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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT: MAY 10, 2005
(Date of earliest event reported: May 8, 2005)
CINERGY CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-11377 31-1385023
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
139 EAST FOURTH STREET, CINCINNATI, OHIO 45202 (Address of
Principal Executive Offices, including Zip code)
(513) 421-9500 (Registrant's telephone number,
including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240. 13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
MERGER AGREEMENT
On May 8, 2005, Duke Energy Corporation, a North Carolina corporation
("Duke"), Cinergy Corp., a Delaware corporation ("Cinergy"), Deer Holding Corp.,
a Delaware corporation ("Holdco"), Deer Acquisition Corp., a North Carolina
corporation ("Merger Sub A"), and Cougar Acquisition Corp., a Delaware
corporation ("Merger Sub B"), entered into an Agreement and Plan of Merger
(together with the exhibits thereto, the "Merger Agreement"). Each of Holdco,
Merger Sub A and Merger Sub B are newly-formed, wholly-owned direct or indirect
subsidiaries of Duke, and Merger Sub A and Merger Sub B are direct wholly-owned
subsidiaries of Holdco.
On May 9, 2005, Duke and Cinergy issued a joint press release announcing
the execution of the Merger Agreement. A copy of such press release is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
The Merger Agreement provides that Merger Sub A will merge with and into
Duke (the "Duke Merger") and each share of Duke common stock will be cancelled
and converted into the right to receive one share of Holdco common stock. In the
Duke Merger, Duke will be the surviving corporation and continue as a
wholly-owned subsidiary of Holdco and the former shareholders of Duke will be
shareholders of Holdco. As a result of the Duke Merger, Duke will shift into a
holding company structure wherein Duke will become a wholly-owned direct
subsidiary Holdco.
Following the Duke Merger, Duke (as a subsidiary of Holdco) may convert to
a limited liability company (the "Duke Conversion") and be renamed "Deer Power
LLC." If the Duke Conversion occurs, Duke Power LLC will be a limited liability
company whose membership or other equity interests will be held by Holdco.
Following the Duke Conversion, Duke Power LLC will initiate one or more
restructuring transactions as described in the Merger Agreement, including the
distribution of certain subsidiaries of Duke Power LLC to Holdco.
Following the latest of the consummation of the Duke Merger and any of the
restructuring transactions, Merger Sub B will merge with and into Cinergy (the
"Cinergy Merger" and, together with the Duke Merger, the "Mergers") and each
share of Cinergy common stock will be cancelled and converted into the right to
receive 1.56 shares of Holdco common stock. In the Cinergy Merger, Cinergy will
be the surviving corporation and will continue as a wholly-owned subsidiary of
Holdco and the former shareholders of Cinergy will be shareholders of Holdco.
All outstanding options at the effective time of the Mergers, whether
vested or unvested, will be converted into options to acquire shares of Holdco
common stock. Each outstanding option to acquire one share of Duke common stock
will be converted into an option to acquire one share of Holdco common stock at
the same exercise price. Each outstanding option to acquire one share of Cinergy
common stock will be converted into an option to acquire 1.56 shares of Holdco
common stock at an equitably adjusted exercise price. The options to acquire
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Holdco common stock will be issued subject to the same terms and conditions as
were applicable under the Duke or Cinergy option plan pursuant to which each
option was initially issued.
In connection with the signing of the Merger Agreement, Duke announced that
it would suspend the voluntary portion of its share repurchase program pending
further assessment.
The Merger Agreement provides that following the effective time of the
Mergers, Holdco will have a fifteen member board of directors, which will
include ten directors named by Duke and five directors named by Cinergy. Paul M.
Anderson, Chairman and Chief Executive Officer of Duke, will be the Chairman of
the Board of Directors of Holdco, with certain additional responsibilities for
analyzing potential strategic alternatives regarding the separation of the gas
and electric businesses. James E. Rogers, Chairman, President and Chief
Executive Officer of Cinergy, will be the President and Chief Executive Officer
of Holdco.
Duke and Cinergy have each made customary representations, warranties and
covenants in the Merger Agreement, including, among others, covenants to conduct
their businesses in the ordinary course between the execution of the Merger
Agreement and the consummation of the Mergers and covenants not to engage in
certain kinds of transactions during that period. During such period, Cinergy
will not increase its regular quarterly cash dividend without the prior written
consent of Duke and Duke may increase its regularly quarterly cash dividend up
to $0.31 per share without the prior written consent of Cinergy. In addition,
Duke and Cinergy have made certain additional customary covenants, including,
among others, covenants, subject to certain exceptions, (A) to cause a
stockholder meeting to be held to consider approval of the Mergers and the other
transactions contemplated by the Merger Agreement, (B) not to solicit proposals
relating to alternative business combination transactions, and (C) not to enter
into discussions concerning, or provide confidential information in connection
with, alternative business combination transactions.
Consummation of the Mergers is subject to customary conditions, including,
among others, (i) approval of the stockholders of each of Duke and Cinergy, (ii)
absence of any material adverse effect, (iii) expiration or termination of the
applicable Hart-Scott-Rodino Act waiting period, (iv) absence of any order or
injunction prohibiting the consummation of the Mergers, (v) the registration
statement of Holdco filed on Form S-4 shall have become effective, (vi) shares
of Holdco common stock shall have been approved for listing on the New York
Stock Exchange, (vii) subject to certain exceptions, the accuracy of
representations and warranties with respect to Duke's and Cinergy's business, as
applicable, (viii) receipt of customary tax opinions, and (ix) receipt of all
required statutory approvals from, among others, the Federal Energy Regulatory
Commission, the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935, the Nuclear Regulatory Commission, the Federal
Communications Commission, and state public service and utility commissions.
The Merger Agreement contains certain termination rights for both Duke and
Cinergy, and further provides that, upon termination of the Merger Agreement
under specified circumstances, a party would be required to pay the other
party's fees and expenses in an amount not to exceed $35 million or a
termination fee of $300 million in the case of a fee payable by Cinergy to Duke
or a termination fee of $500 million in the case of a fee payable by Duke to
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Cinergy. The termination fee is payable by Cinergy under specified
circumstances, including (i) if Cinergy enters into a definitive agreement with
respect to certain business combinations (other than the Merger Agreement), or
(ii) if Duke terminates the Merger Agreement following a withdrawal by Cinergy's
Board of Directors of its recommendation of the Merger Agreement and the Mergers
under certain circumstances. The termination fee is payable by Duke under
specified circumstances, including (i) if Duke enters into a definitive
agreement with respect to certain business combinations (other than the Merger
Agreement), or (ii) if Cinergy terminates the Merger Agreement following a
withdrawal by Duke's Board of Directors of its recommendation of the Merger
Agreement and the Mergers under certain circumstances.
The foregoing description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
which is filed as Exhibit 2.1 hereto, and is incorporated into this report by
reference.
EMPLOYMENT ARRANGEMENTS AND AGREEMENT
At the effective time of the Mergers, Paul M. Anderson shall be Chairman of
the Board of Directors of Holdco. In addition to the duties of the Chairman of
the Board of Directors of Holdco set forth in the Holdco By-laws, Mr. Anderson
shall have management responsibilities for analyzing potential strategic
alternatives regarding the separation of Duke's gas and electric businesses.
At the effective time of the Mergers, James E. Rogers shall become
President and Chief Executive Officer of Holdco. Duke, Cinergy, Holdco and Mr.
Rogers have executed a term sheet (the "ROGERS EMPLOYMENT AGREEMENT TERM SHEET")
pursuant to which the parties agree to amend the existing employment agreement
for Mr. Rogers in certain respects to reflect the Merger Agreement and the
transactions contemplated thereby (as so amended, the "ROGERS EMPLOYMENT
AGREEMENT"). The Rogers Employment Agreement will be assumed by Holdco effective
upon the completion of the Mergers. The Rogers Employment Agreement provides for
a three-year term of employment commencing upon completion of the Mergers, which
shall renew automatically for subsequent one-year periods thereafter if neither
Mr. Rogers nor Holdco gives notice prior to or as of a specified date.
The Rogers Employment Agreement provides that the parties will negotiate in
good faith to restructure the current compensation arrangements for Mr. Rogers
to provide that he shall be paid substantially in the form of equity
compensation by which the current Duke Chief Executive Officer is presently
compensated, in any event on terms no less favorable than Mr. Rogers' existing
compensation arrangements.
If Mr. Rogers' employment is involuntarily terminated without cause, or Mr.
Rogers terminates with "good reason" on or prior to the second anniversary of
the completion of the Mergers, or within two years following a change in control
of Holdco, then he will receive an amount no less than the economic value to
which he would otherwise be entitled under his existing employment agreement had
he terminated employment under such circumstances immediately following the
completion of the Mergers. If such termination of employment occurs at any time
following the second anniversary of the completion of the Mergers (other than
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within two years following a change in control of Holdco), then he will receive
an amount no less than the economic value to which he would otherwise be
entitled under his existing employment agreement had he terminated employment
immediately prior to the occurrence of a change in control of Cinergy (and, in
either case, such economic value shall be determined without regard to the form
of his then-restructured compensation arrangements). The required relocation of
Mr. Rogers to Charlotte, North Carolina will not constitute a "good reason"
trigger under the Rogers Employment Agreement.
Effective upon the completion of the Merger, Cinergy will waive the
limitation on Mr. Rogers' ability to sell, while still employed, certain shares
of stock of Cinergy acquired upon the exercise of Cinergy stock options,
provided that Mr. Rogers will be subject to any future Duke/Holdco stock
ownership guidelines.
A copy of the Rogers Employment Agreement Term Sheet is filed hereto as
Exhibit 10.1 and is incorporated herein by reference.
In connection with the signing of the Merger Agreement, Cinergy entered
into amendments to the employment agreements of certain of its named executive
officers (each an "AMENDMENT TO EMPLOYMENT AGREEMENT"), including each of
Messrs. Cyrus, Manly, and Turner pursuant to which each of the executives has
agreed to waive his right to resign for good reason and collect severance
benefits solely as a result of being required to relocate to Charlotte, North
Carolina or, for some executives, Houston, Texas in connection with the Mergers.
In addition, the good reason definitions were amended to eliminate the
executives' right to resign for good reason and collect severance due to changes
to the executives' title and to add a right to resign for good reason and
collect severance pay in the event that Mr. Rogers fails to continue to serve as
Chief Executive Officer of Holdco (other than as a result of his death,
disability, termination for cause or his voluntary resignation without good
reason).
A form of the Amendment to Employment Agreement is filed as Exhibit 10.2
hereto and is incorporated herein by reference.
* * *
FORWARD-LOOKING STATEMENTS
This document includes statements that do not directly or exclusively
relate to historical facts. Such statements are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements include
statements regarding benefits of the proposed mergers and Restructuring
Transactions, integration plans and expected synergies, anticipated future
financial operating performance and results, including estimates of growth.
These statements are based on the current expectations of management of Duke and
Cinergy. There are a number of risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements included in
this document. For example, (1) the companies may be unable to obtain
shareholder approvals required for the transaction; (2) the companies may be
unable to obtain
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regulatory approvals required for the transaction, or required regulatory
approvals may delay the transaction or result in the imposition of conditions
that could have a material adverse effect on the combined company or cause the
companies to abandon the transaction; (3) conditions to the closing of the
transaction may not be satisfied; (4) problems may arise in successfully
integrating the businesses of the companies, which may result in the combined
company not operating as effectively and efficiently as expected; (5) the
combined company may be unable to achieve cost-cutting synergies or it may take
longer than expected to achieve those synergies; (6) the transaction may involve
unexpected costs or unexpected liabilities, or the effects of purchase
accounting may be different from the companies' expectations; (7) the credit
ratings of the combined company or its subsidiaries may be different from what
the companies expect; (8) the businesses of the companies may suffer as a result
of uncertainty surrounding the transaction; (9) the industry may be subject to
future regulatory or legislative actions that could adversely affect the
companies; and (10) the companies may be adversely affected by other economic,
business, and/or competitive factors. Additional factors that may affect the
future results of Duke and Cinergy are set forth in their respective Form 10-K
reports for the year ended December 31, 2004 and other filings with the
Securities and Exchange Commission ("SEC"), which are available at
www.duke-energy.com/investors and www.cinergy.com/investors, respectively. Duke
and Cinergy undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed transaction, a registration statement of
Deer Holding Corp., which will include a joint proxy statement of Duke and
Cinergy, and other materials will be filed with the SEC. WE URGE INVESTORS TO
READ THE REGISTRATION STATEMENT AND PROXY STATEMENT AND THESE OTHER MATERIALS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT DUKE, CINERGY, DEER HOLDING CORP., AND THE PROPOSED
TRANSACTION. Investors will be able to obtain free copies of the registration
statement and proxy statement (when available) as well as other filed documents
containing information about Duke and Cinergy at http://www.sec.gov, the SEC's
website. Free copies of Duke's SEC filings are also available on Duke's website
at www.duke-energy.com/investors, and free copies of Cinergy's SEC filings are
also available on Cinergy's website at www.cinergy.com/investors.
PARTICIPANTS IN THE SOLICITATION
Duke, Cinergy and their respective executive officers and directors may be
deemed, under SEC rules, to be participants in the solicitation of proxies from
Duke's or Cinergy's stockholders with respect to the proposed transaction.
Information regarding the officers and directors of Duke is included in its
definitive proxy statement for its 2005 Annual Meeting filed with the SEC on
March 31, 2005. Information regarding the officers and directors of Cinergy is
included in its definitive proxy statement for its 2005 Annual Meeting filed
with the SEC on March 28, 2005. More detailed information regarding the identity
of potential participants, and their direct or indirect interests, by
securities, holdings or otherwise, will be set forth in the registration
statement and proxy statement and other materials to be filed with the SEC in
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connection with the proposed transaction.
ITEM 8.01. OTHER EVENTS
On May 9, 2005, Cinergy issued a press release announcing its merger with Duke.
A copy of the press release is attached as Exhibit 99.1.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated May 8, 2005, by and among Duke
Energy Corporation, Cinergy Corp., Deer Holding Corp., Deer
Acquisition Corp., and Cougar Acquisition Corp.
10.1 Employment Agreement Term Sheet, James E. Rogers, dated May 8,
2005, by Duke Energy Corporation, Cinergy Corp., Deer Holding
Corp., and James E. Rogers
10.2 Form of Amendment to Employment Agreement
99.1 Joint Press Release, dated May 9, 2005, issued by Duke Energy
Corporation and Cinergy Corp.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cinergy Corp.
Date: May 10, 2005 By: /s/ Marc E. Manly
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Name: Marc E. Manly
Title: Executive Vice
President and Chief
Legal Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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2.1 Agreement and Plan of Merger, dated May 8, 2005, by and among Duke
Energy Corporation, Cinergy Corp., Deer Holding Corporation, Deer
Acquisition Corp., and Cougar Acquisition Corp.
10.1 Employment Agreement Term Sheet, James E. Rogers, dated May 8,
2005, by Duke Energy Corporation, Cinergy Corp., Deer Holding
Corp., and James E. Rogers
10.2 Form of Amendment to Employment Agreement
99.1 Joint Press Release, dated May 9, 2005, issued by Duke Energy
Corporation and Cinergy Corp.
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