577 million was
attributable to the impairment of the fixed-asset
carrying value of AEP’s two coal-fired generation
plants in the United Kingdom. AEP recorded a pretax impairment of $70 million on certain qualifying
facilities as defined under the Public Utility
Regulatory Policies Act of 1978, as amended in the
third quarter of 2003.
3 AEP’s utility subsidiaries are: Appalachian
Power Company, Columbus Southern Power
Company, Indiana Michigan Power Company,
Kentucky Power Company, Ohio Power Company,
AEP Texas Central Company, Public Service
Company of Oklahoma, Southwestern Electric
Power Company, and AEP Texas North Company
(collectively, ‘‘Utility Subsidiaries’’).
VerDate jul<14>2003
16:38 Mar 02, 2005
Jkt 205001
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
E:\FR\FM\03MRN1.SGM
03MRN1
Federal Register / Vol. 70, No. 41 / Thursday, March 3, 2005 / Notices
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
Printing Costs .............................
$75,000 18, 2005, the American Stock Exchange
Transfer Agent and Brokerage
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
1 450,000
Fees and Expenses .................
the Securities and Exchange
Estimated Commission Filing
Commission (‘‘Commission’’) the
Fee Related to 1933 Act Registration ...................................
80,000 proposed rule change as described in
items I and II below, which items have
Total ....................................
$605,000 been prepared by the Exchange. The
1 This represents the total amount of exproposed rule change has been filed by
penses that AEP estimates it will incur in Amex as a ‘‘non-controversial’’ rule
connection with the solicitation of proxies
for the 2005 annual meeting, including with change pursuant to section 19(b)(3)(A)
respect to the Plan. AEP states that it does of the Act 3 and Rule 19b–4(f)(6)
not have enough data to make a reasonable thereunder.4 On January 24, 2005, Amex
estimate of the incremental costs associated
with the solicitation of proxies in regard to submitted Amendment No. 1 to the
the Plan, but believes that the incremental proposed rule change.5 On January 26,
costs would not represent more than ap- 2005, Amex submitted Amendment No.
proximately 10% of the estimated amounts 2 to the proposed rule change.6 On
indicated.
February 3, 2005, Amex submitted
Other expenses for legal, financial,
Amendment No. 3 to the proposed rule
accounting, and clerical services will be change.7 On February 24, 2005, Amex
billed at cost by the American Electric
submitted Amendment No. 4 to the
Power Service Corporation. These
proposed rule change.8 The Commission
expenses are estimated not to exceed
is publishing this notice to solicit
$5,000. In addition, if AEP considers it
comments on the proposed rule change,
desirable to do so it may employ
as amended, from interested persons.
professional proxy solicitors for
I. Self-Regulatory Organization’s
additional fees estimated not to exceed
Statement of the Terms of Substance of
$92,000.
the Proposed Rule Change
It appears to the Commission that
AEP’s Declaration regarding the
Amex proposes to adopt new Amex
proposed solicitation of proxies should
Rules 936, 936C, 936–ANTE, and 936C–
be permitted to become effective
ANTE to provide for the cancellation
immediately under rule 62(d).
and adjustment of options transactions
It is ordered, under rule 62 of the Act, resulting from obvious errors. The
that the Declaration regarding the
proposed rule text is set forth below.9
proposed solicitation of proxies from
Additions are italicized. Deletions are
the holders of outstanding shares of AEP bracketed.
Common Stock become effective
*
*
*
*
*
immediately, subject to the terms and
conditions of rule 24 under the Act.
1 15
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–853 Filed 3–2–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51246; File No. SR–Amex–
2005–11]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change and
Amendment Nos. 1, 2, 3, and 4 Thereto
by the American Stock Exchange LLC
To Adopt Obvious Error Rules for
Options Transactions
February 24, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
VerDate jul<14>2003
16:38 Mar 02, 2005
Jkt 205001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 Amendment No. 1 superseded and replaced the
original proposed rule change in its entirety.
6 Amendment No. 2 superseded and replaced the
original proposed rule change and Amendment No.
1 in their entirety.
7 Amendment No. 3 superseded and replaced the
original proposed rule change, Amendment No. 1,
and Amendment No. 2 in their entirety.
8 In Amendment No. 4, Amex replaced the term
‘‘control room’’ with ‘‘Exchange’s Service Desk’’ in
paragraph (b)(2) of proposed Amex Rule 936C and
paragraph (b)(2) of Amex Rule 936C—ANTE.
9 The proposed rule text below contains technical
corrections as follows: (1) capitalize the word
‘‘Official’’ in proposed Amex Rule 936,
Commentary .03; (2) change the abbreviation ‘‘EST’’
to ‘‘ET’’ in proposed Amex Rule 936C—ANTE (a)(6)
and (b)(1), and the purpose section; and (3) make
typographical corrections to proposed Amex Rules
936, 936—ANTE, 936C, and 936C—ANTE.
Telephone conversations between Claire P.
McGrath, Senior Vice President and General
Counsel, Amex, and Frank N. Genco, Special
Counsel, Division of Market Regulation,
Commission, on February 9, 2005; and Jeffrey
Burns, Associate General Counsel, Amex, and Frank
N. Genco, Special Counsel, Division of Market
Regulation, Commission, on February 9, 2005.
2 17
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
10425
Rule 950. Rules of General
Applicability
(a) The following Floor Rules shall
apply to Exchange option transactions
and other transactions on the Exchange
in options contracts: 100, 101, 104, 105,
106, 110, 112, 117, 123, 129, 130, [135,]
150, 151, 152, 153, 155, 157, 172, 173,
174, 175, 176, 177, 180, 181, 183, 184,
185, 192 and 193. Unless the context
otherwise requires, the term ‘‘stock’’
wherever used in the foregoing Rules
shall be deemed to include option
contracts. Except as otherwise provided
in this Rule, all other Floor Rules (series
100 et seq.) shall not be applicable to
Exchange option transactions.
(b)–(n). No Change
Rule 936. Cancellation and Adjustment
of Equity Options Transactions
This Rule governs the cancellation
and adjustment of transactions
involving equity options. Rules 936C
and 936C–ANTE govern the
cancellation and adjustment of
transactions involving options on
indexes, exchange-traded funds
(‘‘ETFs’’) and trust issued receipts
(‘‘TIRs’’). Paragraphs (a)(1) and (2) of
this Rule have no applicability to trades
executed in open outcry. (a) Trades
Subject to Review. A member or person
associated with a member may have a
trade cancelled or adjusted if, in
addition to satisfying the procedural
requirements of paragraph (b) below,
one of the following conditions is
satisfied:
(1) Obvious Price Error. An obvious
pricing error occurs when the execution
price of an electronic transaction is
above or below the Theoretical Price for
the series by an amount equal to at least
the amount shown below:
Theoretical price
Below $2 ...................................
$2 to $5 ....................................
Above $5 to $10 .......................
Above $10 to $20 .....................
Above $20 ................................
Minimum
amount
$0.25
0.40
0.50
0.80
1.00
Definition of Theoretical Price. For
purposes of this Rule only, the
Theoretical Price of an option series is,
for series traded on at least one other
options exchange, the last bid price with
respect to an erroneous sell transaction
and the last offer price with respect to
an erroneous buy transaction, just prior
to the trade, disseminated by the
competing options exchange that has
the most liquidity in that option class in
the previous two calendar months. If
there are no quotes for comparison,
designated Trading Officials will
E:\FR\FM\03MRN1.SGM
03MRN1
]]>Agencies
[Federal Register Volume 70, Number 41 (Thursday, March 3, 2005)]
[Notices]
[Pages 10422-10425]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-853]
[[Page 10422]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27948]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
February 25, 2005.
Notice is hereby given that the following filing(s) has/have been
made with the Commission under provisions of the Act and rules
promulgated under the Act. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendment(s) is/are available for public
inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in
writing by March 22, 2005, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549-0609, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in the case of an attorney at law,
by certificate) should be filed with the request. Any request for
hearing should identify specifically the issues of facts or law that
are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in
the matter. After March 22, 2005, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted
to become effective.
American Electric Power Company, Inc. (70-10283)
Order Authorizing Solicitation of Proxies; Notice of Request To
Distribute Securities Under Proposed Amended and Restated American
Electric Power System 2000 Long-Term Incentive Plan
American Electric Power Company, Inc. (``AEP''), 1 Riverside Plaza,
Columbus, Ohio, 43215, a registered holding company has filed a
declaration (``Declaration'') under sections 6(a), 7 and 12(e) of the
Act and rules 23, 42, 54, 62 and 65 under the Act.
I. Requested Authority
AEP requests authority to: (1) Solicit proxies with respect to the
Amended and Restated American Electric Power System 2000 Long-Term
Incentive Plan (``Plan'') from the holders of its outstanding common
stock for action at the annual meeting of AEP's shareholders scheduled
to be held on April 26, 2005; and (2) issue securities under the Plan,
if it is approved by shareholders, including up to 19,200,000 shares of
common stock (``Common Stock'').
II. Order for Solicitation of Proxies
AEP has requested that an order be issued authorizing commencement
of the solicitation of proxies from the holders of the outstanding
shares of its common stock with respect to the Plan.
AEP is authorized to issue up to 15,700,000 shares of common stock
under the current Long-Term Incentive Plan (``Current Plan''). AEP has
issued all but 3,754,150 shares of common stock under the Current Plan.
AEP shareholders will be asked to approve the following amendments to
the Current Plan: (1) The provision of an additional 15,445,850 shares
of Common Stock for awards (which when added to the 3,754,150 shares
still available for issuance under the Current Plan establishes a new
limit of 19,200,000 shares of Common Stock that will be available for
issuance under the Plan); (2) an increase in the maximum number of
options and stock appreciation rights that may be awarded to a
participant during any three calendar year period from 1,650,000 to
2,000,000; (3) an increase in the maximum number of restricted shares
that may be awarded to a participant during any one calendar year from
330,000 to 400,000; (4) an increase in the maximum amount of
compensation that may be payable to a participant during any one
calendar year under a performance-based award from $8,260,000 to
$15,000,000; (5) an increase in the maximum number of performance share
units that may be earned by a participant during any one calendar year
from 330,000 to 400,000; and (6) revised performance criteria.
AEP states that the Plan is designed to allow for the grant of
certain types of awards that conform to the requirements for tax
deductible ``performance-based'' compensation under Section 162(m) of
the Internal Revenue Code (``Code''). Shareholder approval of the Plan
is needed in order to maximize the deductibility of the payments under
the Plan to AEP's chief executive officer and other four most highly
compensated officers under the provisions of Section 162(m), and to
comply with the requirements of the regulations issued by the Internal
Revenue Service governing the deductibility of individual compensation
amounts in excess of $1,000,000.
Approval of the proposed amendments will require the affirmative
vote of a majority of the votes cast at the annual meeting.
III. Description of the Plan and Securities Issuable Under the Plan
A. Purpose of Plan
The purpose of the Plan is to promote the interests of AEP and its
shareholders by strengthening AEP's ability to attract, motivate and
retain employees and directors, to align further the interests of AEP's
management with the shareholders, and to provide an additional
incentive for employees and directors to promote the financial success
and growth of AEP. The Plan provides for the grant of stock options,
including incentive stock options and nonqualified stock options, stock
appreciation rights, restricted stock, performance share awards,
phantom stock, and dividend equivalents to employees and non-employee
Directors.
B. Reservation of Shares and Administration of the Plan
The Common Stock that will be issuable under the Plan will be made
available from authorized but unissued shares and/or shares reacquired
by AEP. If any shares of Common Stock awarded under the Plan are not
issued and cease to be issuable for any reason, the shares will no
longer be charged against the maximum share limitation and may again be
made subject to awards under the Plan. If certain corporate
reorganizations, recapitalizations, or any similar corporate
transactions affecting AEP or the Common Stock, or stock splits, stock
dividends or other distribution with respect to the Common Stock occur,
proportionate adjustments may be made to the number of shares available
for grant under the Plan, the applicable maximum share limitations
under the Plan, and the number of shares and prices under outstanding
awards at the time of the event.
The Plan will be administered by the Human Resources Committee of
AEP's Board of Directors (``Committee''). However, for awards granted
to non-employee Directors, all rights, powers and authorities vested in
the Committee under the Plan will be instead exercised by the Board.
Subject to limitations set forth in the Plan, the Committee has the
authority to determine the persons to whom awards are granted, the
type, timing, vesting and duration of the awards, the number of shares,
units or other rights awarded and the exercise, base or purchase price
of an award.
The Plan has no fixed expiration date, but no awards may be granted
after April 26, 2015. The Board may amend
[[Page 10423]]
the Plan, except that shareholder approval is required for amendments
that would either: (1) Increase the number of shares of Common Stock
reserved for issuance under the Plan; or (2) allow the grant of options
at an exercise price below fair market value or allow the repricing of
options.
C. Stock Options
The Plan authorizes the grant of nonqualified and incentive stock
options. Nonqualified stock options may be granted to employees and
non-employee Directors, but incentive stock options may only be granted
to employees. The exercise price of an option may be determined by the
Committee, provided that the exercise price per share of an option may
not be less than 100% of the fair market value of a share of Common
Stock on the date of grant. The exercise price of an option is payable
by the participant in cash, or at the discretion of the Committee, in
shares of Common Stock, or by any other method approved by the
Committee. The terms of any Incentive Stock Option shall comply with
the provisions of the Code. The maximum number of shares of Common
Stock that may be granted under stock options to any one participant
during any three calendar year period shall be limited to 2 million
shares.
D. Stock Appreciation Rights
A stock appreciation right entitles the holder, upon exercise, to
receive a payment based on the difference between the base price of the
stock appreciation right and the fair market value of a share of Common
Stock on the date of exercise, multiplied by the number of shares as to
which the stock appreciation right will have been exercised. A stock
appreciation right may be granted either separately or in tandem with
an option. If the stock appreciation right is granted in tandem with an
option it will have a base price per share equal to the per share
exercise price of the option, will be exercisable only at the same time
the related option is exercisable, and will expire no later than when
the related option expires. Exercise of the option or the stock
appreciation right results in the cancellation of the same number of
shares under the tandem right. A stock appreciation right granted
without relationship to an option will be exercisable as determined by
the Committee. The base price assigned to a stock appreciation right
granted without relationship to an option shall not be less than 100%
of the fair market value of a share of Common Stock on the date of
grant. The maximum number of shares of Common Stock that may be subject
to stock appreciation rights granted to any one participant during any
three calendar year period shall be limited to 2,000,000 shares. Stock
appreciation rights are payable in cash, restricted or unrestricted
shares of Common Stock, or a combination thereof, in the discretion of
the Committee.
E. Performance Awards
Performance awards are units denominated in shares of Common Stock
or specified dollar amounts (``Performance Units''). Performance awards
are payable upon the achievement of performance criteria established by
the Committee at the beginning of the performance period. At the time
of grant, the Committee establishes the number of units, the duration
of the performance period, the applicable performance criteria, and in
the case of Performance Units, the target unit value or range of unit
values for the award. Performance awards are payable in cash,
restricted or unrestricted shares of Common Stock, phantom stock or
options, or a combination thereof, in the discretion of the Committee.
The maximum amount of compensation that may be payable in any one
calendar year to any one participant designated to receive an award
intended to qualify under Section 162(m) of the Code is $15,000,000.
The maximum number of performance share units that may be earned in any
one calendar year by any one participant intended to qualify under
Section 162(m) of the Code is 400,000 units.
F. Restricted Stock
An award of restricted stock represents shares of Common Stock that
are issued subject to restrictions on transfer and on incidents of
ownership and to forfeiture upon the occurrence of certain events
deemed appropriate by the Committee. The Committee may, in connection
with an award of restricted stock, require the payment of a specified
purchase price. During the period of restriction, the participant will
have the rights of a shareholder of AEP, including all voting and
dividend rights, unless otherwise determined by the Committee. The
maximum number of shares of Common Stock that may be subject to
restricted stock awards intended to qualify under Section 162(m) of the
Code granted to any one participant during any calendar year is limited
to 400,000 shares.
G. Phantom Stock
An award of phantom stock gives the participant the right to
receive payment at the end of a fixed vesting period based on the value
of a share of Common Stock at the time of vesting. Phantom stock units
are subject to restrictions and conditions to payment as the Committee
determines are appropriate. An award of phantom stock may be granted,
at the discretion of the Committee, together with an award of dividend
equivalent rights for the same number of shares. Phantom stock awards
are payable in cash, restricted or unrestricted shares of Common Stock,
options or a combination thereof.
H. Dividend Equivalents
Dividend equivalent awards entitle the holder to a right to receive
cash, shares of Common Stock, or other property equal in value to
dividends paid with respect to a specified number of shares of Common
Stock. Dividend equivalents may be awarded on a free-standing basis or
in connection with another award, and may be paid currently or on a
deferred basis. The Committee may provide that the dividend equivalent
award shall be paid when accrued or shall be deemed to have been
reinvested in additional shares of Common Stock or other investment
vehicles as the Committee may specify, provided that dividend
equivalent awards (other than free-standing dividend equivalent awards)
shall be subject to all conditions and restrictions of the underlying
awards to which they relate.
IV. Rule 54 Analysis
The proposed transactions are subject to rule 54. Rule 54 provides
that, in determining whether to approve the issue or sale of any
securities for purposes other than the acquisition of any ``exempt
wholesale generator'' (``EWG'') or ``foreign utility company''
(``FUCO'') or other transactions unrelated to EWGs or FUCOs, the
Commission shall not consider the effect of the capitalization or
earnings of subsidiaries of a registered holding company that are EWGs
or FUCOs if the requirements of Rule 53(a), (b) and (c) are satisfied.
Under rule 53(a), the Commission shall not make certain specified
findings under Section 7 and 12 of the Act in connection with a
proposal by a holding company to issue securities for the purpose of
acquiring the securities of, or other interest in, an EWG or to
guarantee the securities of an EWG, if each of the conditions in
paragraphs (a)(1) through (a)(4) are met, provided that none of the
conditions specified in paragraph (b)(1) through (b)(3) of rule 53
exists.
AEP currently meets all of the conditions of rule 53(a). At
September
[[Page 10424]]
30, 2004, AEP's ``aggregate investment,'' as defined in rule 53(a)(1),
in EWGs and FUCOs was approximately $332 million or about 19.9% of
AEP's ``consolidated retained earnings,'' also as defined in rule
53(a)(1), for the four quarters ended September 30, 2004 ($1.675
billion).\1\
---------------------------------------------------------------------------
\1\ With respect to rule 53(a)(1), however, the Commission has
determined that AEP's financing of investments in EWGs and FUCOs in
an amount greater than the amount that would otherwise be allowed by
rule 53(a)(1) would not have either of the adverse effects set forth
in rule 53(c). By order dated June 14, 2000 (Holding Company Act
Release No. 27186), the Commission authorized AEP to invest up to
100% of its consolidated retained earnings, with consolidated
retained earnings to be calculated on the basis of the combined
consolidated retained earnings of AEP and Central and South West
Corporation (``CSW'')(``Rule 53(c) Order''). The Rule 53(c) Order
also authorized the merger of AEP and CSW.
---------------------------------------------------------------------------
AEP 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 to render services
to EWGs and FUCOs, and the requirements of rule 53(a)(4) concerning the
submission of copies of certain filings under the Act to retail rate
regulatory commissions. Further, none of the circumstances described in
rule 53(b)(1) or (3) has occurred or is continuing. AEP states that it
meets the requirements of Rule 53(c).
The circumstances described in rule 53(b)(2) have occurred. As a
result of the recording of a loss with respect to impairment
charges,\2\ AEP's consolidated retained earnings declined. The average
consolidated retained earnings of AEP for the four quarterly periods
ended September 30, 2004, was $1.695 billion, or a decrease of
approximately 24.8% from AEP's average consolidated retained earnings
for the four quarterly periods ended September 30, 2003, of $2.226
billion. In addition, AEP's ``aggregate investment'' in EWGs and FUCOs
as of September 30, 2004, exceeded 2% of the total capital invested in
utility operations.
---------------------------------------------------------------------------
\2\ In the fourth quarter of 2003 AEP recorded pre-tax
impairments of assets (including goodwill) and investments totaling
$1.4 billion that reflected downturns in energy trading markets,
projected long-term decreases in electricity prices, and other
factors. The impairments consisted of $650 million related to asset
impairments, $70 million related to investment value and other
impairment losses, and $711 million related to discontinued
operations. Of the discontinued operations, $577 million was
attributable to the impairment of the fixed-asset carrying value of
AEP's two coal-fired generation plants in the United Kingdom. AEP
recorded a pre-tax impairment of $70 million on certain qualifying
facilities as defined under the Public Utility Regulatory Policies
Act of 1978, as amended in the third quarter of 2003.
---------------------------------------------------------------------------
AEP states that if the effect of the capitalization and earnings of
its EWGs and FUCOs upon its holding company system were considered,
there would be no basis for the Commission to withhold or deny approval
for the authority sought in the Declaration. AEP states that the
proposed transactions would not, by themselves or even considered in
conjunction with the effect of the capitalization and earnings of AEP's
EWGs and FUCOs, have a material adverse effect on the financial
integrity of the AEP system, or an adverse impact on AEP's utility
subsidiaries,\3\ their customers or the ability of state commissions to
protect the public utility customers. The Rule 53(c) Order was
predicated, in part, upon an assessment of AEP's overall financial
condition which took into account, among other factors, AEP's
consolidated capitalization ratio and the growth trend in AEP's
retained earnings.
---------------------------------------------------------------------------
\3\ AEP's utility subsidiaries are: Appalachian Power Company,
Columbus Southern Power Company, Indiana Michigan Power Company,
Kentucky Power Company, Ohio Power Company, AEP Texas Central
Company, Public Service Company of Oklahoma, Southwestern Electric
Power Company, and AEP Texas North Company (collectively, ``Utility
Subsidiaries'').
---------------------------------------------------------------------------
Since the date of the Rule 53(c) Order, there has been an increase
in AEP's consolidated equity capitalization ratio. As of December 31,
1999, the most recent period for which financial statement information
was evaluated in the Rule 53(c) Order, AEP's consolidated
capitalization (including CSW on a pro forma basis) consisted of 61.3%
debt, 37.3% common and preferred equity, and 1.4% of certain subsidiary
obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely junior subordinated debentures of the
subsidiaries (or $335 million principal amount). However, as of
September 30, 2004, AEP's consolidated capitalization consisted of
60.4% debt, and 39.6% common and preferred equity (consisting of common
stock representing 39%, and preferred stock representing 0.6% (or $133
million principal amount).
In addition, the Utility Subsidiaries, which will have a
significant influence on the determination of the AEP corporate rating,
continue to show strong financial statistics as measured by the rating
agencies. As of December 31, 1999 and September 30, 2004 Standard and
Poor's (``S&P'') rating of secured debt for AEP's Utility Subsidiaries
was as follows:
------------------------------------------------------------------------
12 / 31 / 99 9 / 30 / 04
------------------------------------------------------------------------
Appalachian Power Company......... A BBB
Columbus Southern Power Company... A- BBB
Indiana Michigan Power Company.... A- BBB
Kentucky Power Company............ A BBB
Ohio Power Company................ A- BBB
AEP Texas Central Company......... A BBB
Public Service Company of Oklahoma AA- BBB
Southwestern Electric Power AA- BBB
Company.
AEP Texas North Company........... A BBB
------------------------------------------------------------------------
AEP did not have a long-term debt rating as of December 31, 1999.
As of September 30, 2004, S&P's rating of AEP's unsecured debt was BBB.
V. Conclusion
AEP states that no State or other Federal regulatory authority has
jurisdiction over the proposed transactions. AEP states that the fees,
commissions and expenses to be paid or incurred directly or indirectly,
by it in connection with the proposed transactions are estimated to be
as follows, except as otherwise indicated:
[[Page 10425]]
Printing Costs.............................................. $75,000
Transfer Agent and Brokerage Fees and Expenses.............. \1\
450,000
Estimated Commission Filing Fee Related to 1933 Act 80,000
Registration...............................................
-----------
Total................................................... $605,000
\1\ This represents the total amount of expenses that AEP estimates it
will incur in connection with the solicitation of proxies for the 2005
annual meeting, including with respect to the Plan. AEP states that it
does not have enough data to make a reasonable estimate of the
incremental costs associated with the solicitation of proxies in
regard to the Plan, but believes that the incremental costs would not
represent more than approximately 10% of the estimated amounts
indicated.
Other expenses for legal, financial, accounting, and clerical
services will be billed at cost by the American Electric Power Service
Corporation. These expenses are estimated not to exceed $5,000. In
addition, if AEP considers it desirable to do so it may employ
professional proxy solicitors for additional fees estimated not to
exceed $92,000.
It appears to the Commission that AEP's Declaration regarding the
proposed solicitation of proxies should be permitted to become
effective immediately under rule 62(d).
It is ordered, under rule 62 of the Act, that the Declaration
regarding the proposed solicitation of proxies from the holders of
outstanding shares of AEP Common Stock become effective immediately,
subject to the terms and conditions of rule 24 under the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-853 Filed 3-2-05; 8:45 am]
BILLING CODE 8010-01-P
