EXHIBIT 10-SS
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
DIRECTOR, OFFICER AND KEY EMPLOYEE
STOCK PURCHASE PROGRAM OF CINERGY CORP.
1. PURPOSE. The Director, Officer and Key Employee Stock Purchase Program
(the "PROGRAM") of Cinergy Corp. ("CINERGY") is adopted to facilitate
the purchase, by the Directors, executives and certain key employees of
Cinergy and its subsidiaries (collectively, the "COMPANY"), of shares
of Cinergy's common stock ("COMMON STOCK"). The purchases facilitated
by the Program are intended to achieve the following specific purposes:
(1) more closely align directors', officers' and key
employees' financial interests with the financial
interests of all other shareholders of the Company;
(2) increase officers' and key employees' motivation to
manage the Company as owners; and
(3) increase the ownership of Common Stock among senior
management of the Company.
2. ELIGIBILITY. To be eligible to participate in the Program, the
individual (the "ELIGIBLE PARTICIPANT") must be: (a) a Director of the
Company or an executive officer of the Company; or (b) an officer or a
key employee of the Company selected by the Board of Directors, the
Chairman of the Compensation Committee of the Board of Directors (the
"COMPENSATION COMMITTEE") or by the Chief Executive Officer (the "CEO")
of Cinergy (the foregoing referred to herein, singly or collectively,
as the "PROGRAM ADMINISTRATOR").
3. PARTICIPATION. To become a Program participant ("PARTICIPANT"), an
Eligible Participant must satisfy the following requirements:
(1) submit a completed, signed and irrevocable election
to purchase all or a portion of the Common Stock
which the Eligible Participant is eligible to
purchase under the Program as set forth in the
election form or accompanying materials furnished to
such Eligible Participant by the Company, in each
case along with a power of attorney authorizing such
purchases on the Participant's behalf;
(2) complete and sign all necessary agreements and other
documents relating to the loan described in Section 4
hereof including, but not limited to, personal
financial statements and letters of instruction to
brokers, transfer agents and banks as are necessary
or appropriate under the loan described in Section 4
hereof, and a power of attorney authorizing
borrowings under such loan; and
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(3) satisfy all other conditions of participation
specified in the Program.
The agreements and other documents specified in subsections 3(a), (b)
and (c) must be submitted at such times and to such Company officers as
specified by the Company. No Eligible Participant is required to
participate in the Program.
Directors and executive officers may purchase between $100,000
and $1,500,000 of Common Stock. Other officers and senior key
employees, as designated by the CEO or the Chairman of the Compensation
Committee, may purchase between $100,000 and $1,000,000 of Common
Stock. Other key employees, as designated by the CEO or the Chairman of
the Compensation Committee, may purchase between $100,000 and $500,000
of Common Stock. Subscriptions for purchase of a dollar amount of
Common Stock in excess of the Participants' minimum level of
participation must be in increments of $50,000. Under the Program, a
maximum of $50,000,000 of Common Stock may be purchased by all
Participants. In the event that the Program is oversubscribed, there
will be a pro rata reduction of the dollar amount of Common Stock that
Participants are entitled to purchase under the Program, based on the
initial dollar amount commitment of each Participant; PROVIDED,
HOWEVER, that in no event shall the level of participation be reduced
to below $100,000 per Participant. Directors and executive officers
shall have the right to purchase shares not purchased by other
Participants in such amount as is determined by the pro rata amount of
their participation in the Program compared to the participation of the
other Participants electing to purchase additional shares. All such
purchases may be made by the individual Participant or by a trust,
corporation, partnership or limited liability company controlled by the
Participant ("PARTICIPANT DESIGNEE"; the term Participant shall include
Participant Designee unless the context otherwise requires).
It is anticipated that there may be one or more additional
election periods under the Program during which Eligible Participants
who did not elect to participate in the Program at the time of its
initial implementation may elect to become Participants. EACH ELIGIBLE
PARTICIPANT MAY PARTICIPATE IN THE PROGRAM ONLY ONE TIME. THE COMPANY
HAS NOT SET ANY DATES FOR ANY ADDITIONAL ELECTION PERIODS AND THERE CAN
BE NO ASSURANCE THAT ANY ADDITIONAL ELECTION PERIODS WILL BE MADE
AVAILABLE TO THE ELIGIBLE PARTICIPANTS. The decision to conduct any
additional election periods rests solely with the Program
Administrator.
4. PURCHASE OF SHARES. The Program Administrator, in its sole discretion
subject to the terms and provisions of the Program, will determine the
timing, amount, price and mechanics of all of the purchases of shares
of Common Stock (the "PURCHASED SHARES") through open market and
negotiated transactions. Purchases of Purchased Shares shall be
effected through a broker in accordance with Rule 10b-18 under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
In accordance with its sole discretion to determine the timing
of the purchases pursuant to the Program, the Program Administrator may
direct the broker to suspend purchases of Common Stock at any time and
from time to time. The Program Administrator shall direct the broker to
suspend purchases of Common Stock in the event that the market price of
the Common Stock increases 20% or more over the closing price of the
Common Stock on the last day of the
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Participant election period. Further, the Program Administrator shall
direct the broker to cease making any purchases pursuant to
Participants' commitments, and such commitments shall be terminated to
the extent not yet satisfied, as of the close of trading on April 24,
2000, even if as a consequence thereof a Participant will purchase a
dollar amount of Common Stock which is lower than the dollar amount
which the Participant committed to purchase. Any funds borrowed by the
Participant under the Loan (as defined below) which were not applied on
the Participant's behalf toward the purchase of Company Common Stock
prior to such termination of purchases will be credited toward payment
of outstanding amounts under the Loan.
The shares of Common Stock purchased pursuant to the Program
will be allocated proportionately among Participants at the end of the
trading period during which sufficient shares of Common Stock are
purchased to allocate the full allotment of Purchased Shares to which
all of the Participants are entitled, based upon the percentage of the
aggregate dollar amount of Common Stock for which the Participants have
subscribed and the average price for all purchases of shares of Common
Stock during the allocation period; PROVIDED, HOWEVER, that the Program
Administrator, in his or its sole discretion, may determine to allocate
the Purchased Shares at the end of a trading day or trading week. By
way of example only, in the event the Program Administrator determines
to allocate at the end of a trading day, if the Program has two
Participants, Participant A and Participant B, and Participant A
committed to purchase up to $500,000 of Common Stock and Participant B
committed to purchase up to $1,000,000 of Common Stock, and on a given
trading day, the Company arranged for the purchase of $300,000 of
Common Stock on behalf of the Participants, $100,000 in Purchased
Shares would be allocated to the account of Participant A and $200,000
in Purchased Shares would be allocated to the account of Participant B.
Purchased Shares will not include any fractional shares of Common
Stock. Following the purchase of the total number of whole shares of
Common Stock to which the Participant is entitled, any remaining dollar
amount pursuant to the Participant's commitment will be credited toward
payment of interest on the Participant's Loan (as defined below), if
any.
In the event that issues arising under Section 16 of the
Exchange Act, make impractical the use of open-market purchases on
behalf of a Participant, the Program Administrator may elect, in his or
its sole discretion, to allocate newly-issued shares of Cinergy to the
Participant's account. It is intended that the timing, amount, price
and mechanics associated with the allocation of such newly-issued
shares will replicate as closely as possible the timing, amount, price
and mechanics associated with the open-market purchases pursuant to the
Program. Such newly-issued shares will not be registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
Consequently, any resale of such shares will be subject to the
restrictions of Rule 144 of the Securities Act, which include, among
other things, a requirement that such shares be held prior to resale
for a period of one year.
Cinergy has arranged the opportunity for each Participant to
obtain (i) a loan through KeyBank National Association or an additional
or substitute financial institution(s) (the "BANK") to fund the
purchase of the Purchased Shares (the "PURCHASE LOAN") and (ii) a loan
through the Bank to assist in funding interest payments on the Purchase
Loan (together with the Purchase Loan, the "LOAN"). Each Participant
must sign a power of attorney authorizing loans under the Bank loan
documents and the purchase of the Purchased Shares. Each Participant is
responsible for satisfying all of the lending requirements, including
supplying requisite information on a timely basis, specified by the
Bank to qualify for the Loan. Each Participant is fully obligated to
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repay to the Bank all principal, interest and any prepayment fees on
the Loan when due and payable. Any prepayments of the Loan must be made
in $50,000 increments, on the last day of the month and in a manner
otherwise consistent with the terms of any interest rate swap
agreement.
In the event a Participant does not wish to obtain the Loan,
the Participant shall provide sufficient funds to fund the purchase of
the Purchased Shares. Such Participant must execute a power of attorney
authorizing the purchase of the Purchased Shares. If the Participant
fails to fund the purchase of the Purchased Shares, the Participant may
no longer participate in the Program, and all of the Purchased Shares
not paid for will be allocated to the other Participants.
5. REGISTRATION OF SHARES. The Purchased Shares will be registered in the
name of the Participant or his or her designee and certificated. Each
certificate will bear a legend referring to the Program. The
certificates for the Purchased Shares of each Participant who
participates in the Loan will be held for safekeeping by the Company
for the benefit of each Participant.
6. SHAREHOLDER RIGHTS. Each Participant will have all of the rights of a
shareholder with respect to the Purchased Shares, including the right
to dispose of the shares, the right to vote the shares and the right to
receive dividends. Dividends will be deposited in the Participant's
account at the Bank to apply towards the payment of interest on the
Participant's Loan.
7. SALE OF PURCHASED SHARES. Each Participant is permitted to sell all or
any portion of the Purchased Shares; provided, that any such sale does
not violate any provision of the Participant's Loan.
8. LOAN GUARANTY. Cinergy and/or a subsidiary of Cinergy (the "GUARANTOR")
will guarantee repayment to the Bank of 100% of all principal,
interest, prepayment fees and other obligations of each Participant
under such Participant's Loan (the "GUARANTY"). Any Guaranty issued by
a subsidiary of Cinergy will be guaranteed by Cinergy. The issuance of
the Guaranty is a condition to the loan arrangement Cinergy has made
with the Bank. The terms and conditions of the Guaranty are as agreed
by Cinergy and the Bank. Each Participant shall enter into an
indemnification agreement to indemnify Cinergy or the Guarantor, as the
case may be, for any losses under the Guaranty of the Loan with respect
to the Participant. If a Participant specifies a Participant Designee,
the Participant shall enter into an indemnification agreement to
indemnify Cinergy or the Guarantor, as the case may be, for any losses
under the Guaranty of the Loan with respect to the Participant
Designee. Each Participant is fully obligated to repay to the Bank all
principal, interest, and other amounts on the Loan when due and
payable. Cinergy may take any action relating to the Participant and
her or his assets, which the Program Administrator deems necessary,
proper or desirable, (including, but not limited to, offsetting amounts
owed to Cinergy or its subsidiaries against wages, fees or other
amounts owed to the Participant from Cinergy) to obtain full
reimbursement for amounts the Guarantor pays to the Bank under the
Guaranty related to the Participant's or a Participant Designee's Loan.
9. INTEREST PAYMENTS AND INTEREST RESERVE. The Purchase Loan will be a
floating rate loan based on LIBOR, which will then be swapped at a time
to be determined by the Program Administrator to a fixed rate so that
Participants will not have interest rate risk during the term of the
Purchase Loan. Interest on the Purchase Loan will be payable quarterly,
on or
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about the Company's dividend payment date. Interest will be funded
primarily from the dividends received by the Participant on the
Purchased Shares. Interest in excess of the dividend, if any, may, at
the option of the Participant, be paid from an interest reserve
facility (the "INTEREST RESERVE FACILITY") made available by the Bank
and equal to 8% of the Purchase Loan balance. If a Participant elects
to utilize the Interest Reserve Facility, an amount will be drawn from
the facility on the Participant's behalf to fund any interest due in
excess of the dividend at the time of each interest payment date. Such
amounts drawn from the Participant's Interest Reserve Facility will be
subject to the Guaranty as set forth in Section 8. Each Participant is
responsible for satisfying all of the lending requirements, including
supplying requisite information on a timely basis, specified by the
Bank to qualify for the Interest Reserve Facility. Each Participant is
fully obligated to repay to the Bank all principal, interest and any
prepayment fees on the Interest Reserve Facility when due and payable.
ALTHOUGH THE BANK WILL TAKE AN ASSIGNMENT OF THE DIVIDENDS ON
THE PURCHASED SHARES TO SERVICE THE PURCHASE LOAN, THE PARTICIPANT WILL
BE SOLELY RESPONSIBLE FOR PAYING ALL PRINCIPAL AND INTEREST WHEN DUE.
IF THE CINERGY DIVIDEND WERE EVER REDUCED, A PARTICIPANT COULD INCUR
SUBSTANTIAL QUARTERLY INTEREST PAYMENTS IN EXCESS OF THE DIVIDENDS AND
THE INTEREST RESERVE FACILITY.
10. MARGIN REGULATIONS.
(1) None of the obligations of the Participants to
Cinergy or any of its subsidiaries (collectively,
Cinergy and its subsidiaries shall be referred to as
"CINERGY" for the purposes of this Section 10)
hereunder, or the obligations of the Participants to
the Bank under their respective Loan, is or will be
secured, directly or indirectly, by Margin Stock (as
such term is defined in Regulation U promulgated by
the Board of Governors of the Federal Reserve
System);
(2) Neither Cinergy nor any third party acting on behalf
of Cinergy has taken or will take possession of a
Participant's Margin Stock to secure, directly or
indirectly, any of the obligations of such
Participant to Cinergy;
(3) Cinergy does not and will not have any right to
prohibit or, in any way, restrict such Participant
from selling, pledging, encumbering or otherwise
disposing of any Margin Stock owned by such
Participant;
(4) Such Participant has not granted and will not grant
Cinergy or any third party acting on behalf of
Cinergy the right to accelerate repayment of any of
the obligations under this Program of such
Participant if any of the Margin Stock owned by such
Participant is sold, pledged, encumbered or otherwise
disposed of by such Participant; and
(5) There is no agreement or other arrangement between
such Participant and Cinergy or any third party
acting on behalf of Cinergy (and no such agreement or
arrangement shall be entered into so long as this
Program
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is in effect or any of the obligations of such
Participant under this Program remain outstanding)
under which the Margin Stock of Participant would be
made more readily available as security to Cinergy
than to other creditors of such Participant.
11. DEATH OR DISABILITY. Upon the death of a Participant, her or his estate
or the Participant Designee, as the case may be, may elect to cause
Cinergy to pay the estate or the Participant Designee, as the case may
be, an amount equal to the balance of the Participant's Loan minus the
value of the Purchased Shares based upon the closing price of Common
Stock on the New York Stock Exchange on the first trading date after
the date of death. The estate or the Participant Designee, as the case
may be, of a deceased Participant must give to the Company written
notification of its decision to make such an election within 60 days
after the death of the Participant. If a Participant who is an employee
of the Company becomes eligible for benefits under the Cinergy Corp.
Long-Term Disability Plan (a "DISABLED PARTICIPANT"), such disabled
Participant may elect to cause Cinergy to pay the Participant an amount
equal to the balance of the Participant's Loan minus the value of the
Purchased Shares based upon the closing price of Common Stock on the
New York Stock Exchange on the first trading date after the first date
of eligibility for payment under the Cinergy Corp. Long-Term Disability
Plan. This Section 11 has no effect on a deceased or disabled
Participant's sale of Purchased Shares before the Participant's death
or disability. Payment by Cinergy of amounts described in this Section
11 is conditioned on the payment in full of the Participant's Loan (if
any) and the release of the Guaranty with respect thereto.
12. OTHER TERMINATION. Within 30 days of a Participant ceasing to be a
Director, officer or employee of Cinergy in circumstances other than as
described in Section 11, such Participant or Participant Designee shall
have the option to either (i) retire the Loan and release the Guaranty
or (ii) continue the Loan until its maturity date with Cinergy's
Guaranty.
Notwithstanding the above, if at such Participant's request,
the Bank, in its sole discretion, agrees to the termination of any
dividend assignment agreement between Cinergy, the Bank and the
Participant or agrees to waive the Participant's obligations
thereunder, all outstanding interest and principal under the Loan shall
become due and payable and the Guaranty shall subsequently be
terminated.
13. ADMINISTRATION. The Program Administrator shall be charged with the
administration and interpretation of the Program but may delegate the
ministerial duties hereunder to such persons as it determines. The
Program Administrator may adopt such rules as may be necessary or
appropriate for the proper administration of the Program. The decision
of the Program Administrator in all matters involving the
interpretation and application of the Program shall be final and shall
be given the maximum possible deference allowed by law.
14. PAYMENT OF EXPENSES. The expenses of administering the Program shall be
paid by the Company except those expenses which are expenses of the
Participants.
15. INCOME TAX CONSIDERATIONS. THIS SUMMARY IS NOT INTENDED TO DISCUSS ALL
INCOME TAX ASPECTS OF PARTICIPATION IN THE PROGRAM OR TO CONSTITUTE TAX
ADVICE, AND ALL PROGRAM PARTICIPANTS ARE URGED TO
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CONSULT THEIR PERSONAL TAX ADVISORS. THIS SUMMARY IS FOR INFORMATIONAL
PURPOSES ONLY AND IS BASED ON THE TAX LAWS IN EFFECT AS OF THE
EFFECTIVE DATE OF THIS PROGRAM, WHICH LAWS ARE SUBJECT TO CHANGE. THE
TAX CONSEQUENCES TO EACH PARTICIPANT WILL DEPEND IN PART UPON SUCH
PARTICIPANT'S PARTICULAR SITUATION. SPECIAL TAX CONSEQUENCES NOT
DESCRIBED HEREIN MAY BE APPLICABLE TO CERTAIN PARTICIPANTS.
The dividends paid by the Company on Common Stock purchased
through the Program will be reported to Participants and the IRS on
Form 1099DIV. These amounts must be reported as dividend income on
Schedule B of a Participant's federal income tax return in the year
they are paid even though the dividends will be paid directly to the
Bank. Note that a portion of the Company's distributions to its
shareholders may be considered to be a capital gain dividend, in which
case the dividend would be reported as a long-term capital gain. In
addition, a portion of the Company's distributions to its shareholders
may be considered to be a return of capital, which would reduce the tax
basis of the shares purchased.
Provided a Participant itemizes deductions and does not take
the standard deduction, the interest expense that is deemed to be paid
on the Purchase Loan may be deductible as "investment interest expense"
on Form 4952 of his or her federal income tax return. Investment
interest expense is deductible to the extent of investment income.
Investment income includes interest income and dividend income. Unlike
certain other itemized deductions, investment interest expense is not
phased out at certain income levels. Participants will be deemed to
have paid interest on the Purchase Loan if the dividends are used to
pay interest on the Purchase Loan. If the dividends are not sufficient
to fully pay the accrued interest on the Loan, the interest shortfall
may be funded through the Interest Reserve Facility. The IRS currently
takes the position that interest paid from borrowed funds is not
deductible until those borrowed funds are repaid.
Participants that do not itemize deductions may not receive
any tax benefit from the payment of the interest expense.
In general, Participants will realize capital gain or loss on
the disposition of Common Stock purchased under the Program equal to
the difference between (i) the amount of cash received on such
disposition and (ii) the Participant's adjusted basis of the stock.
Currently, such gain or loss generally will constitute long-term
capital gain or loss if the Participant has held the shares for more
than one year.
The state and local tax consequences from participation in the
Program vary widely depending on the state and municipality of a
Participant. Many state and local tax statutes do not permit taxpayers
to itemize deductions. Accordingly, Participants may be subject to
state and local income taxes on the dividends paid on the Common Stock
with no corresponding tax benefit for interest paid under the Program.
In addition, certain states impose franchise taxes on the value of
marketable securities held, such as the Common Stock.
16. EMPLOYER-EMPLOYEE RELATIONSHIP. The establishment of this Program shall
not be construed as conferring any legal or other rights upon any
employee or any person for a
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continuation of employment, nor shall it interfere with the rights of
the Company to discharge any employee or otherwise act with relation to
the employee. Subject to any agreements the Company has with a
Participant, the Company may take any action (including discharge) with
respect to any employee or other person and may treat such person
without regard to the effect which such action or treatment might have
upon such person as a Participant of this Program.
17. AMENDMENT AND TERMINATION. The Company reserves the right to change or
discontinue this Program by action of the Program Administrator in his
or its discretion; PROVIDED, HOWEVER, that in the case of any person to
whom benefits under this Program had accrued upon termination of
employment prior to such Program Administrator action, or in the case
of any Participant who would have been entitled to benefits under this
Program had the Participant's employment ceased prior to such change or
discontinuance, the benefits such person had accrued under this Program
prior to such change or discontinuance shall not be adversely affected
thereby.
18. WITHHOLDING. The Company shall have the right to deduct in cash
(whether under this Program or otherwise) in connection with all
payments by the Company to a Participant under this Program any taxes
required by law to be withheld and to require any payments required to
enable it to satisfy its withholding obligations.
19. GOVERNING LAW. This Program shall be construed in accordance with the
laws of the State of Delaware.
20. APPROVAL. If a Participant elects to purchase Purchased Shares, such
election shall constitute formal approval of this Program by the
Participant and such Participant's agreement to be bound by the terms
and conditions of the Program.
EFFECTIVE DATE: JANUARY 7, 2000
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