-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UXMvnUWlkHJtwQnvVZvkeBXLlw8kvW/jjPXD0i6hcDaS5CT3bqiE4VRFwZLZVSC7 MTiSINDM3nU/3AMet7TzIQ== 0000950123-03-006215.txt : 20030519 0000950123-03-006215.hdr.sgml : 20030519 20030516211608 ACCESSION NUMBER: 0000950123-03-006215 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20030519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE ENERGY CORP CENTRAL INDEX KEY: 0000030371 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 560205520 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105354 FILM NUMBER: 03709529 BUSINESS ADDRESS: STREET 1: 526 SOUTH CHURCH STREET CITY: CHARLOTTE STATE: NC ZIP: 28202 BUSINESS PHONE: 7045940887 MAIL ADDRESS: STREET 1: 526 S. CHURCH ST. CITY: CHARLOTTE STATE: NC ZIP: 28202 FORMER COMPANY: FORMER CONFORMED NAME: DUKE POWER CO /NC/ DATE OF NAME CHANGE: 19920703 S-4 1 y86343sv4.txt DUKE ENERGY CORPORATION AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 2003 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 DUKE ENERGY CORPORATION (Exact name of Registrant as Specified in Its Charter) NORTH CAROLINA (State or Other Jurisdiction of Incorporation or Organization) 56-0205520 (IRS Employer Identification No.) 526 SOUTH CHURCH STREET CHARLOTTE, NORTH CAROLINA 28202 (704) 594-6200 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) --------------------- ROBERT P. BRACE EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER DUKE ENERGY CORPORATION 526 SOUTH CHURCH STREET CHARLOTTE, NORTH CAROLINA 28202 (704) 594-6200 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) COPY TO: VINCENT PAGANO, JR., ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 (212) 455-2000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE - ---------------------------------------------------------------------------------------------------------------------------- First and Refunding Mortgage Bonds, 3.75% Series B due 2008............... $500,000,000 100% $500,000,000 $40,450 - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
--------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED MAY , 2003 PROSPECTUS [DUKE ENERGY LOGO] $500,000,000 Offer to exchange all outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 for an equal amount of First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which have been registered under the Securities Act of 1933. THE EXCHANGE OFFER - We will exchange all outstanding bonds that are validly tendered and not validly withdrawn for an equal principal amount of exchange bonds that are freely tradeable, except in limited circumstances described below. - You may withdraw tenders of outstanding bonds at any time prior to the expiration of the exchange offer. - The exchange offer expires at 5:00 p.m., New York City time, on , 2003, unless extended. We do not currently intend to extend the expiration date. - The exchange of outstanding bonds for exchange bonds in the exchange offer will not be a taxable event for U.S. federal income tax purposes. - We will not receive any proceeds from the exchange offer. THE EXCHANGE BONDS - The exchange bonds are being offered in order to satisfy certain of our obligations under the registration rights agreement entered into in connection with the placement of the outstanding bonds. - The terms of the exchange bonds to be issued in the exchange offer are substantially identical to the outstanding bonds, except that the exchange bonds will be freely tradeable, except in limited circumstances described below. RESALES OF EXCHANGE BONDS - The exchange bonds may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. We do not plan to list the exchange bonds on a national market. If you are a broker-dealer and you receive exchange bonds for your own account, you must acknowledge that you will deliver a prospectus in connection with any resale of such exchange bonds. By making such acknowledgement, you will not be deemed to admit that you are an "underwriter" under the Securities Act of 1933. Broker-dealers may use this prospectus in connection with any resale of exchange bonds received in exchange for outstanding bonds where the outstanding bonds were acquired by the broker-dealer as a result of market-making activities or trading activities. We have agreed to make this prospectus, and any amendment or supplement thereto, available to any such broker-dealer for use in connection with any resale of any Exchange Bonds for a period of the lesser of 90 days after the consummation of the Exchange Offer and the date on which all broker-dealers have sold all Exchange Bonds held by them (unless such Exchange Offer period is extended). A broker-dealer may not participate in the exchange offer with respect to outstanding bonds acquired other than as a result of market-making activities or trading activities. See "Plan of Distribution." If you are an affiliate of Duke Energy Corporation or are engaged in, or intend to engage in, or have an agreement or understanding to participate in, a distribution of the exchange bonds, you cannot rely on the applicable interpretations of the Securities and Exchange Commission and you must comply with the registration requirements of the Securities Act of 1933 in connection with any resale transaction. YOU SHOULD CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2003. TABLE OF CONTENTS
PAGE ---- About This Prospectus................ i Forward-Looking Statements........... i Where You Can Find More Information........................ iii Prospectus Summary................... 1 Risk Factors......................... 8 Ratio of Earnings to Fixed Charges... 22 Use of Proceeds...................... 22 Selected Historical Consolidated Financial Information.............. 23
PAGE ---- The Exchange Offer................... 25 Description of the Bonds............. 35 Certain United States Federal Income Tax Consequences................... 43 Plan of Distribution................. 43 Legal Matters........................ 44 Experts.............................. 44
--------------------- ABOUT THIS PROSPECTUS In this prospectus, the terms "we," "our," "us," "Company" and "Duke Energy" mean Duke Energy Corporation including, unless the context otherwise requires or as otherwise expressly stated, our subsidiaries. Unless the context otherwise requires, "bonds" refers to the outstanding bonds and the exchange bonds. You should rely only on the information contained in this document. Neither Duke Energy nor the exchange agent has authorized anyone to provide you with information different from that contained in this document. We are not offering to exchange, or soliciting any offers to exchange, securities pursuant to the exchange offer in any jurisdiction in which those offers or exchanges would not be permitted. The information contained in this document is accurate only as of the date of this document regardless of the time of delivery of this document or the time of any exchange of securities in the exchange offer. This document incorporates important business and financial information about us from documents filed with the Securities and Exchange Commission that have not been included in or delivered with this document. This information is available without charge upon written or oral request. See "Where You Can Find More Information" beginning on page iii. FORWARD-LOOKING STATEMENTS Our disclosure and analysis in this prospectus contains or incorporates by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "potential," "plan," "forecast" and other similar words. Those statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Those factors include: - state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures, and affect the speed at and degree to which competition enters the electric and natural gas industries; - the outcomes of litigation and regulatory investigations, proceedings or inquiries; - industrial, commercial and residential growth in our service territories; - the weather and other natural phenomena; i - the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; - general economic conditions, including any potential effects arising from terrorist attacks, the situation in Iraq and any consequential hostilities or other hostilities; - changes in environmental and other laws and regulations to which we and our subsidiaries are subject or other external factors over which we have no control; - the results of financing efforts, including our ability to obtain financing on favorable terms, which can be affected by various factors, including our credit ratings and general economic conditions; - lack of improvement or further declines in the market prices of equity securities and resultant cash funding requirements for our defined benefit pension plans; - the level of creditworthiness of counterparties to our transactions; - the amount of collateral required to be posted from time to time in our transactions; - growth in opportunities for our business units, including the timing and success of efforts to develop domestic and international power, pipeline, gathering, processing and other infrastructure projects; - the performance of electric generation, pipeline and gas processing facilities; - the extent of success in connecting natural gas supplies to gathering and processing systems and in connecting and expanding gas and electric markets; and - the effect of accounting pronouncements issued periodically by accounting standard-setting bodies. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ii WHERE YOU CAN FIND MORE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, or the SEC. Such reports and other information can be inspected and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates from the Public Reference Section of the SEC at its Washington address. Please call the SEC at 1-800-SEC-0330 for further information. Duke Energy's filings are also available to the public through: - Duke Energy's web site at http://www.duke-energy.com; - the SEC web site at http://www.sec.gov; and - The New York Stock Exchange 20 Broad Street New York, New York 10005. Additional information about Duke Energy is also available on its web site at http://www.duke-energy.com. Such web site is not a part of this prospectus. The SEC allows Duke Energy to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and information that Duke Energy files later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we complete our offering of the securities: - Duke Energy's annual report on Form 10-K for the year ended December 31, 2002; - Duke Energy's quarterly report on Form 10-Q for the quarter ended March 31, 2003; and - Duke Energy's current report on Form 8-K filed on May 8, 2003. Duke Energy will provide without charge a copy of these filings, other than any exhibits unless the exhibits are specifically incorporated by reference into this prospectus. You may request your copy by writing Duke Energy at the following address or telephoning one of the following numbers: Investor Relations Department Duke Energy Corporation P.O. Box 1005 Charlotte, North Carolina 28201 (704) 382-3853 or (800) 488-3853 (toll-free) IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST FOR DOCUMENTS SHOULD BE MADE NO LATER THAN [FIVE BUSINESS DAYS BEFORE THE EXPIRATION DATE], 2003 TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER. IN THE EVENT THAT WE EXTEND THE EXCHANGE OFFER, YOU MUST SUBMIT YOUR REQUEST AT LEAST FIVE BUSINESS DAYS BEFORE THE EXPIRATION DATE, AS EXTENDED. If you request any such documents from us, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request. iii PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information you need to consider. You should read carefully this entire prospectus. OVERVIEW Duke Energy, together with its subsidiaries, an integrated provider of energy and energy services, offers physical delivery and management of both electricity and natural gas throughout the United States and abroad. Duke Energy, together with its subsidiaries, provides these and other services through six business segments: - Franchised Electric - Natural Gas Transmission - Field Services - Duke Energy North America - International Energy - Other Operations FRANCHISED ELECTRIC generates, transmits, distributes and sells electricity in central and western North Carolina and western South Carolina. It conducts operations primarily through Duke Power and Nantahala Power and Light. These electric operations are subject to the rules and regulations of the Federal Energy Regulatory Commission, or FERC, the North Carolina Utilities Commission, or NCUC, and the Public Service Commission of South Carolina, or PSCSC. NATURAL GAS TRANSMISSION provides transportation and storage of natural gas for customers throughout the east coast and southern portion of the United States and in Canada. Natural Gas Transmission also provides distribution service to retail customers in Ontario and Western Canada and gas gathering and processing services to customers in Western Canada. Natural Gas Transmission does business primarily through Duke Energy Gas Transmission Corporation. Duke Energy acquired Westcoast Energy Inc. on March 14, 2002. Duke Energy Gas Transmission's natural gas transmission and storage operations in the United States are subject to the FERC's and the Texas Railroad Commission's rules and regulations, while natural gas gathering, processing, transmission, distribution and storage operations in Canada are subject to the rules and regulations of the National Energy Board, the Ontario Energy Board and the British Columbia Utilities Commission. FIELD SERVICES gathers, compresses, treats, processes, transports, trades and markets, and stores natural gas; and produces, transports, markets and stores natural gas liquids, or NGLs. It conducts operations primarily through Duke Energy Field Services, LLC, which is approximately 30% owned by ConocoPhillips and approximately 70% owned by Duke Energy. Field Services gathers natural gas from production wellheads in Western Canada and 11 contiguous states in the United States. Those systems serve major natural gas-producing regions in the Western Canadian Sedimentary Basin, Rocky Mountain, Permian Basin, Mid-Continent and East Texas-Austin Chalk-North Louisiana areas, as well as onshore and offshore Gulf Coast areas. DUKE ENERGY NORTH AMERICA develops, operates and manages merchant power generation facilities and engages in commodity sales and services related to natural gas and electric power. Duke Energy North America conducts business throughout the United States and Canada through Duke Energy North America, LLC and Duke Energy Trading and Marketing, LLC. Duke Energy Trading and Marketing is approximately 40% owned by ExxonMobil Corporation and approximately 60% owned by Duke Energy. In 2002, management combined Duke Energy Merchants Holdings with the Other Energy Services segment. Previous periods have been reclassified to conform to the current presentation. 1 In April 2003, Duke Energy announced that it would discontinue proprietary trading at Duke Energy North America. INTERNATIONAL ENERGY develops, operates and manages natural gas transportation and power generation facilities, and engages in sales and marketing of natural gas and electric power outside the United States and Canada. It conducts operations primarily through Duke Energy International, LLC and its activities target power generation in Latin America, power generation and natural gas transmission in the Asia-Pacific region and natural gas marketing in Northwest Europe. OTHER OPERATIONS is composed of diverse businesses, operating through Crescent Resources, LLC, DukeNet Communications, LLC, Duke Capital Partners, LLC, Duke Energy Merchants, Duke/Fluor Daniel and Energy Delivery Services. Beginning in 2003, the business segments formally known as Other Energy Services and Duke Ventures were combined into a segment called Other Operations. Crescent Resources develops high-quality commercial, residential and multi-family real estate projects, and manages land holdings primarily in the Southeastern and Southwestern U.S. DukeNet develops and manages fiber optic communications systems for wireless, local and long distance communications companies and selected educational, governmental, financial and health care entities. Duke Capital Partners, a wholly owned merchant finance company, provides debt and equity capital and financial advisory services primarily to the energy industry. In March 2003, Duke Energy announced that it will exit the merchant finance business at Duke Capital Partners in an orderly manner. Duke Energy Merchants engages in commodity buying and selling, and risk management and financial services in non-regulated energy commodity markets other than physical natural gas and power (such as petroleum products). On April 11, 2003, Duke Energy announced that it will also discontinue proprietary trading at Duke Energy Merchants. Duke/Flour Daniel provides comprehensive engineering, procurement, construction, commissioning and operating plant services for fossil-fueled electric power generating facilities worldwide. Duke/Flour Daniel is a 50/50 partnership between Duke Energy and Fluor Enterprises, Inc., a wholly owned subsidiary of Fluor Corporation. Energy Delivery Services is an engineering, construction, maintenance and technical services firm specializing in electric transmission and distribution lines and substation projects. The foregoing information about Duke Energy and its business segments is only a general summary and is not intended to be comprehensive. For additional information about Duke Energy and its business segments, you should refer to the information described under the caption "Where You Can Find More Information" in this prospectus. --------------------- We are incorporated in North Carolina and the address of our principal executive offices is 526 South Church Street, Charlotte, North Carolina 28202. Our telephone number is (704) 594-6200. 2 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER On February 25, 2003, we completed the private offering of the outstanding bonds. References to the "bonds" in this prospectus are references to both the outstanding bonds and the exchange bonds. This prospectus is part of a registration statement covering the exchange of the outstanding bonds for the exchange bonds. The outstanding bonds were issued and the exchange bonds offered hereby will be issued as part of a series of First and Refunding Mortgage Bonds under our First and Refunding Mortgage, dated as of December 1, 1927, to JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee, as supplemented and amended, including by the Eighty-First Supplemental Indenture, dated as of February 25, 2003. The First and Refunding Mortgage, as supplemented and amended, is sometimes called the "Mortgage." In connection with the private offering, we entered into a registration rights agreement, dated as of February 25, 2003, with the initial purchasers in the private offering, or the Registration Rights Agreement, in which we agreed, among other things, to deliver this prospectus to you as part of the exchange offer and we agreed to complete the exchange offer within 210 days after the date of original issuance of the outstanding bonds. You are entitled to exchange in the exchange offer your outstanding bonds for exchange bonds, which are identical in all material respects to the outstanding bonds except: - the exchange bonds have been registered under the Securities Act; - the exchange bonds are not entitled to certain registration rights which are applicable to the outstanding bonds under the Registration Rights Agreement; and - the special interest premium is no longer applicable. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. The Exchange Offer............ We are offering to exchange up to $500,000,000 aggregate principal amount of our First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which we refer to in this prospectus as the exchange bonds, for up to $500,000,000 aggregate principal amount of our First and Refunding Mortgage Bonds, 3.75% Series A due 2008, which we refer to in this prospectus as the outstanding bonds. Outstanding bonds may be exchanged only in integral multiples of $1,000. Resale........................ Based on an interpretation by the staff of the Securities and Exchange Commission, or the SEC, set forth in no-action letters issued to third parties, we believe that the exchange bonds issued pursuant to the exchange offer in exchange for outstanding bonds may be offered for resale, resold and otherwise transferred by you (unless you are an "affiliate" of Duke Energy Corporation within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that you are acquiring the exchange bonds in the ordinary course of your business and that you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange bonds. Each participating broker-dealer that receives exchange bonds for its own account pursuant to the exchange offer in exchange for outstanding bonds that were acquired as a result of market- making or other trading activity must acknowledge that it will 3 deliver a prospectus in connection with any resale of the exchange bonds. See "Plan of Distribution." Any holder of outstanding bonds who: - is an affiliate of Duke Energy Corporation, - does not acquire exchange bonds in the ordinary course of its business, or - tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange bonds cannot rely on the position of the staff of the SEC enunciated in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the exchange bonds. Expiration Date; Withdrawal of Tender........................ The exchange offer will expire at 5:00 p.m., New York City time, on , 2003, or such later date and time to which we extend it, which date we refer to as the "expiration date." We do not currently intend to extend the expiration date. A tender of outstanding bonds pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. Any outstanding bonds not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. Certain Conditions to the Exchange Offer................ The exchange offer is subject to customary conditions, which we may waive. Please read the section of this prospectus captioned "The Exchange Offer -- Certain Conditions to the Exchange Offer" for more information regarding the conditions to the exchange offer. Procedures for Tendering Outstanding Bonds............. If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the outstanding bonds and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. If you hold outstanding bonds through The Depository Trust Company, or DTC, and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the letter of transmittal. By signing, or 4 agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: - any exchange bonds that you receive will be acquired in the ordinary course of your business; - you have no arrangement or understanding with any person or entity to participate in a distribution of the exchange bonds; - if you are a broker-dealer that will receive exchange bonds for your own account in exchange for outstanding bonds that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such exchange bonds; and - you are not an "affiliate," as defined in Rule 405 of the Securities Act, of Duke Energy Corporation or, if you are an affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act. Special Procedures for Beneficial Owners............. If you are a beneficial owner of outstanding bonds that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender such outstanding bonds in the exchange offer, you should contact such registered holder promptly and instruct such registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding bonds, either make appropriate arrangements to register ownership of the outstanding bonds in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. Guaranteed Delivery Procedures.................... If you wish to tender your outstanding bonds and your outstanding bonds are not immediately available or you cannot deliver your outstanding bonds, the letter of transmittal or any other documents required by the letter of transmittal or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date, you must tender your outstanding bonds according to the guaranteed delivery procedures set forth in this prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." Effect on Holders of Outstanding Bonds............. As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding bonds pursuant to the terms of the exchange offer, we will have fulfilled a covenant contained in the Registration Rights Agreement and, accordingly, there will be no increase in the interest rate on the outstanding bonds under the circumstances described in the Registration Rights Agreement. If you are a holder of outstanding bonds and you do not tender your outstanding bonds in the exchange offer, you will continue to hold such outstanding bonds and you will be entitled to all the rights and limitations applicable to the outstanding 5 bonds in the Mortgage, except for any rights under the Mortgage or the Registration Rights Agreement that by their terms terminate upon the consummation of the exchange offer. To the extent that outstanding bonds are tendered and accepted in the exchange offer, the trading market for outstanding bonds could be adversely affected. Consequences of Failure to Exchange...................... All untendered outstanding bonds will continue to be subject to the restrictions on transfer provided for in the outstanding bonds and in the Mortgage. In general, the outstanding bonds may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding bonds under the Securities Act. Certain Income Tax Considerations................ The exchange of outstanding bonds for exchange bonds in the exchange offer will not be a taxable event for United States federal income tax purposes. See "Certain United States Federal Income Tax Considerations." Use of Proceeds............... We will not receive any cash proceeds from the issuance of exchange bonds pursuant to the exchange offer. Exchange Agent................ JPMorgan Chase Bank is the exchange agent for the exchange offer. The address and telephone number of the exchange agent are set forth in the section of this prospectus captioned "The Exchange Offer -- Exchange Agent." 6 SUMMARY OF THE TERMS OF THE EXCHANGE BONDS Issuer........................ Duke Energy Corporation. Bonds Offered................. $500,000,000 in aggregate principal amount of First and Refunding Mortgage Bonds, 3.75% Series B due 2008. Maturity Date................. March 5, 2008. Interest Payment Dates........ March 5 and September 5 of each year, beginning September 5, 2003. The initial interest payment will include accrued interest from February 25, 2003. Interest Rate................. 3.75% per year. Ranking....................... The outstanding bonds are, and the exchange bonds will be, a series of First and Refunding Mortgage Bonds of Duke Energy Corporation. All series of the First and Refunding Mortgage Bonds are equally and ratably secured without preference, priority or distinction. Optional Redemption........... We may redeem some or all of the bonds at the redemption prices set forth under "Description of the Bonds -- Optional Redemption." Use of Proceeds............... There will be no cash proceeds to us from the exchange offer. Certain Covenants............. The Mortgage governing the bonds contains certain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to create liens on our assets. See "Description of the Bonds" in this prospectus. Absence of a Public Market for the Exchange Bonds............ The exchange bonds generally will be freely transferable but will also be new securities for which there will not initially be a market. Accordingly, we cannot assure you whether a market for the exchange bonds will develop or as to the liquidity of any market. We do not intend to apply for a listing of the exchange bonds on any securities exchange or automated dealer quotation system. The initial purchasers in the private offering of the outstanding bonds have advised us that they currently intend to make a market in the exchange bonds. However, they are not obligated to do so, and any market making with respect to the exchange bonds may be discontinued without notice. --------------------- You should carefully consider the risk factors set forth under the caption of this "Risk Factors" and the other information included in this prospectus before tendering your outstanding bonds in the exchange offer. 7 RISK FACTORS You should carefully consider the following factors and other information contained in this prospectus before deciding to tender outstanding bonds in the exchange offer. The risk factors set forth below are generally applicable to the outstanding bonds as well as the exchange bonds. Any of these risks could materially adversely affect our business, financial condition and results of operations, which could in turn materially adversely affect the price of the bonds. RISKS RELATED TO THE EXCHANGE OFFER IF YOU CHOOSE NOT TO EXCHANGE YOUR OUTSTANDING BONDS, THE PRESENT TRANSFER RESTRICTIONS WILL REMAIN IN FORCE AND THE MARKET PRICE OF YOUR OUTSTANDING BONDS COULD DECLINE. If you do not exchange your outstanding bonds for exchange bonds under the exchange offer, then you will continue to be subject to the transfer restrictions on the outstanding bonds as set forth in the offering memorandum distributed in connection with the private offering of the outstanding bonds. In general, the outstanding bonds may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the Registration Rights Agreement, we do not intend to register resales of the outstanding bonds under the Securities Act. You should refer to "Prospectus Summary -- Summary of Terms of the Exchange Offer" and "The Exchange Offer" for information about how to tender your outstanding bonds. The tender of outstanding bonds under the exchange offer will reduce the principal amount of the outstanding bonds outstanding, which may have an adverse effect upon, and increase the volatility of, the market price of the outstanding bonds due to a reduction in liquidity. YOU MUST FOLLOW THE EXCHANGE OFFER PROCEDURES CAREFULLY IN ORDER TO RECEIVE THE EXCHANGE BONDS. If you do not follow the procedures described herein, you will not receive the exchange bonds. The exchange bonds will be issued to you in exchange for your outstanding bonds only after timely receipt by the exchange agent of: - a properly completed and executed letter of transmittal and all other required documents; or - a book-entry delivery by electronic transmittal of an agent's message through DTC. If you want to tender your outstanding bonds in exchange for exchange bonds, you should allow sufficient time to ensure timely delivery. No one is under any obligation to give you notification of defects or irregularities with respect to tenders of outstanding bonds for exchange. For additional information, please refer to the sections captioned "The Exchange Offer" and "Plan of Distribution" in this prospectus. RISKS RELATED TO THE MARKET CYCLE OF OUR INDUSTRY OUR RESULTS OF OPERATIONS MAY BE NEGATIVELY AFFECTED BY SUSTAINED DOWNTURNS OR SLUGGISHNESS IN THE ECONOMY, INCLUDING LOW LEVELS IN THE MARKET PRICES OF COMMODITIES, ALL OF WHICH ARE BEYOND OUR CONTROL. Sustained downturns or sluggishness in the economy generally affect the markets in which we operate and negatively influence our regulated and unregulated energy operations. Declines in demand for electricity as a result of economic downturns in our Franchised Electric service territories will reduce overall electricity sales and lessen our cash flows, especially as our industrial customers reduce production and, thus, consumption of electricity. Our Natural Gas Transmission and Field Services businesses may experience a decline in the volume of natural gas shipped through their pipelines and transport systems or gathered and processed at their plants, resulting in lower revenue and cash flows, as lower economic output reduces energy demand. Although our Franchised Electric business is subject to regulated allowable rates of return and recovery of fuel costs under a fuel adjustment clause, and our gas transmission is subject to mandated tariff rates, overall declines in electricity sold or the volume of gas shipped as a result of economic downturn or recession could reduce our revenues and cash flows, thus diminishing our results of operations. 8 Our Duke Energy North America business sells power from generation facilities into the spot market or other competitive power markets on a contractual basis and enters into contracts to purchase and sell electricity, natural gas and NGLs as part of our power marketing and energy trading operations. With respect to such transactions, we are not guaranteed any rate of return on our capital investments through mandated rates, and our revenues and results of operations are likely to depend, in large part, upon prevailing market prices for power, natural gas and NGLs in our regional markets and other competitive markets. These market prices may fluctuate substantially over relatively short periods of time. These factors could reduce our revenues and margins and therefore diminish our results of operations. Lower demand for the electricity we sell, for the natural gas we gather, process and transport and in the market prices for electricity, natural gas and NGLs result from multiple factors that affect our service territories and the end markets where we sell electricity or ship natural gas, including: - weather conditions; - seasonality; - supply of and demand for energy commodities, including any decreases in the production of natural gas due to depressed prices for natural gas which could negatively affect our gas transmission business due to lower throughput and our energy trading business through lower prices; - illiquid markets; - general economic conditions, including downturns in the U.S. or other economies which impact consumption; - transmission or transportation constraints or inefficiencies which impact our merchant energy operations; - availability of competitively priced alternative energy sources; - natural gas, crude oil, refined products and coal production levels; - electric generation capacity; - capacity and transmission service into, or out of, our markets; - natural disasters, wars, embargoes and other catastrophic events to the extent they affect our markets; and - federal, state and foreign energy and environmental regulation and legislation. These market factors have led to industry-wide downturns that have resulted in the slowing down or stopping of new construction of power plants and announcements by us and other energy suppliers and gas pipeline companies of plans to sell non-core assets in order to boost liquidity or strengthen balance sheets. Proposed sales by other energy suppliers and gas pipeline companies could increase the supply of the type of assets we are attempting to sell which could lead to our failing to execute such asset sales or obtaining lower prices on completed asset sales. OUR RISK MANAGEMENT PROCEDURES MAY NOT PREVENT LOSSES. We actively manage the risk inherent in our energy, debt and foreign currency positions. Although we have sophisticated risk management systems in place that use advanced methodologies to quantify risk, these systems may not always be followed or may not always work as planned. If prices significantly deviate from historical prices, our risk management systems may not protect us from significant losses. Adverse changes in energy prices, interest rates and foreign currency exchange rates may result in economic losses in our earnings and cash flows and our balance sheet under applicable accounting rules. Although we devote a considerable amount of management effort to our trading, marketing and risk management systems, their effectiveness remains uncertain. 9 OUR HEDGING PROCEDURES MAY NOT PROTECT OUR SALES AND NET INCOME FROM VOLATILITY. To lower our financial exposure related to price fluctuations, our corporate marketing, trading and risk management operations routinely enter into contracts to hedge the value of our assets and operations. As part of this strategy, we routinely utilize fixed-price, forward, physical purchase and sales contracts, futures, financial swaps and option contracts traded in the over-the-counter markets or on exchanges. However, we do not cover the entire exposure of our assets or our positions to market price volatility and the coverage will vary over time. To the extent we have unhedged positions or our hedging procedures do not work as planned, fluctuating commodity prices could cause our sales and net income to be volatile. OUR OPERATING RESULTS MAY FLUCTUATE ON A SEASONAL AND QUARTERLY BASIS. Electric power generation and gas transmission are generally seasonal businesses. In most parts of the U.S. and world in which we operate, demand for power peaks during the hot summer months, with market prices also peaking at that time. In other areas, demand for power peaks during the winter. In addition, demand for gas and other fuels peaks during the winter, especially for our natural gas businesses in Canada. As a result, our overall operating results in the future may fluctuate substantially on a seasonal basis. Further, extreme weather conditions such as heat waves or winter storms could cause these seasonal fluctuations to be more pronounced. The pattern of this fluctuation may change depending on the nature and location of our facilities and pipeline systems and the terms of power sale contracts and gas transmission arrangements we enter into. RECENT DEVELOPMENTS AFFECTING THE WHOLESALE POWER AND ENERGY TRADING MARKETS HAVE REDUCED MARKET ACTIVITY AND LIQUIDITY AND MAY CONTINUE TO ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. As a result of the energy crisis in California, the recent decline of natural gas prices in North America, the filing of bankruptcy by Enron Corporation, and investigations by governmental authorities into energy trading activities and increased litigation related to these matters, companies generally in the regulated and unregulated utility businesses have been impacted negatively. In addition, certain participants have chosen to or have been forced to exit from the energy trading markets, leading to a reduction in the number of trading partners and lower trading revenues. Depressed spot and forward wholesale power prices have resulted in substantially reduced revenues in our merchant energy business and may continue to affect our earnings. OUR PROFITABILITY MAY DECLINE IF THE COUNTERPARTIES TO OUR TRANSACTIONS FAIL TO PERFORM IN ACCORDANCE WITH OUR AGREEMENTS WITH THEM. Our marketing, trading and risk management operations are exposed to the risk that counterparties to our transactions will not perform their obligations. Should the counterparties to these arrangements fail to perform, we might be forced to acquire alternative hedging arrangements, honor the underlying commitment at then-current market prices or return a significant portion of the consideration received for unused electricity or gas under a long-term contract. In such event, we might incur additional losses to the extent of amounts, if any, already paid to, or received from, counterparties. In addition, in our marketing and trading activities, we often extend credit to our trading counterparties. Despite performing credit analysis prior to extending credit, we are exposed to the risk that we may not be able to collect amounts owed to us. If the counterparty to such a financing transaction fails to perform and any collateral we have secured is inadequate, we will lose money. WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE THE RISKS ASSOCIATED WITH SELLING AND MARKETING PRODUCTS IN THE WHOLESALE POWER MARKETS. We purchase and sell power at the wholesale level under the FERC's market-based tariffs throughout the United States and also enter into short-term agreements to market available energy and capacity from our generation assets with the expectation of profiting from market price fluctuations. If we are unable to deliver firm capacity and energy under these agreements, then we could be required to pay damages. These 10 damages would be based on the difference between the market price to acquire replacement capacity or energy and the contract price of the undelivered capacity or energy. Depending on price volatility in the wholesale energy markets, such damages could be significant. In the absence or upon expiration of power sales agreements, we must sell all or a portion of the energy, capacity and other products from our facilities into the competitive wholesale power markets. Unlike most other commodities, electricity cannot be stored and must be produced concurrently with its use. As a result, the wholesale power markets are subject to significant price fluctuations over relatively short periods of time and can be unpredictable. In addition, the price we can obtain for power sales may not change at the same rate as changes in fuel costs. Given the volatility and potential for material differences between actual power prices and fuel costs, if we are unable to secure long-term purchase agreements for our power generation facilities, our revenues would be subject to increased volatility and our financial results may be materially adversely affected. COMPETITION IN THE WHOLESALE POWER AND ENERGY TRADING MARKETS MAY ADVERSELY AFFECT THE GROWTH AND PROFITABILITY OF OUR BUSINESS. While companies in the regulated and unregulated utility business have been generally negatively affected by recent events in the energy markets, it is possible that in the future we may be vulnerable to competition from new competitors that have greater financial resources than we do, seeking attractive opportunities to acquire or develop energy assets or energy trading operations both in the United States and abroad. These new competitors may include sophisticated financial institutions, some of which are already entering the energy trading and marketing sector, and international energy players, which may enter regulated or unregulated utility businesses. This competition may adversely affect our ability to make investments or acquisitions. We may not be able to respond in a timely or effective manner to the many changes intended to increase competition in the electricity industry. To the extent competitive pressures increase and the pricing and sale of electricity assume more characteristics of a commodity business, the economics of our business may come under long-term pressure. In addition, regulatory changes have also been proposed to increase access to electricity transmission grids by utility and non-utility purchasers and sellers of electricity. We believe that these changes could continue the disaggregation of many vertically-integrated utilities into separate generation, transmission, distribution and retail businesses. As a result, a significant number of additional competitors could become active in the wholesale power generation segment of our industry. WE ARE EXPOSED TO MARKET RISK AND MAY INCUR LOSSES FROM OUR MARKETING AND TRADING OPERATIONS. Our trading portfolios consist of contracts to buy and sell commodities, including contracts for electricity, natural gas, NGLs and other commodities that are settled by the delivery of the commodity or cash. If the values of these contracts change in a direction or manner that we do not anticipate, we could realize material losses from our trading activities. We have marketing and trading operations which target the U.S., Canadian, Latin American, Asia-Pacific and European regions. We incur trading risks and market exposures in these markets. If our trading volumes in these regions increase, we will be exposed to increased market risks. RISKS RELATED TO LEGAL PROCEEDINGS AND REGULATORY INVESTIGATIONS Recently, in part due to the California electricity supply situation and the failure of Enron Corporation, public and regulatory scrutiny of the energy industry and of the capital markets have resulted in increased regulatory investigations new regulations being either proposed or implemented and an increase in litigation in the industry. During this time, we have experienced a significant increase in regulatory investigations and litigation related to our operations, primarily with respect to the California situation, pricing information and so-called "roundtrip" trades, each as described in greater detail below. Future developments in these and other government investigations, including the subpoena we have 11 recently received from a North Carolina grand jury related to the audit by the NCUC and PSCSC of Duke Power's regulatory reporting from 1998 to 2000, and litigation impacting the energy industry and us, including litigation regarding performance, contracts and other matters arising in the ordinary course of our business and personal injury claims alleged to have arisen from the exposure to asbestos in our plants, could be materially adverse to us by affecting our operations and diverting our attention and resources to addressing such actions. Furthermore, future declines in the availability, or increases in the cost, of our insurance policies and charges to our self-insurance reserves with respect to such litigation could cause material liabilities and costs, which could have a material adverse effect on our results of operations or financial position in the future. WE MAY BE ADVERSELY AFFECTED BY LEGAL PROCEEDINGS ARISING OUT OF THE ELECTRICITY SUPPLY SITUATION IN CALIFORNIA AND OTHER WESTERN STATES. Litigation and administrative proceedings arising out of the California electricity supply situation are ongoing before the FERC and in California and several other western state courts against sellers of energy in California. Duke Energy and some of its subsidiaries are named as defendants in a number of lawsuits brought by or on behalf of electricity purchasers in California, with one suit filed on behalf of a Washington State electricity purchaser. In addition to lawsuits, several investigations and regulatory proceedings at the state and federal levels are looking into the causes of high wholesale electricity prices in the western United States. We cannot predict the outcome of any such lawsuits and other proceedings or whether the ultimate impact on us of the effects of the historical electricity supply situation in California and other western states will be material due to any future developments. WE MAY BE ADVERSELY AFFECTED BY REGULATORY INVESTIGATIONS RELATED TO PRICING INFORMATION THAT WE PROVIDED TO MARKET PUBLICATIONS. The FERC and the Commodity Futures Trading Commission, or CFTC, have requested information from us regarding pricing information that we provided to publications that produce price indices. We have been responding to the FERC and CFTC, but we cannot predict the outcome of this investigation or whether this investigation will lead to additional legal proceedings against us, civil or criminal fines or penalties, or other regulatory action, including legislation, which may be materially adverse to the operation of our trading business and our trading revenues and net income or increase our operating costs in other ways. WE MAY BE ADVERSELY AFFECTED BY REGULATORY INVESTIGATIONS AND ANY RELATED LEGAL PROCEEDINGS RELATED TO THE ALLEGED CONDUCTING OF "ROUNDTRIP" TRADES BY OUR ENERGY TRADING BUSINESS. The activities of Enron Corporation and other energy traders in allegedly using "roundtrip" trades which involve the prearrangement of simultaneously executed and offsetting buy and sell trades for the purpose of increasing reported revenues or trading volumes, or influencing prices and which lack a legitimate business purpose, has resulted in increased public and regulatory scrutiny. Various governmental and regulatory inquiries are ongoing and continue to adversely affect the energy trading business as a whole. We may see these adverse effects continue as a result of the uncertainty of these ongoing inquiries or additional inquiries by other federal or state regulatory agencies. To date, we have been investigated by, or responded to requests from, the SEC, the FERC, the Houston office of the U.S. Attorney and the CFTC concerning these alleged "roundtrip" trades. In addition, we cannot predict the outcome of any of these inquiries, or whether these inquiries will lead to additional legal proceedings against us, civil or criminal fines or penalties, or other regulatory action, including legislation, which may be materially adverse to the operation of our trading business and our trading revenues and net income or increase our operating costs in other ways. Also, a number of class action lawsuits have been filed against us, and others may be filed, claiming that investors suffered damages as a result of the alleged "roundtrip" trades inflating our revenue and earnings. While a number of the lawsuits have been dismissed at a preliminary stage, further developments 12 in such lawsuits could lead to settlements, civil damages or other litigation costs that could adversely affect our business. RISKS RELATED TO THE REGULATION OF OUR BUSINESSES ELECTRIC OUR BUSINESSES IN NORTH AMERICA ARE SUBJECT TO COMPLEX GOVERNMENT REGULATIONS. THE ECONOMICS, INCLUDING THE COSTS, OF OPERATING OUR GENERATING FACILITIES MAY BE ADVERSELY AFFECTED BY CHANGES IN THESE REGULATIONS OR IN THEIR INTERPRETATION OR IMPLEMENTATION. The regulatory environment applicable to the electric power industry has recently undergone substantial changes, both on a federal and a state level, which have had a significant impact on the nature of the industry and the manner in which its participants conduct their businesses. These changes are ongoing and we cannot predict the future course of changes in this regulatory environment or the ultimate effect that this changing regulatory environment will have on our business. The Public Utility Holding Company Act, or PUHCA, and the Federal Power Act, or FPA, regulate public utility holding companies and their subsidiaries and place certain constraints on the conduct of their business, although we are exempt from most of the provisions of PUHCA, as discussed below. The rates charged in our Franchised Electric business are approved by the FERC, the NCUC and/or the PSCSC. The NCUC and the PSCSC regulate many aspects of our utility operations including siting and construction of facilities, customer service and the rates that we can charge customers. The FERC regulates wholesale electricity operations and transmission rates and the state commissions regulate retail generation and distribution rates. The Public Utility Regulatory Policies Act of 1978, or PURPA, provides qualifying facilities with exemptions from some federal and state laws and regulations, including PUHCA and most provisions of the FPA. The Energy Policy Act of 1992, or the Energy Act, also provides relief from regulation under PUHCA to "exempt wholesale generators." Maintaining the status of our facilities as qualifying facilities or exempt wholesale generators is conditioned on those facilities continuing to meet statutory criteria. Under current law, we are not and will not be subject to regulation as a registered holding company under PUHCA as long as the domestic power plants we own through subsidiaries (such as in Duke Energy North America's business) are qualifying facilities under PURPA or are exempt wholesale generators. If we were subject to these regulations, the economics and operations of our generating facilities could be negatively affected by the increased costs associated with upgrading our facilities and taking other actions to comply with these regulations. While we are currently exempt from registration under PUHCA, we may lose that exemption if we fail to comply with our exemptive order from the SEC. If we were to lose our exemption, we would have the alternatives of registering as a holding company which would subject us to more extensive regulation, or divesting or changing the nature of some of our foreign utility holdings, including some facilities acquired in our Westcoast Energy purchase. Existing regulations may be revised or reinterpreted, new laws and regulations may be adopted or become applicable to us or our facilities, and future changes in laws and regulations may have a detrimental effect on our business. Certain restructured markets have recently experienced supply problems and price volatility. These supply problems and volatility have been the subject of a significant amount of press coverage, much of which has been critical of the restructuring initiatives. In some of these markets, including California, proposals have been made by governmental agencies and other interested parties to re-regulate areas of these markets which have previously been deregulated. We cannot assure you that other proposals to re-regulate will not be made or that legislative or other attention to the electric power restructuring process will not cause the deregulation process to be delayed or reversed. The FERC has proposed to broaden its regulations that restrict relations between jurisdictional electric and natural gas companies, or "jurisdictional companies," and marketing affiliates. The proposed rules would limit communications between a jurisdictional company and all our affiliates engaged in energy activities. The rulemaking is pending at the FERC and the precise scope and effect of the rule is unclear. 13 If adopted as proposed, the rule could adversely affect our ability to coordinate and manage our energy activities. OUR SALES MAY DECREASE IF WE ARE UNABLE TO GAIN ADEQUATE, RELIABLE AND AFFORDABLE ACCESS TO TRANSMISSION AND DISTRIBUTION ASSETS DUE TO THE FERC AND REGIONAL REGULATION OF WHOLESALE MARKET TRANSACTIONS FOR ELECTRICITY AND GAS. We depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver the electricity and natural gas we sell to the wholesale market, as well as the natural gas we purchase to supply some of our electric generation facilities. If transmission is disrupted, or if capacity is inadequate, our ability to sell and deliver products may be hindered. The FERC's proposed restrictions upon relations between jurisdictional companies and marketing affiliates, as described above, may also inhibit access to energy transmission and distribution assets controlled by us. The FERC has issued power transmission regulations that require wholesale electric transmission services to be offered on an open-access, non-discriminatory basis. Although these regulations are designed to encourage competition in wholesale market transactions for electricity, some companies have failed to provide fair and equal access to their transmission systems or have not provided sufficient transmission capacity to enable other companies to transmit electric power. We cannot predict whether and to what extent the industry will comply with these initiatives, or whether the regulations will fully accomplish their objectives. In addition, other companies' ability to access and compete for our existing "native-load" transmission customers may negatively affect our business leading to declining prices for transmission services as a result of this competition. In addition, the independent system operators who oversee the transmission systems in regional power markets, such as California, have in the past been authorized to impose, and may continue to impose, price limitations and other mechanisms to address volatility in the power markets. These types of price limitations and other mechanisms may adversely impact the profitability of our wholesale power marketing and trading. Given the extreme volatility and lack of meaningful long-term price history in many of these markets and the imposition of price limitations by regulators, independent system operators or other market operators, we can offer no assurance that we will be able to operate profitably in all wholesale power markets. IN THE FUTURE, WE MAY NOT BE ABLE TO SECURE LONG-TERM PURCHASE AGREEMENTS FOR OUR POWER GENERATION FACILITIES OR OUR EXISTING POWER PURCHASE AGREEMENTS MAY NOT BE ENFORCEABLE, EITHER OF WHICH WOULD SUBJECT OUR SALES TO INCREASED VOLATILITY. Historically, power from merchant generation facilities has been sold under long-term power purchase agreements pursuant to which all energy and capacity was generally sold to a single party at fixed prices. Because of changes in the industry, the percentage of facilities with these types of long-term power purchase agreements has decreased, and it is likely that most of our facilities will operate without these agreements. Without the benefit of long-term power purchase agreements, we cannot assure you that we will be able to sell the power generated by our facilities or that our facilities will be able to operate profitably. Recently, some entities have brought litigation or regulatory proceedings aimed at forcing the renegotiation or termination of power purchase agreements requiring payments to owners of generating facilities that are qualifying facilities under PURPA. Many qualifying facilities sell their electric output to utilities and other entities pursuant to long-term contracts at prices that are based upon the incremental cost that, at the time of contracting, it was estimated that it would cost the utility or entity to generate or purchase the power from another source. In some cases, these prices are now substantially in excess of market prices. In addition, in the future, utilities and other entities, with the approval of federal or state regulatory authorities, could seek to abrogate their existing power purchase agreements with qualifying facilities or with other power generators. Some of our power purchase agreements for power generated from our independent power projects and generation assets could be subject to similar efforts by the 14 entities who contract to purchase power from our facilities. If those efforts were to be successful, our sales could decrease or be subject to increased volatility. THE DIFFERENT REGIONAL POWER MARKETS IN WHICH WE COMPETE OR WILL COMPETE IN THE FUTURE HAVE CHANGING REGULATORY STRUCTURES, WHICH COULD AFFECT OUR GROWTH AND PERFORMANCE IN THESE REGIONS. Our wholesale power and franchised electric results are likely to be affected by differences in the market and transmission regulatory structures in various regional power markets. Because it remains unclear which companies will be participating in the various regional power markets, or how and when regional transmission organizations, or RTOs, will develop or what regions they will cover, we are unable to assess fully the impact that these power markets may have on our business. THE RATE FREEZE AFFECTING OUR NORTH CAROLINA UTILITY WILL LIMIT OUR ABILITY TO PASS ON TO OUR CUSTOMERS OUR COST OF PRODUCING ELECTRICITY. In 2002, the State of North Carolina passed clean air legislation that freezes electric utility rates until 2007, subject to certain conditions, in order for North Carolina electric utilities, including us, to make significant reductions in emissions of sulfur dioxide and nitrogen oxides from the state's coal-fired power plants over the next ten years. We estimate the cost of achieving the proposed emission reductions to be approximately $1.5 billion. While we expect to recover 70% of the total estimated costs of plant improvements through the five-year rate freeze period, there is no guarantee that we will recover such amount. As a result of the rate freeze, we will be limited in the amount of revenue our North Carolina utility generates in relation to operational costs and the amount of recovery for our costs of emission reductions. In addition, as the NCUC will determine how any remaining costs will be recovered after the rate freeze period, the manner of such recovery is unclear at this time. GAS OUR GAS TRANSMISSION AND STORAGE OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATIONS AND RATE PROCEEDINGS THAT COULD HAVE AN ADVERSE IMPACT ON OUR ABILITY TO RECOVER THE COSTS OF OPERATING OUR PIPELINE FACILITIES. Our U.S. interstate gas transmission and storage operations are subject to the FERC's regulatory authority, which extends to: - transportation of natural gas; - rates and charges; - construction; - acquisition, extension or abandonment of services or facilities; - accounts and records; - depreciation and amortization policies; and - operating terms and conditions of service. The FERC has taken certain actions to strengthen market forces in the natural gas pipeline industry which has led to increased competition throughout the industry. In a number of key markets, interstate pipelines are now facing competitive pressure from other major pipeline systems, enabling local distribution companies and end users to choose a supplier or switch suppliers based on the short-term price of gas and the cost of transportation. Given the extent of the FERC's regulatory power, we cannot give any assurance regarding the likely regulations under which we will operate our natural gas transmission and storage business in the future or the effect of regulation on our financial position and results of operations. In addition, the FERC has proposed to broaden its regulations on jurisdictional companies to limit communications between a jurisdictional company and all our affiliates engaged in energy activities. If adopted as proposed, the rule could adversely affect our ability to manage our energy activities. 15 Certain of our interstate gas transmission operations from time to time have in effect rate settlements approved by FERC which prevent those companies or third parties from modifying rates, except for certain allowed adjustments. These settlements do not preclude the FERC from taking action on its own to modify the rates. Upon expiration of the settlements, the companies or third parties may institute actions at the FERC to modify the companies' rates. It is not possible to determine at this time whether any such actions would be instituted or what the outcome would be but such proceedings could result in rate adjustments. Recent decisions could result in the imposition of regulatory operating terms and conditions of service on our interstate gas transmission operations that limit our management discretion and could also increase operational risks. In September 2002, a FERC administrative law judge ruled that El Paso Gas Transmission Company, an interstate natural gas pipeline company, was in violation of the Natural Gas Act for not delivering sufficient gas to its California markets during 2000 and 2001 because it had operated its interstate gas pipeline system at less than the maximum allowable pressure for which the system is rated, engaged in inappropriate system maintenance and delivered gas to other markets. If this ruling stands after review by the FERC, it could be interpreted to increase the delivery obligations and reduce the operational discretion of interstate gas pipelines, including those we operate, and, as a result, increase operational, contractual and litigation risks for our natural gas pipelines. POSSIBLE CHANGES AND DEVELOPMENTS IN THE CANADIAN REGULATORY ENVIRONMENT COULD RESULT IN A NEGATIVE IMPACT ON WESTCOAST ENERGY'S BUSINESS AND OPERATIONS. The majority of our Canadian natural gas assets are subject to various degrees of federal or provincial regulation. Changes in such regulation may impact our capacity to conduct this business effectively and sustain or increase profitability. Furthermore, as the regulatory environment within which Westcoast Energy conducts its business and operates its facilities continues to evolve from a traditional cost recovery model to a more competitive, market-based approach, there is increasing competition among pipeline companies. We cannot predict the timing or scope of these changes and developments in the regulatory environment or the impact they may ultimately have on Westcoast Energy's business and operations. Aboriginal groups have claimed aboriginal and treaty rights over a substantial portion of the lands on which our facilities in British Columbia and Alberta and the gas supply areas served by those facilities are located. The existence of these claims, which range from the assertion of rights of limited use up to aboriginal title, has given rise to some uncertainty regarding access to public lands for future development purposes. RISKS RELATED TO OUR BUSINESS GENERALLY AND OUR INDUSTRY FINANCING AND LIQUIDITY RISKS OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO SUCCESSFULLY ACCESS CAPITAL MARKETS. OUR INABILITY TO ACCESS CAPITAL MAY LIMIT OUR ABILITY TO EXECUTE OUR BUSINESS PLAN OR PURSUE IMPROVEMENTS. We rely on access to both short-term money markets and longer-term capital markets as a source of liquidity for capital requirements not satisfied by the cash flow from our operations. If we are not able to access capital at competitive rates, our ability to implement our strategy will be adversely affected. Certain market disruptions or a downgrade of our credit rating may increase our cost of borrowing or adversely affect our ability to access one or more financial markets. Such disruptions could include: - further economic downturns; - the bankruptcy of an unrelated energy company; - capital market conditions generally; - market prices for electricity and gas; - terrorist attacks or threatened attacks on our facilities or unrelated energy companies; or - the overall health of the utility industry. 16 Restrictions on our ability to access financial markets may affect our ability to execute our business plan as scheduled. An inability to access capital may limit our ability to pursue improvements or acquisitions that we may otherwise rely on for future growth. INCREASES IN OUR LEVERAGE COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION, BUSINESS PLANNING AND FLEXIBILITY, FINANCIAL CONDITION, ABILITY TO SERVICE OUR DEBT OBLIGATIONS AND TO PAY DIVIDENDS ON OUR COMMON STOCK, AND ABILITY TO ACCESS CAPITAL ON FAVORABLE TERMS. Our cash requirements arise primarily from the capital intensive nature of our electric utilities, as well as the expansion of our diversified businesses. In addition to operating cash flows, we rely heavily on our commercial paper and long-term debt. Our credit lines impose various limitations that could impact our liquidity and result in a material adverse impact on our business strategy and our ongoing financing needs. Changes in economic conditions could result in higher interest rates, which would increase our interest expense on our floating rate debt and reduce funds available to us for our current plans. Additionally, an increase in our leverage could adversely affect us by: - increasing the cost of future debt financing; - prohibiting the payment of dividends on our common stock or adversely impacting our ability to pay such dividends at the current rate; - making it more difficult for us to satisfy our existing financial obligations; - limiting our ability to obtain additional financing, if we need it, for working capital, acquisitions, debt service requirements or other purposes; - increasing our vulnerability to adverse economic and industry conditions; - requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce funds available to us for operations, future business opportunities or other purposes; and - limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete. A DOWNGRADE IN OUR CREDIT RATING COULD NEGATIVELY AFFECT OUR ABILITY TO ACCESS CAPITAL AND/OR TO OPERATE OUR POWER AND GAS TRADING BUSINESSES. Standard & Poor's, Moody's and Fitch rate our senior, unsecured debt at A-, A3 and A-, respectively. Our Standard & Poor's and Fitch ratings are both on negative outlook and our Moody's rating is on review for potential downgrade. If Standard & Poor's, Moody's or Fitch were to downgrade our long-term rating, particularly below investment grade, our borrowing costs would increase which would diminish our financial results. In addition, we would likely be required to pay a higher interest rate in future financings, and our potential pool of investors and funding sources would likely decrease. Further, if our short-term rating were to fall, it may significantly limit our access to the commercial paper market. In addition, many of our subsidiaries access debt and other capital from various sources and carry their own credit ratings. Any downgrade or other event negatively affecting the credit ratings of these subsidiaries could make their costs of borrowing higher or access to funding sources more limited, which in turn could increase the need of Duke Energy to provide liquidity in the form of capital contributions or loans to such subsidiaries, thus reducing the liquidity and borrowing availability of the consolidated group. Our ratings may be dependent on, among other things, our earnings outlook for future periods and the success of our business plan. If, as a result of market conditions or other factors affecting our business, we are unable to achieve our earnings outlook or we lower our earnings outlook, our ratings could be adversely affected. The failure to meet the goals set forth in our business plan from time to time, such as our inability to successfully execute a significant portion of planned asset divestitures, could cause our ratings to be lowered. 17 Our power and gas trading businesses rely on our investment grade ratings. Most of our counterparties require the creditworthiness of an investment grade entity to stand behind transactions. If our ratings were to decline below investment grade, our ability to profitably operate our power and gas trading businesses would be diminished because we would likely have to deposit additional collateral of cash or cash related instruments which would reduce our liquidity and profitability. POOR INVESTMENT PERFORMANCE OF PENSION PLAN EQUITY HOLDINGS AND OTHER FACTORS IMPACTING PENSION PLAN COSTS COULD UNFAVORABLY IMPACT OUR LIQUIDITY AND RESULTS OF OPERATIONS. Our costs of providing non-contributory defined benefit pension plans are dependent upon a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation and our required or voluntary contributions made to the plans. The market value of Duke Energy's defined benefit pension plan assets has been affected by declines in the equity markets since the third quarter of 2000. As a result, at our most recent measurement date of September 30, 2002, our pension plan obligation exceeded the value of plan assets by $439 million. Without a substantial recovery in the equity markets over time to increase the value of our plan assets and depending upon the other factors impacting our costs as listed above, we could be required to fund our plans with significant amounts of cash. Such cash funding obligations could have a material impact on our liquidity by reducing our cash flows and negatively effect our results of operations. ENVIRONMENTAL REGULATION AND LIABILITY OUR BUSINESS WILL BE SUBJECT TO ENVIRONMENTAL LEGISLATION IN ALL JURISDICTIONS IN WHICH IT OPERATES AND ANY CHANGES IN SUCH LEGISLATION COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS. Our operations are subject to extensive environmental regulation pursuant to a variety of U.S., Canadian, and other federal, provincial, state and municipal laws and regulations. Such environmental legislation imposes, among other things, restrictions, liabilities and obligations in connection with the generation, handling, use, storage, transportation, treatment and disposal of hazardous substances and waste and in connection with spills, releases and emissions of various substances into the environment. Environmental legislation also requires that our facilities, sites and other properties associated with our operations be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Existing environmental regulations could also be revised or reinterpreted, new laws and regulations could be adopted or become applicable to us or our facilities, and future changes in environmental laws and regulations could occur. The federal government and several states recently have proposed increased environmental regulation of many industrial activities, including increased regulation of air quality, water quality and solid waste management. In addition, certain countries in which we operate, including Canada, may move forward on the process of adopting the greenhouse gas emissions principles of the Kyoto Accords. With the trend toward stricter standards, greater regulation, more extensive permit requirements and an increase in the number and types of assets operated by us subject to environmental regulation, we expect our environmental expenditures to be substantial in the future. Compliance with environmental legislation can require significant expenditures, including expenditures for clean up costs and damages arising out of contaminated properties, and failure to comply with environmental legislation may result in the imposition of fines and penalties. The steps we take to bring our facilities into compliance could be prohibitively expensive, and we may be required to shut down or alter the operation of our facilities, which may cause us to incur losses. Further, our regulatory rate structure and our contracts with clients may not necessarily allow us to recover capital costs we incur to comply with new environmental regulations such as the rate freeze being imposed by the NCUC. Also, we may not be able to obtain or maintain from time to time all required environmental regulatory approvals for certain development projects. If there is a delay in obtaining any required environmental regulatory approvals or if we fail to obtain and comply with them, the operation of our facilities could be prevented or become subject to additional costs. Should we fail to comply with all applicable environmental laws, we 18 may be subject to penalties and fines imposed against us by regulatory authorities. Although it is not expected that the costs of complying with current environmental legislation will have a material adverse effect on our financial condition or results of operations, no assurance can be made that the costs of complying with environmental legislation in the future will not have such an effect. WE COULD INCUR MATERIAL LOSSES IF WE ARE HELD LIABLE FOR THE ENVIRONMENTAL CONDITION OF ANY OF OUR ASSETS. We are generally responsible for all on-site liabilities associated with the environmental condition of our power generation facilities and natural gas assets which we have acquired or developed, regardless of when the liabilities arose and whether they are known or unknown. In addition, in connection with certain acquisitions and sales of assets, we may obtain, or be required to provide, indemnification against certain environmental liabilities. If we incur a material liability, or the other party to a transaction fails to meet its indemnification obligations to us, we could suffer material losses. ACCOUNTING POLICY RISKS POTENTIAL CHANGES IN ACCOUNTING PRACTICES FOR THE ENERGY INDUSTRY MAY CAUSE US TO REVISE OUR FINANCIAL DISCLOSURE IN THE FUTURE, WHICH MAY CHANGE THE WAY ANALYSTS MEASURE OUR BUSINESS OR FINANCIAL PERFORMANCE. Recently discovered accounting irregularities in various industries have forced regulators and legislators to take a renewed look at accounting practices, financial disclosures, companies' relationships with their independent auditors and retirement plan practices. It is still unclear how some proposed laws and regulations will develop and what new laws and regulations will be promulgated. As a result, we cannot predict the ultimate impact of any future changes in accounting regulations or practices in general with respect to public companies or the energy industry or in our operations specifically. In addition, new accounting standards could be enacted by the Financial Accounting Standards Board, or FASB, the Emerging Issues Task Force, or EITF, or the SEC which could impact the way we are required to record revenues, assets and liabilities. These and other future changes in accounting standards could lead to negative impacts on reported earnings or increases in liabilities which in turn could affect our reported results of operations. OPERATIONAL RISKS OUR INVESTMENTS AND PROJECTS LOCATED OUTSIDE OF THE UNITED STATES EXPOSE US TO RISKS RELATED TO LAWS OF OTHER COUNTRIES, TAXES, ECONOMIC CONDITIONS, FLUCTUATIONS IN CURRENCY RATES, POLITICAL CONDITIONS AND POLICIES OF FOREIGN GOVERNMENTS. THESE RISKS MAY DELAY OR REDUCE OUR REALIZATION OF VALUE FROM OUR INTERNATIONAL PROJECTS. We currently own and may acquire and/or dispose of material energy-related investments and projects outside the United States. The economic and political conditions in certain countries where we have interests or in which we may explore development, acquisition or investment opportunities present risks of delays in construction and interruption of business, as well as risks of war, expropriation, nationalization, renegotiation, trade sanctions or nullification of existing contracts and changes in law or tax policy, that are greater than in the United States. The uncertainty of the legal environment in certain foreign countries in which we develop or acquire projects or make investments could make it more difficult to obtain non-recourse project or other financing on suitable terms, could adversely affect the ability of certain customers to honor their obligations with respect to such projects or investments and could impair our ability to enforce our rights under agreements relating to such projects or investments. Operations in foreign countries also can present currency exchange rate and convertibility, inflation and repatriation risk. In certain conditions under which we develop or acquire projects, or make investments, economic and monetary conditions and other factors could affect our ability to convert our earnings denominated in foreign currencies. In addition, risk from fluctuations in currency exchange rates can arise when our foreign subsidiaries expend or borrow funds in one type of currency but receive revenue in another. In such cases, an adverse change in exchange rates can reduce our ability to meet expenses, including debt service obligations. Foreign currency risk can also arise when the revenues received by our foreign subsidiaries are not in U.S. dollars. In such cases, a strengthening of the U.S. dollar could reduce 19 the amount of cash and income we receive from these foreign subsidiaries. While we believe we have hedges and contracts in place to mitigate our most significant short-term foreign currency exchange risks, our hedges may not be sufficient or we may have some exposures that are not hedged which could result in losses or volatility in our revenues. THE LONG-TERM FINANCIAL CONDITION OF OUR U.S. AND CANADIAN NATURAL GAS TRANSMISSION BUSINESSES ARE DEPENDENT ON THE CONTINUED AVAILABILITY OF NATURAL GAS RESERVES. The development of additional natural gas reserves requires significant capital expenditures by others for exploration and development drilling and the installation of production, gathering, storage, transportation and other facilities and permit natural gas to be produced and delivered to our pipeline systems. Low prices for natural gas, regulatory limitations, or the lack of available capital for these projects could adversely affect the development of additional reserves and production, gathering, storage and pipeline transmission and import and export of natural gas supplies. Additional natural gas reserves may not be developed in commercial quantities and in sufficient amounts to fill the capacities of our pipeline systems. GATHERING, PROCESSING AND TRANSPORTING ACTIVITIES INVOLVE NUMEROUS RISKS THAT MAY RESULT IN ACCIDENTS AND OTHER OPERATING RISKS AND COSTS. There are inherent in our gas gathering, processing and transporting properties a variety of hazards and operating risks, such as leaks, explosions and mechanical problems, that could cause substantial financial losses. In addition, these risks could result in loss of human life, significant damage to property, environmental pollution, impairment of our operations and substantial losses to us. In accordance with customary industry practice, we maintain insurance against some, but not all, of these risks and losses. The occurrence of any of these events not fully covered by insurance could have a material adverse effect on our financial position and results of operations. The location of pipelines near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks. WE ARE SUBJECT TO THE RISKS OF NUCLEAR GENERATION. Our three nuclear stations, Oconee, Catawba and McGuire, subject us to the risks of nuclear generation, which include: - the potential harmful effects on the environment and human health resulting from the operation of nuclear facilities and the storage, handling and disposal of radioactive materials; - limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and - uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives. The Nuclear Regulatory Commission has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of non-compliance, the Nuclear Regulatory Commission has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements promulgated by the Nuclear Regulatory Commission could necessitate substantial capital expenditures at our nuclear plants. In addition, although we have no reason to anticipate a serious nuclear incident, if an incident did occur, it could have a material adverse effect on our results of operations or financial condition. Furthermore, the non-compliance of other nuclear facilities operators with applicable regulations or the occurrence of a serious nuclear incident at other facilities could result in increased regulation of the industry as a whole, which could then increase our compliance costs and impact the results of operations of our facilities. 20 POTENTIAL TERRORIST ACTIVITIES OR MILITARY OR OTHER ACTIONS, INCLUDING THE SITUATION IN IRAQ, COULD ADVERSELY AFFECT OUR BUSINESS. The current situation in Iraq, the continued threat of terrorism and the impact of retaliatory military and other action by the United States and its allies may lead to increased political, economic and financial market instability and volatility in prices for natural gas which could affect the market for our gas operations and may materially adversely affect us in ways we cannot predict at this time. In addition, future acts of terrorism and any possible reprisals as a consequence of action by the United States and its allies could be directed against companies operating in the United States. In particular, nuclear generation facilities such as our nuclear plants could be potential targets of terrorist activities. The potential for terrorism has subjected our operations to increased risks and could have a material adverse effect on our business. In particular, we may experience increased capital or operating costs to implement increased security for our plants, including our nuclear power plants under the Nuclear Regulatory Commission's design basis threat requirements, such as additional physical plant security and additional security personnel. The insurance industry has also been disrupted by these events. As a result, the availability of insurance covering risks we and our competitors typically insure against may decrease. In addition, the insurance we are able to obtain may have higher deductibles, higher premiums and more restrictive policy terms. 21 RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
YEAR ENDED DECEMBER 31, -------------------------------- THREE MONTHS ENDED 1998 1999 2000 2001 2002 MARCH 31, 2003 ---- ---- ---- ---- ---- ------------------ Ratio of Earnings to Fixed Charges........................... 4.5 2.7 3.6 3.8 2.1 2.6
For purposes of this ratio (a) earnings consist of income from continuing operations before income taxes and fixed charges and (b) fixed charges consist of all interest deductions, the interest component of rentals and preference security dividends of consolidated subsidiaries. USE OF PROCEEDS The exchange offer is intended to satisfy our obligations under the Registration Rights Agreement that we entered into in connection with the private offering of the outstanding bonds. We will not receive any cash proceeds from the issuance of the exchange bonds in the exchange offer. In consideration for issuing the exchange bonds as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding bonds, the terms of which are identical in all material respects to the exchange bonds. The outstanding bonds surrendered in exchange for the exchange bonds will be retired and canceled and cannot be reissued. Accordingly, issuance of the exchange bonds will not result in any change in our capitalization. We received net proceeds of approximately $496.4 million from the offering and sale of the outstanding bonds, after deducting discounts, commissions and other expenses of the offering of the outstanding bonds payable by us. The net proceeds from the offering of the outstanding bonds were used (i) to pay upon maturity $100 million of a series of 6.625% First and Refunding Mortgage Bonds due in February 2003, (ii) to repay approximately $200 million of an intercompany loan bearing a weighted average interest rate of 1.49% and a maturity of less than one year and (iii) for general corporate purposes. The intercompany loan was incurred by Duke Energy for general corporate purposes. 22 SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION The following selected historical consolidated financial information (1) for the years ended December 31, 2002, 2001, 2000, 1999 and 1998 have been derived from our audited consolidated financial statements and (2) for the three month periods ended March 31, 2003 and March 31, 2002 have been derived from our unaudited condensed consolidated financial statements. You should read the following table in conjunction with our "Management's Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and the related notes that are incorporated by reference in this prospectus.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ----------------- ----------------------------------------------- 2003 2002 2002 2001 2000 1999(A) 1998 ------- ------- ------- ------- ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT Operating revenues(b)............ $ 6,324 $ 3,308 $15,663 $18,197 $15,342 $10,135 $ 8,636 Operating expenses(b)............ 5,431 2,640 13,212 14,494 12,253 8,560 6,278 Gains on sale of other assets, net............................ -- -- 49 238 214 132 48 ------- ------- ------- ------- ------- ------- ------- Operating income................. 893 668 2,500 3,941 3,303 1,707 2,406 Other income and expenses, net... 81 102 369 315 711 336 241 Interest expense................. 340 198 1,110 785 911 601 514 Minority interest expense........ 52 32 107 327 307 142 96 ------- ------- ------- ------- ------- ------- ------- Earnings before income taxes..... 582 540 1,652 3,144 2,796 1,300 2,037 Income taxes..................... 195 158 618 1,150 1,020 453 777 ------- ------- ------- ------- ------- ------- ------- Income before extraordinary item and cumulative effect of change in accounting principles....... 387 382 1,034 1,994 1,776 847 1,260 Extraordinary gain (loss), net of tax............................ -- -- -- -- -- 660 (8) Cumulative effect of change in accounting principles, net of tax and minority interest...... (162) -- -- (96) -- -- -- ------- ------- ------- ------- ------- ------- ------- Net income....................... 225 382 1,034 1,898 1,776 1,507 1,252 Preferred and preference stock dividends...................... 3 3 13 14 19 20 21 ------- ------- ------- ------- ------- ------- ------- Earnings available for common stockholders................... $ 222 $ 379 $ 1,021 $ 1,884 $ 1,757 $ 1,487 $ 1,231 ------- ------- ------- ------- ------- ------- ------- COMMON STOCK DATA(C) Shares of common stock outstanding Period-end....................... 900 829 895 777 739 733 726 Weighted average................. 897 788 836 767 736 729 722 Earnings per share (before extraordinary item and cumulative effect of change in accounting principle) Basic............................ $ 0.43 $ 0.48 $ 1.22 $ 2.58 $ 2.39 $ 1.13 $ 1.72 Diluted.......................... 0.43 0.48 1.22 2.56 2.38 1.13 1.71 Earnings per share Basic............................ $ 0.25 $ 0.48 $ 1.22 $ 2.45 $ 2.39 $ 2.04 $ 1.70 Diluted.......................... 0.25 0.48 1.22 2.44 2.38 2.03 1.70 Dividends per share.............. 0.275 0.275 1.10 1.10 1.10 1.10 1.10 ------- ------- ------- ------- ------- ------- ------- BALANCE SHEET Total assets..................... $63,245 $62,546 $60,966 $48,531 $58,232 $33,409 $26,806 Long-term debt, less current maturities..................... 20,480 18,323 20,221 12,321 10,717 8,683 6,272
23 - --------------- (a) Financial information reflects a pre-tax $800 million charge for estimated injuries and damages claims. The earnings-per-share effect of this charge was $0.67 per share. (b) Operating revenues and expenses for 1998 through 2002 have been updated to the extent required to show the impact of the gross versus net presentation of revenues under the partial consensus reached in June 2002 on Emerging Issues Task Force Issue (EITF) No. 02-03, "Issues Involved in Accounting for Derivative Contracts Held for Trading and Risk Management Activities." In the calculation of net revenues, Duke Energy has continued to enhance its methodologies around the application of this complex accounting literature since the third quarter of 2002 when these trading revenues were first reported on a net basis. Effective January 1, 2003, in connection with the implementation of the remaining provisions of EITF Issue No. 02-03, gains and losses for certain derivative and non-derivative contracts that were previously reported on a net basis are now reported on a gross basis. Adopting the final consensus on EITF Issue No. 02-03 did not require a change to prior periods. (c) Amounts prior to 2001 were restated to reflect the two-for-one common stock split effective January 26, 2001. 24 THE EXCHANGE OFFER GENERAL Duke Energy hereby offers, upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal (which together constitute the exchange offer), to exchange up to $500 million aggregate principal amount of our First and Refunding Mortgage Bonds, 3.75% Series A due 2008, which we refer to in this prospectus as the outstanding bonds, for a like aggregate principal amount of our First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which we refer to in this prospectus as the exchange bonds, properly tendered prior to the expiration date and not withdrawn as permitted pursuant to the procedures described below. The exchange offer is being made with respect to all of the outstanding bonds. As of the date of this prospectus, $500 million aggregate principal amount of the outstanding bonds is outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about , 2003, to all holders of outstanding bonds known to Duke Energy. Duke Energy's obligation to accept outstanding bonds for exchange pursuant to the exchange offer is subject to certain conditions set forth under "-- Certain Conditions to the Exchange Offer" below. Duke Energy currently expects that each of the conditions will be satisfied and that no waivers will be necessary. PURPOSE AND EFFECT OF THE EXCHANGE OFFER We have entered into a Registration Rights Agreement with the initial purchasers of the outstanding bonds in which we agreed, under some circumstances, to file a registration statement relating to an offer to exchange the outstanding bonds for exchange bonds. We also agreed to use our reasonable best efforts to cause the exchange offer registration statement to become effective under the Securities Act within 210 days after the closing date and keep the exchange offer registration statement effective for not less than 20 business days after the date notice of the registered exchange offer is mailed to the holders (or longer if required by applicable law). The exchange bonds will have terms substantially identical to the outstanding bonds, except that the exchange bonds will not contain terms with respect to transfer restrictions, registration rights and additional interest for failure to observe certain obligations in the Registration Rights Agreement. The outstanding bonds were issued on February 25, 2003. Under the circumstances set forth in the Registration Rights Agreement, we will use our reasonable best efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the outstanding bonds and keep the statement effective for up to the earliest of (i) two years from the date the outstanding bonds were originally issued by us, (ii) the date on which the outstanding bonds become eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or (iii) for such shorter period that will terminate when all outstanding bonds covered by the shelf registration statement have been sold pursuant to the shelf registration statement or cease to be outstanding or otherwise to be outstanding bonds. If we fail to comply with certain obligations under the Registration Rights Agreement, we will be required to pay additional interest to holders of the outstanding bonds. Each holder of outstanding bonds that wishes to exchange outstanding bonds for transferable exchange bonds in the exchange offer will be required to make the following representations: - any exchange bonds will be acquired in the ordinary course of its business; - the holder will have no arrangements or understanding with any person to participate in the distribution of the outstanding bonds or the exchange bonds within the meaning of the Securities Act; - the holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of ours or if it is an affiliate, that it will comply with applicable registration and prospectus delivery requirements of the Securities Act to the extent applicable; 25 - if the holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the exchange bonds; and - if the holder is a broker-dealer, that it will receive exchange bonds for its own account in exchange for outstanding bonds that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange bonds. See "Plan of Distribution." RESALE OF EXCHANGE BONDS Based on interpretations of the SEC staff set forth in no-action letters issued to unrelated third parties, we believe that exchange bonds issued under the exchange offer in exchange for outstanding bonds may be offered for resale, resold and otherwise transferred by any exchange bond holder without compliance with the registration and prospectus delivery provisions of the Securities Act, if: - the holder is not an "affiliate" of ours within the meaning of Rule 405 under the Securities Act; - the exchange bonds are acquired in the ordinary course of the holder's business; and - the holder does not intend to participate in the distribution of the exchange bonds. Any holder who tenders in the exchange offer with the intention of participating in any manner in a distribution of the exchange bonds: - cannot rely on the position of the staff of the SEC enunciated in Exxon Capital Holdings Corporation or similar interpretive letters; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. This prospectus may be used for an offer to resell, for the resale or for other retransfer of exchange bonds only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the outstanding bonds as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange bonds for its own account in exchange for outstanding bonds, where the outstanding bonds were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange bonds. Please read the section captioned "Plan of Distribution" for more details regarding the transfer of exchange bonds. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange any outstanding bonds properly tendered and not withdrawn prior to the expiration date. We will issue $1,000 principal amount of exchange bonds in exchange for each $1,000 principal amount of outstanding bonds surrendered under the exchange offer. Outstanding bonds may be tendered only in integral multiples of $1,000. The form and terms of the exchange bonds will be substantially identical to the form and terms of the outstanding bonds except the exchange bonds will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any additional amounts upon our failure to fulfill our obligations under the Registration Rights Agreement to file, and cause to be effective, a registration statement. The exchange bonds will evidence the same debt as the outstanding bonds. The exchange bonds will be issued under and entitled to the benefits of the same Mortgage that authorized the issuance of the outstanding bonds. The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding bonds being tendered for exchange. 26 As of the date of this prospectus, $500 million aggregate principal amount of the outstanding bonds are outstanding. This prospectus and a letter of transmittal are being sent to all registered holders of outstanding bonds. There will be no fixed record date for determining registered holders of outstanding bonds entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the exchange offer and Registration Rights Agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934 and the rules and regulations of the SEC. Outstanding bonds that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits the holders have under the Mortgage relating to the outstanding bonds, except for any rights under the Mortgage or the Registration Rights Agreement that by their terms terminate upon the consummation of the exchange offer. We will be deemed to have accepted for exchange properly tendered outstanding bonds when we have given oral (promptly confirmed in writing) or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange bonds from us and delivering exchange bonds to the holders. Under the terms of the exchange offer and Registration Rights Agreement, we reserve the right to amend or terminate the exchange offer, and not to accept for exchange any outstanding bonds not previously accepted for exchange, upon the occurrence of any of the conditions specified below under the caption "-- Certain Conditions to the Exchange Offer." Holders who tender outstanding bonds in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding bonds. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled "-- Fees and Expenses" below for more details regarding fees and expenses incurred in the exchange offer. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time on , 2003, unless in our sole discretion we extend it. In order to extend the exchange offer, we will notify the exchange agent orally (promptly confirmed in writing) or in writing of any extension. We will notify the registered holders of outstanding bonds of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: - to delay accepting for exchange any outstanding bonds; - to extend the exchange offer or to terminate the exchange offer and to refuse to accept outstanding bonds not previously accepted if any of the conditions set forth below under "-- Certain Conditions to the Exchange Offer" have not been satisfied, by giving oral (promptly confirmed in writing) or written notice of the delay, extension or termination to the exchange agent; or - under the terms of the exchange offer and Registration Rights Agreement, to amend the terms of the exchange offer in any manner. Any delay in acceptance, extension, termination, or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of outstanding bonds. If we amend the exchange offer in a manner that we determine constitutes a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holder of outstanding bonds of the amendment. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we will have no obligation to 27 publish, advertise, or otherwise communicate any public announcement, other than by making a timely release to a financial news service. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Despite any other term of the exchange offer, we will not be required to accept for exchange, or exchange any exchange bonds for, any outstanding bonds, and we may terminate the exchange offer as provided in this prospectus before accepting any outstanding bonds for exchange if in our reasonable judgment: - the exchange bonds to be received will not be tradable by the holder, without restriction under the Securities Act, the Securities Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; - the exchange offer, or the making of any exchange by a holder of outstanding bonds, would violate applicable law or any applicable interpretation of the staff of the SEC; or - any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. In addition, we will not be obligated to accept for exchange the outstanding bonds of any holder that has not made to us: - the representations described under "-- Purpose and Effect of the Exchange Offer," "-- Procedures for Tendering" and "Plan of Distribution;" and - such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to it an appropriate form for registration of the exchange bonds under the Securities Act. We expressly reserve the right, at any time or at various times, to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any outstanding bonds by giving oral or written notice of the extension to their holders. During any such extensions, all bonds previously tendered will remain subject to the exchange offer, and we may accept them for exchange. We will return any outstanding bonds that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any outstanding bonds not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice of any extension, amendment, nonacceptance, or termination to the holders of the outstanding bonds as promptly as practicable. These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of this right. Each right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any outstanding bonds tendered, and will not issue exchange bonds in exchange for any outstanding bonds, if at the time any stop order will be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the Eighty-First Supplemental Indenture under the Trust Indenture Act. 28 PROCEDURES FOR TENDERING Only a holder of outstanding bonds may tender the outstanding bonds in the exchange offer. To tender in the exchange offer, a holder must: - complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date; or - comply with DTC's Automated Tender Offer Program procedures described below. In addition, either: - the exchange agent must receive the outstanding bonds along with the accompanying letter of transmittal; - the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of the outstanding bonds into the exchange agent's account at DTC according to the procedures for book-entry transfer described below and a properly transmitted agent's message; or - the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the exchange agent must receive any physical delivery of a letter of transmittal and other required documents at the address set forth below under "-- Exchange Agent" prior to the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. The method of delivery of outstanding bonds, the letter of transmittal and all other required documents to the exchange agent is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent before the expiration date. Holders should not send the letter of transmittal or outstanding bonds to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for them. Any beneficial owner whose outstanding bonds are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owner's behalf. If the beneficial owner wishes to tender on its own behalf, it must, prior to completing and executing the accompanying letter of transmittal and delivering its outstanding bonds either: - make appropriate arrangements to register ownership of the outstanding bonds in such owner's name; or - obtain a properly completed bond power from the registered holder of outstanding bonds. The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. Signatures on a letter of transmittal or a notice of withdrawal described below must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States 29 or another "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act, unless the outstanding bonds are tendered: - by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the accompanying letter of transmittal; or - for the account of an eligible guarantor institution. If the accompanying letter of transmittal is signed by a person other than the registered holder of any outstanding bonds listed on the outstanding bonds, the outstanding bonds must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the outstanding bonds and an eligible guarantor institution must guarantee the signature on the bond power. If the accompanying letter of transmittal or any outstanding bonds or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the accompanying letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the accompanying letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the outstanding bonds to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that: - DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding bonds that are the subject of the book-entry confirmation; - the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or, in the case of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and - the agreement may be enforced against that participant. We will determine in our sole discretion all outstanding questions as to the validity, form, eligibility, including time of receipt, acceptance of tendered outstanding bonds and withdrawal of tendered outstanding bonds. Our determination will be final and binding. We reserve the absolute right to reject any outstanding bonds not properly tendered or any outstanding bonds the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding bonds. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the accompanying letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding bonds must be cured within such time as we will determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding bonds, neither we, the exchange agent nor any other person will incur any liability for failure to give the notification. Tenders of outstanding bonds will not be deemed made until any defects or irregularities have been cured or waived. Any outstanding bonds received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. 30 In all cases, we will issue exchange bonds for outstanding bonds that we have accepted for exchange under the exchange offer only after the exchange agent timely receives: - outstanding bonds or a timely book-entry confirmation of the outstanding bonds into the exchange agent's account at DTC; and - a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message. By signing the accompanying letter of transmittal or authorizing the transmission of the agent's message, each tendering holder of outstanding bonds will represent or be deemed to have represented to us that, among other things: - any exchange bonds that the holder receives will be acquired in the ordinary course of its business; - the holder has no arrangement or understanding with any person or entity to participate in the distribution of the exchange bonds; - if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the exchange bonds; - if the holder is a broker-dealer that will receive exchange bonds for its own account in exchange for outstanding bonds that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus, as required by law, in connection with any resale of any exchange bonds. See "Plan of Distribution;" and - the holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of ours or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the outstanding bonds at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participating in DTC's system may make book-entry delivery of outstanding bonds by causing DTC to transfer the outstanding bonds into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Holders of outstanding bonds who are unable to deliver confirmation of the book-entry tender of their outstanding bonds into the exchange agent's account at DTC or all other documents required by the letter of transmittal to the exchange agent prior to the expiration date must tender their outstanding bonds according to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders wishing to tender their outstanding bonds but whose outstanding bonds are not immediately available or who cannot deliver their outstanding bonds, the accompanying letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date may tender if: - the tender is made through an eligible guarantor institution; - prior to the expiration date, the exchange agent receives from the eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery, or a properly transmitted agent's message relating to guaranteed delivery: 1. setting forth the name and address of the holder, the registered number(s) of the outstanding bonds and the principal amount of outstanding bonds tendered; 2. stating that the tender is being made thereby; and 31 3. guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the accompanying letter of transmittal, or facsimile thereof, together with the outstanding bonds or a book-entry confirmation, and any other documents required by the accompanying letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent; and - the exchange agent receives the properly completed and executed letter of transmittal, or facsimile thereof, as well as all tendered outstanding bonds in proper form for transfer or a book-entry confirmation, and all other documents required by the accompanying letter of transmittal, within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their outstanding bonds according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, holders of outstanding bonds may withdraw their tenders at any time prior to the expiration date. For a withdrawal to be effective: - the exchange agent must receive a written notice of withdrawal, which notice may be by telegram, telex, facsimile transmission or letter of withdrawal at the address set forth below under "-- Exchange Agent," or - holders must comply with the appropriate procedures of DTC's Automated Tender Offer Program system. Any notice of withdrawal must: - specify the name of the person who tendered the outstanding bonds to be withdrawn; - identify the outstanding bonds to be withdrawn, including the principal amount of the outstanding bonds; and - where certificates for outstanding bonds have been transmitted, specify the name in which the outstanding bonds were registered, if different from that of the withdrawing holder. If certificates for outstanding bonds have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates, the withdrawing holder must also submit: - the serial numbers of the particular certificates to be withdrawn; and - a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution unless the holder is an eligible guarantor institution. If outstanding bonds have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn outstanding bonds and otherwise comply with the procedures of that facility. We will determine all questions as to the validity, form and eligibility, including time of receipt, of the notices, and our determination will be final and binding on all parties. We will deem any outstanding bonds so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding bonds that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder, or, in the case of outstanding bonds tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, the outstanding bonds will be credited to an account maintained with DTC for outstanding bonds, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn, outstanding bonds may be retendered by following one of the procedures described under "-- Procedures for Tendering" above at any time prior to the expiration date. 32 EXCHANGE AGENT JPMorgan Chase Bank has been appointed as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or for the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent as follows: By Regular Mail: By Registered, Certified Mail, By Facsimile Transmission Overnight Courier or Hand: (for Eligible Guarantor JPMorgan Chase Bank Institutions only): ITS Bond Events JPMorgan Chase Bank P.O. Box 2320 ITS Bond Events (214) 468-6494 Dallas, TX 75221 2001 Bryan Street, 9th Floor Attention: Frank Ivins Dallas, TX 75201 Attention: Frank Ivins To Confirm by Telephone: (214) 468-6464
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitations by telephone or in person by our officers and regular employees and those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptance of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. We will pay the cash expenses to be incurred in connection with the exchange offer. The expenses are estimated in the aggregate to be approximately $200,000. They include: - SEC registration fees; - fees and expenses of the exchange agent and Trustee; - accounting and legal fees and printing costs; and - related fees and expenses. TRANSFER TAXES We will pay all transfer taxes, if any, applicable to the exchange of outstanding bonds under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if: - certificates representing outstanding bonds for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding bonds tendered; - tendered outstanding bonds are registered in the name of any person other than the person signing the letter of transmittal; or - a transfer tax is imposed for any reason other than the exchange of outstanding bonds under the exchange offer. If satisfactory evidence of payment of the taxes is not submitted with the letter of transmittal, the amount of the transfer taxes will be billed to that tendering holder. Holders who tender their outstanding bonds for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register exchange bonds in the name of, or request that 33 outstanding bonds not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of outstanding bonds who do not exchange their outstanding bonds for exchange bonds under the exchange offer will remain subject to the restrictions on transfer of the outstanding bonds: - as set forth in the legend printed on the outstanding bonds as a consequence of the issuance of the outstanding bonds under the exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and - otherwise as set forth in the offering memorandum distributed in connection with the private offering of the outstanding bonds. In general, you may not offer or sell the outstanding bonds unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the Registration Rights Agreement, we do not intend to register resales of the outstanding bonds under the Securities Act. Based on interpretations of the SEC staff, exchange bonds issued under the exchange offer may be offered for resale, resold or otherwise transferred by their holders (other than any holder that is our "affiliate" within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holders acquired the exchange bonds in the ordinary course of the holders' business and the holders have no arrangement or understanding with respect to the distribution of the exchange bonds to be acquired in the exchange offer. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the exchange bonds: - cannot rely on the applicable interpretations of the SEC; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. ACCOUNTING TREATMENT We will record the exchange bonds in our accounting records at the same carrying value as the outstanding bonds, which is the aggregate principal amount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will amortize the expenses of the exchange offer over the life of the exchange bonds. OTHER Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take. We may in the future seek to acquire untendered outstanding bonds in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any outstanding bonds that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding bonds. 34 DESCRIPTION OF THE BONDS The outstanding bonds were issued and the exchange bonds offered hereby will be issued as part of a series of First and Refunding Mortgage Bonds under our First and Refunding Mortgage, dated as of December 1, 1927, to JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee, as supplemented and amended, including by the Eighty-First Supplemental Indenture, dated as of February 25, 2003. The First and Refunding Mortgage, as supplemented and amended, is sometimes called the "Mortgage." The following description of the bonds is only a summary and is not intended to be comprehensive. For additional information you should refer to the Mortgage. The following description is only a summary of the material provisions of the Mortgage and the Registration Rights Agreement. We urge you to read the Mortgage and the Registration Rights Agreement because they, not this description, define your rights as holders of these bonds. You may request copies of these agreements at our address set forth under the heading "Where You Can Find More Information." PRINCIPAL, MATURITY AND INTEREST The exchange bonds will be limited in aggregate principal amount to $500,000,000. We may issue additional bonds from time to time after the offering of the exchange bonds. The amount of bonds that Duke Energy may issue under the Mortgage is unlimited subject to the provisions stated below under "-- Issuance of Additional Bonds." The bonds and any additional bonds subsequently issued under the Mortgage will be treated as a single class for all purposes under the Mortgage, including, without limitation, waivers, amendments, redemptions and offers to purchase. Unless the context otherwise requires, for all purposes of the Mortgage and this "Description of the Bonds," references to the bonds include any additional bonds actually issued. The bonds will mature on March 5, 2008. Interest on the bonds will accrue at the rate of 3.75% per annum and will be payable semi-annually on March 5 and September 5 of each year, commencing on September 5, 2003, to the holder of record at the close of business on the 15th day preceding the applicable interest payment date until the relevant principal amount has been paid or made available for payment. Interest on these bonds accrues from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest on the bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. OPTIONAL REDEMPTION We will have the right to redeem the bonds, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such bonds (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the bonds to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such bonds. "Comparable Treasury Price" means with respect to any redemption date for bonds, the average of three Reference Treasury Dealer Quotations for such redemption date. "Quotation Agent" means a Reference Treasury Dealer appointed by us. "Reference Treasury Dealers" means Banc One Capital Markets, Inc., Deutsche Bank Securities Inc. and UBS Warburg LLC, and their respective successors; provided, however, that if any of the foregoing 35 shall cease to be a primary U.S. Government securities dealer in the United States (a "Primary Treasury Dealer"), we will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the maturity date of the bonds to be redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date. REDEMPTION PROCEDURES We will provide not less than 30 nor more than 60 days' notice mailed to each registered holder of the bonds to be redeemed. If the redemption notice is given and funds deposited as required, then interest will cease to accrue on and after the redemption date on the bonds or portions of such bonds called for redemption. In the event that any redemption date is not a business day, we will pay the redemption price on the next business day without any interest or other payment due to the delay. SECURITY The Mortgage creates a continuing lien to secure the payment of principal and interest on the bonds. All the bonds are equally and ratably secured without preference, priority or distinction. The lien of the Mortgage covers substantially all of Duke Energy's properties, real, personal and mixed, and Duke Energy's franchises, including properties acquired after the date of the Mortgage and after the date hereof, with certain exceptions. Those exceptions include cash, accounts receivable, inventories of materials and supplies, merchandise held for sale, securities that Duke Energy holds, certain after-acquired property not useful in Duke Energy's electric business, certain after-acquired franchises and certain after-acquired non-electric properties. The lien of the Mortgage is subject to certain permitted liens and to liens that exist upon properties that Duke Energy acquired after it entered into the Mortgage to the extent of the amounts of prior lien bonds secured by those properties (not, however, exceeding 75% of the cost or value of those properties) and additions to those properties. "Prior lien bonds" are bonds or other indebtedness that are secured at the time of acquisition by a lien upon property that Duke Energy acquires after the date of the Mortgage that becomes subject to the lien of the Mortgage. 36 ISSUANCE OF ADDITIONAL BONDS If Duke Energy satisfies the conditions in the Mortgage, the Trustee may authenticate and deliver additional bonds in an aggregate principal amount not exceeding: - the amount of cash that Duke Energy has deposited with the Trustee for that purpose; - the amount of previously authenticated and delivered bonds or refundable prior lien bonds that have been or are to be retired which, with certain exceptions, Duke Energy has deposited with the Trustee for that purpose; or - 66 2/3% of the aggregate of the net amounts of additional property (electric) certified to the Trustee after February 18, 1949. The Trustee may not authenticate and deliver any additional bonds under the Mortgage, other than certain types of refunding bonds, unless Duke Energy's available net earnings for twelve consecutive calendar months within the immediately preceding fifteen calendar months have been at least twice the amount of the annual interest charges on all bonds outstanding under the Mortgage, including the bonds proposed to be issued, and on all outstanding prior lien bonds that the Trustee does not hold under the Mortgage. We may not apply to the Trustee to authenticate and deliver any bonds (1) in an aggregate principal amount exceeding $26 million on the basis of additional property (electric) that Duke Energy acquired or constructed prior to January 1, 1949 or (2) on the basis of bonds or prior lien bonds paid, purchased or redeemed prior to February 1, 1949. We may not certify any additional property (electric) which is subject to the lien of any prior lien bonds for the purpose of establishing those prior lien bonds as refundable if the aggregate principal amount of those prior lien bonds exceeds 66 2/3% of the net amount of the additional property that is subject to the lien of such prior lien bonds. RELEASE PROVISIONS The Mortgage permits Duke Energy to dispose of certain property and to take other actions without the Trustee releasing that property. The Mortgage also permits the release of mortgaged property if we deposit cash or other consideration equal to the value of the mortgaged property to be released. In certain events and within certain limitations, the Trustee is required to pay out cash that the Trustee receives -- other than for the Replacement Fund or as the basis for issuing bonds -- upon Duke Energy's application. We may withdraw cash that we deposited with the Trustee as the basis for issuing bonds in an amount equal to the principal amount of any bonds that we are entitled to have authenticated and delivered on the basis of additional property (electric), on the basis of bonds previously authenticated and delivered or on the basis of refundable prior lien bonds. REPLACEMENT FUND The Mortgage requires Duke Energy to deposit with the Trustee annually, for the Replacement Fund established under the Mortgage, the sum of the "replacement requirements" for all years beginning with 1949 and ending with the last calendar year preceding the deposit date, less certain deductions. Those deductions are (1) the aggregate original cost of all fixed property (electric) retired during that time period, not exceeding the aggregate of the gross amounts of additional property (electric) that Duke Energy acquired or constructed during the same period, and (2) the aggregate amount of cash that Duke Energy deposited with the Trustee up to that time, or that Duke Energy would have been required to deposit except for permitted reductions, under the Replacement Fund. The "replacement requirement" for any year is 2 1/2% of the average "amount of depreciable fixed property" (electric) owned by Duke Energy at the beginning and end of that year, not exceeding, however, the amount Duke Energy is permitted to charge as an operating expense for depreciation or retirement by any governmental authority, or the amount deductible as depreciation or similar expense for federal income tax purposes. The "amount of depreciable fixed property" (electric) is the amount by which the sum of 37 $192,913,385 plus the aggregate gross amount of all depreciable additional property (electric) that Duke Energy acquired or constructed from January 1, 1949 to the date as of which such amount is determined exceeds the original cost of all of Duke Energy's depreciable fixed property (electric) retired during that period or released from the lien of the Mortgage. We may reduce the amount of cash at any time required to be deposited in the Replacement Fund and may withdraw any cash that we previously deposited that is held in the Replacement Fund: - in an amount equal to 150% of the principal amount of bonds previously authenticated and delivered under the Mortgage, or refundable prior lien bonds, deposited with the Trustee and on the basis of which Duke Energy would otherwise have been entitled to have additional bonds authenticated and delivered; and - in an amount equal to 150% of the principal amount of bonds which Duke Energy would otherwise be entitled to have authenticated and delivered on the basis of additional property (electric). Upon Duke Energy's application, the Trustee will apply cash that Duke Energy deposited in the Replacement Fund and has not previously withdrawn to the payment, purchase or redemption of bonds issued under the Mortgage or to the purchase of refundable prior lien bonds. Duke Energy has never deposited any cash with the Trustee for the Replacement Fund. If Duke Energy deposits any cash in the future, it has agreed not to apply that cash to the redemption of the bonds as long as any bonds presently outstanding remain outstanding. AMENDMENTS OF THE MORTGAGE We may amend the Mortgage with the consent of the holders of 66 2/3% in principal amount of the bonds, except that no such amendment may: - affect the terms of payment of principal at maturity or of interest or premium on any bond; - affect the rights of bondholders to sue to enforce any such payment at maturity; or - reduce the percentage of bonds required to consent to an amendment. No amendment may affect the rights under the Mortgage of the holders of less than all of the series of bonds outstanding unless the holders of 66 2/3% in principal amount of the bonds of each series affected consent to the amendment. The covenants included in the Eighty-First Supplemental Indenture for the bonds will be solely for the benefit of the holders of the bonds and the exchange bonds referred to herein. We may modify any such covenant only with the consent of the holders of 66 2/3% in principal amount of the bonds and any exchange bonds outstanding, without the consent of holders of any other series of bonds. EVENTS OF DEFAULT The Trustee may, and at the written request of the holders of a majority in principal amount of the outstanding bonds will, declare the principal of all outstanding bonds due when any event of default under the Mortgage occurs. The holders of a majority in principal amount of the outstanding bonds may, however, waive the default and rescind the declaration if Duke Energy cures the default. Events of default under the Mortgage include: - default in the payment of principal; - default for 60 days in the payment of interest; 38 - default in the performance of any other covenant in the Mortgage continuing for 60 days after the Trustee or the holders of not less than 10% in principal amount of the bonds then outstanding give notice of the default; and - certain bankruptcy or insolvency events with respect to Duke Energy. We provide a statement by certain of our officers each year to the Trustee stating whether we have complied with the covenants of the Mortgage. CONCERNING THE TRUSTEE JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the Trustee and is also the senior indenture trustee and the subordinated indenture trustee for Duke Energy under its unsecured senior indenture and subordinated indenture, respectively. Duke Energy and certain of its affiliates maintain deposit accounts and banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank also serves as trustee or agent under other indentures and agreements pursuant to which securities of Duke Energy and of certain of its affiliates are outstanding. We have also appointed JPMorgan Chase Bank as registrar and paying agent with regard to the bonds. The Trustee is under no obligation to exercise any of its powers at the request of any of the holders of the bonds unless those holders have offered to the Trustee security or indemnity satisfactory to it against the cost, expenses and liabilities it might incur as a result. The holders of a majority in principal amount of the bonds outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or the exercise of any trust or power of the Trustee. The Trustee will not be liable for any action that it takes or omits to take in good faith in accordance with any such direction. BOOK-ENTRY We will issue the exchange bonds in the form of one or more fully registered global securities. The global securities will be deposited with, or on behalf of, The Depository Trust Company, or DTC, and will be registered in the name of DTC or its nominee. Investors may hold their beneficial interests in a global security directly through DTC or indirectly through organizations which are participants in the DTC system. Unless and until they are exchanged in whole or in part for certificated securities, the global securities may not be transferred except as a whole by DTC or its nominee. DTC has advised us as follows: - DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. - DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and other organizations. Indirect access to the DTC system is available to others, including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Upon the issuance of the global securities, DTC or its custodian will credit, on its internal system, the respective principal amounts of the securities represented by the global securities to the accounts of those persons who have accounts with DTC designated by the Initial Purchasers. Ownership of beneficial interests in the global securities will be limited to persons who have accounts with DTC or persons who hold interests through the persons who have accounts with DTC. Persons who have accounts with DTC are referred to as "participants." Ownership of beneficial interests in the global securities will be shown on, 39 and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee, with respect to interests of participants, and the records of participants, with respect to interests of persons other than participants. As long as DTC or its nominee is the registered owner or holder of the global securities, DTC or the nominee, as the case may be, will be considered the sole record owner or holder of the securities represented by the global securities for all purposes under the Mortgage and the securities. No beneficial owners of an interest in the global securities will be able to transfer that interest except according to DTC's applicable procedures, in addition to those provided for under the Mortgage. Owners of beneficial interests in the global securities will not: - be entitled to have the securities represented by the global securities registered in their names, - receive or be entitled to receive physical delivery of certificated securities in definitive form, and - be considered to be the owners or holders of any securities under the global securities. Accordingly, each person owning a beneficial interest in the global securities must rely on the procedures of DTC and, if a person is not a participant, on the procedures of the participant through which that person owns its interests, to exercise any right of a holder of securities under the global securities. We understand that under existing industry practice, if an owner of a beneficial interest in the global securities desires to take any action that DTC, as the holder of the global securities, is entitled to take, DTC would authorize the participants to take that action, and that the participants would authorize beneficial owners owning through the participants to take that action or would otherwise act upon the instructions of beneficial owners owning through them. Payments of the principal of, premium, if any, and interest on the securities represented by the global securities will be made by us to the Trustee and from the Trustee to DTC or its nominee, as the case may be, as the registered owner of the global securities. Neither we, the Trustee, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global securities or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the global securities will credit participants' accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of the global securities, as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global securities held through these participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for these customers. These payments will be the responsibility of these participants. DTC has advised us that DTC will take any action permitted to be taken by a holder of securities only at the direction of one or more participants to whose account the DTC interests in the global securities are credited. Further, DTC will take any action permitted to be taken by a holder of securities only in respect of that portion of the aggregate principal amount of securities as to which the participant or participants has or have given that direction. Although DTC has agreed to these procedures in order to facilitate transfers of interests in the global securities among participants of DTC, it is under no obligation to perform these procedures, and may discontinue them at any time. Neither we nor the trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. 40 Beneficial interests in global securities may be exchanged for certificated securities only if: - DTC notifies the Trustee that it is unwilling or unable to continue as a depositary for the global securities or DTC ceases to be a clearing agency registered under the Exchange Act and, in either case, we fail to appoint a successor depositary within 90 days; or - we decide at any time not to have the securities represented by global securities and so notify the Trustee. REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS The Company and the initial purchasers entered into the Registration Rights Agreement on February 25, 2003, which we call the "issue date." We have agreed pursuant to the Registration Rights Agreement that we will, subject to certain exceptions, (1) prepare and, as soon as practicable but not later than 130 calendar days following the issue date, file with the SEC a registration statement with respect to a registered offer, or the Registered Exchange Offer, to exchange the outstanding bonds for a like principal amount of exchange bonds of the Company; (2) use our reasonable best efforts to cause the registration statement to be declared effective under the Securities Act not later than 180 calendar days following the issue date; (3) keep the Registered Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the holders of the outstanding bonds; (4) use our reasonable best efforts to cause the exchange offer to be consummated within 210 calendar days following the issue date; and (5) promptly commence the exchange offer upon the effectiveness of the Exchange Offer Registration Statement. For each outstanding bond tendered to us pursuant to the Registered Exchange Offer, we will issue to the holder of such outstanding bond an exchange bond having a principal amount equal to that of the surrendered outstanding bond. Interest on the exchange bonds will accrue from the most recent interest payment date to which interest has been paid on the outstanding bonds surrendered in exchange therefor or, if no interest has been paid on such outstanding bonds, from the date of original issuance. Under existing SEC interpretations, the exchange bonds will be freely transferable by holders other than our affiliates after the Registered Exchange Offer without further registration under the Securities Act if the holder of the exchange bonds represents to us in the Registered Exchange Offer that it is not an affiliate of ours within the meaning of Rule 405 under the Securities Act, (b) is not a broker-dealer tendering outstanding bonds acquired directly from us for its own account, (c) acquired the exchange bonds in the ordinary course of its business and (d) has no arrangements or understandings with any person to participate in the exchange offer for the purpose of distributing the exchange bonds); provided, however, that broker-dealers receiving exchange bonds in the Registered Exchange Offer will have a prospectus delivery requirement with respect to resales of such exchange bonds. A holder of outstanding bonds (other than certain specified holders) who wishes to exchange such outstanding bonds for exchange bonds in the Registered Exchange Offer will be required to represent that any exchange bonds to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Registered Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange bonds and that it is not an "affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. 41 In the event that: (1) because of any changes of law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, we are not permitted to effect such a Registered Exchange Offer; or (2) for any other reason we do not consummate the Registered Exchange Offer within 210 calendar days of the issue date (provided that we are not then actively pursuing such effectiveness or consummation, as the case may be), then, we will, subject to certain exceptions: (A) as promptly as practicable, file with the SEC, and thereafter shall use our reasonable best efforts to cause to be declared effective as promptly as practicable but no later than 210 calendar days after the issue date, a shelf registration statement relating to the offer and sale of the outstanding bonds by the holders of such outstanding bonds from time to time in accordance with the methods of distribution as set forth in such shelf registration statement; and (B) use our reasonable best efforts to keep the shelf registration statement continuously effective in order to permit the prospectus forming part thereof to be usable by holders of the outstanding bonds for a period ending on the earliest of (i) two years from the date the outstanding bonds were originally issued by the us, (ii) the date on which the outstanding bonds become eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or (iii) for such shorter period that will terminate when all outstanding bonds covered by the shelf registration statement have been sold pursuant to the shelf registration statement or cease to be outstanding or otherwise to be outstanding bonds. If the Registered Exchange Offer is not consummated and the shelf registration statement is not declared effective within 210 days after the issue date, the interest rate on the bonds will be increased by 0.25% per annum, commencing 210 days after the issue date, until the Registered Exchange Offer is consummated or the shelf registration statement is declared effective by the SEC. In the case of a shelf registration statement, if we are unable to cause such shelf registration statement to become effective because holders of outstanding bonds have not provided information with respect to themselves as required by law to be included therein pursuant to our request as provided in the Registration Rights Agreement, such 0.25% increase in the interest rate shall be payable only to holders that have furnished such information required by law to be included therein to us pursuant to our request under the Registration Rights Agreement from but excluding the date such information is provided to us to but excluding the date the shelf registration statement is declared effective by the SEC. If we effect the Registered Exchange Offer, we will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof provided that we have accepted all outstanding bonds theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. 42 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES EXCHANGE OF BONDS The exchange of outstanding bonds for exchange bonds in the exchange offer will not constitute a taxable event to holders for United States federal income tax purposes. Consequently, no gain or loss will be recognized by a holder upon receipt of an exchange bond, the holding period of the exchange bond will include the holding period of the outstanding bond exchanged therefor and the basis of the exchange bond will be the same as the basis of the outstanding bond immediately before the exchange. IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OUTSTANDING BONDS FOR EXCHANGE BONDS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. PLAN OF DISTRIBUTION Each broker-dealer that receives exchange bonds for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange bonds. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker- dealer in connection with resales of exchange bonds received in exchange for outstanding bonds where the outstanding bonds were acquired as a result of market-making activities or other trading activities. We have agreed that we will make such prospectus, and any amendment or supplement thereto, available to any such broker-dealer for use in connection with any resale of any exchange bonds for a period of the lesser of 90 days after the consummation of the Exchange Offer and the date on which all broker-dealers have sold all exchange bonds held by them (unless such period is extended pursuant to the terms of the Registration Rights Agreement). We have also agreed that we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We will not receive any proceeds from any sale of exchange bonds by broker-dealers. Exchange bonds received by broker-dealers for their own accounts pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange bonds or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any exchange bonds. Any broker-dealer that resells exchange bonds that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the exchange bonds may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of exchange bonds and any commissions or concessions received by these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed to pay all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the outstanding bonds, other than commissions or concessions of any brokers or dealers and will indemnify the holders of outstanding bonds, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act. By its acceptance of the exchange offer, any broker-dealer that receives exchange bonds pursuant to the exchange offer hereby agrees to notify us prior to using the prospectus in connection with the sale or transfer of exchange bonds, and acknowledges and agrees that, upon receipt of notice from us of the happening of any event which makes any statement in this prospectus untrue in any material respect or which requires the making of any changes in this prospectus in order to make the statements therein not 43 misleading or which may impose upon us disclosure obligations that may have a material adverse effect on us (which notice we agree to deliver promptly to such broker-dealer) such broker-dealer will suspend use of this prospectus until we have notified such broker-dealer that delivery of this prospectus may resume and have furnished copies of any amendment or supplement to this prospectus to such broker-dealer. LEGAL MATTERS The validity of the exchange bonds offered by this prospectus will be passed upon for Duke Energy by Robert T. Lucas III, Esq., who is Duke Energy's Associate General Counsel and Assistant Secretary, and Karol P. Mack, Esq., who is Duke Energy's Assistant General Counsel. Certain legal matters with respect to the offering of the exchange bonds will be passed upon for Duke Energy by Simpson Thacher & Bartlett, New York, New York. In rendering their opinion, Simpson Thacher & Bartlett will rely upon Mr. Lucas as to all matters of North Carolina law and Ms. Mack as to all matters of South Carolina law. EXPERTS The consolidated financial statements of Duke Energy appearing in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2002 have been audited by Deloitte & Touche LLP, independent auditors, as set forth in their report incorporated herein by reference (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" on January 1, 2001 and the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002). Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 44 (DUKE ENERGY LOGO) OFFER TO EXCHANGE ALL OUTSTANDING FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 FOR FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 --------------------- PROSPECTUS --------------------- UNTIL , 2003, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATIONS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. , 2003 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation Act and the By-Laws of Duke Energy Corporation permit indemnification of its directors and officers in a variety of circumstances, which may include liabilities under the Securities Act of 1933, as amended (the "Securities Act"). In addition, Duke Energy Corporation has purchased insurance permitted by the law of North Carolina on behalf of directors, officers, employees or agents, which may cover liabilities under the Securities Act. The Restated Articles of Incorporation of Duke Energy Corporation provide that a director shall not be personally liable for monetary damages for breach of fiduciary duty as a director except to the extent such exemption from liability or limitation thereof is not permitted under the North Carolina Business Corporation Act. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 3.1 Restated Articles of Incorporation of Duke Energy Corporation, dated June 18, 1997 (filed with Form S-8, No. 333-29563, effective June 19, 1997, as Exhibit 4(G)). 3.2 Articles of Amendment to Restated Articles of Incorporation of Duke Energy Corporation (filed with Post-Effective Amendment No. 2 to Form S-3 of the registrant, file number 333-81573, filed December 12, 2001 as Exhibit 4(B)-1). 3.3 Articles of Amendment to Restated Articles of Incorporation of Duke Energy Corporation (filed with Form 10-Q of the registrant for the quarter ended March 31, 2002, File No. 1-4928, as Exhibit 3). 3.4 By-Laws of Duke Energy Corporation, as amended (filed with Form 10-K for the year ended December 31, 2002, File No. 001-04928, as Exhibit 3-4)). 4.1 First and Refunding Mortgage from Duke Energy Corporation to Guaranty Trust Company of New York, as Trustee, dated as of December 1, 1927 (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(a)). 4.2 Supplemental Indenture, dated as of March 12, 1930, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(b)). 4.3 Supplemental Indenture, dated as of July 1, 1935, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(c)). 4.4 Supplemental Indenture, dated as of December 1, 1935, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(d)). 4.5 Supplemental Indenture, dated as of September 1, 1936, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(e)). 4.6 Supplemental Indenture, dated as of January 1, 1941, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(f)). 4.7 Supplemental Indenture, dated as of April 1, 1944, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(g)). 4.8 Supplemental Indenture, dated as of September 1, 1947, supplementing said Mortgage (filed with Form S-1, File No. 2-7224, effective October 15, 1947, as Exhibit 7(h)). 4.9 Supplemental Indenture, dated as of September 8, 1947, supplementing said Mortgage (filed with Form S-1, File No. 2-10401, effective August 21, 1953, as Exhibit 4-B-9). 4.10 Supplemental Indenture, dated as of February 1, 1949, supplementing said Mortgage (filed with Form S-1, File No. 2-7808, effective February 3, 1949, as Exhibit 7(j)). 4.11 Supplemental Indenture, dated as of March 1, 1949, supplementing said Mortgage (filed with Form S-1, File No. 2-8877, effective April 6, 1951, as Exhibit 7(k)).
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EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 4.12 Supplemental Indenture, dated as of April 1, 1951, supplementing said Mortgage (filed with Form S-1, File No. 2-8877, effective April 6, 1951, as Exhibit 7(1)). 4.13 Supplemental Indenture, dated as of September 1, 1953, supplementing said Mortgage (filed with Form S-1, File No. 2-10401, effective August 21, 1953, as Exhibit 4-B-13). 4.14 Supplemental Indenture, dated as of October 1, 1954, supplementing said Mortgage (filed with Form S-9, File No. 2-11297, effective December 30, 1954, as Exhibit 2-B-14). 4.15 Supplemental Indenture, dated as of January 1, 1955, supplementing said Mortgage (filed with Form S-9, File No. 2-11297, effective December 30, 1954, as Exhibit 2-B-15). 4.16 Supplemental Indenture, dated as of May 1, 1956, supplementing said Mortgage (filed with Form S-9, File No. 2-12402, effective April 26, 1956, as Exhibit 2-B-16). 4.17 Supplemental Indenture, dated as of January 1, 1960, supplementing said Mortgage (filed with Form 10, effective June 29, 1961, as Exhibit 3-B-18). 4.18 Supplemental Indenture, dated as of February 1, 1960, supplementing said Mortgage (filed with Form 10, effective June 29, 1961, as Exhibit 3-B-19). 4.19 Supplemental Indenture, dated as of February 1, 1962, supplementing said Mortgage (filed with Form S-9, File No. 2-20577, effective August 16, 1962, as Exhibit 2-B-20). 4.20 Supplemental Indenture, dated as of August 1, 1962, supplementing said Mortgage (filed with Form S-1, File No. 2-25367, effective August 23, 1966, as Exhibit 4-B-19). 4.21 Supplemental Indenture, dated as of June 15, 1964, supplementing said Mortgage (filed with Form S-1, File No. 2-25367, effective August 23, 1966, as Exhibit 4-B-20). 4.22 Supplemental Indenture, dated as of February 1, 1965, supplementing said Mortgage (filed with Form S-1, File No. 2-25367, effective August 23, 1966, as Exhibit 4-B-21). 4.23 Supplemental Indenture, dated as of April 1, 1967, supplementing said Mortgage (filed with Form S-9, File No. 2-28023, effective February 15, 1968, as Exhibit 2-B-25). 4.24 Supplemental Indenture, dated as of February 1, 1968, supplementing said Mortgage (filed with Form S-9, File No. 2-31304, effective January 21, 1969, as Exhibit 2-B-26). 4.25 Supplemental Indenture, dated as of February 1, 1969, supplementing said Mortgage (filed with Form S-7, File No. 2-34289, effective August 27, 1969, as Exhibit 2-B-27). 4.26 Supplemental Indenture, dated as of September 1, 1969, supplementing said Mortgage (filed with Form S-7, File No. 2-36095, effective February 16, 1970, as Exhibit 2-B-39). 4.27 Supplemental Indenture, dated as of March 1, 1970, supplementing said Mortgage (filed with Form S-7, File No. 2-37953, effective July 28, 1970, as Exhibit 2-B-42). 4.28 Supplemental Indenture, dated as of August 1, 1970, supplementing said Mortgage (filed with Form S-7, File No. 2-39451, effective March 4, 1971, as Exhibit 2-B-28). 4.29 Supplemental Indenture, dated as of March 1, 1971, supplementing said Mortgage (filed with Form S-7, File No. 2-42404, effective December 7, 1971, as Exhibit 2-B-29). 4.30 Supplemental Indenture, dated as of December 1, 1971, supplementing said Mortgage (filed with Form S-7, File No. 2-43122, effective March 7, 1972, as Exhibit 2-B-30). 4.31 Supplemental Indenture, dated as of April 1, 1972, supplementing said Mortgage (filed with Form S-7, File No. 2-46208, effective November 20, 1972, as Exhibit 2-B-31). 4.32 Supplemental Indenture, dated as of December 1, 1972, supplementing said Mortgage (filed with Form S-7, File No. 2-48058, effective June 5, 1973, as Exhibit 2-B-32). 4.33 Supplemental Indenture, dated as of June 1, 1973, supplementing said Mortgage (filed with Form S-7, File No. 2-49333, effective November 5, 1973, as Exhibit 2-B-33). 4.34 Supplemental Indenture, dated as of November 1, 1973, supplementing said Mortgage (filed with Form S-7, File No. 2-50493, effective April 25, 1974, as Exhibit 2-B-34). 4.35 Supplemental Indenture, dated as of May 1, 1974, supplementing said Mortgage (filed with Form S-7, File No. 2-52669, effective February 11, 1975, as Exhibit 2-B-35). 4.36 Supplemental Indenture, dated as of February 1, 1975, supplementing said Mortgage (filed with Form S-7, File No. 2-57118, effective October 5, 1976, as Exhibit 2-B-36).
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EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 4.37 Supplemental Indenture, dated as of July 1, 1975, supplementing said Mortgage (filed with Form S-7, File No. 2-57118, effective October 5, 1976, as Exhibit 2-B-37). 4.38 Supplemental Indenture, dated as of October 1, 1976, supplementing said Mortgage (filed with Form S-7, File No. 2-59494, effective August 10, 1977, as Exhibit 2-B-38). 4.39 Supplemental Indenture, dated as of September 1, 1977, supplementing said Mortgage (filed with Form S-7, File No. 2-61995, effective July 26, 1978, as Exhibit 2-B-39). 4.40 Supplemental Indenture, dated as of August 1, 1978, supplementing said Mortgage (filed with Form S-7, File No. 2-64541, effective June 7, 1979, as Exhibit 2-B-40). 4.41 Supplemental Indenture, dated as of June 1, 1979, supplementing said Mortgage (filed with Form S-7, File No. 2-65371, effective October 2, 1979, as Exhibit 2-B-41). 4.42 Supplemental Indenture, dated as of October 1, 1979, supplementing said Mortgage (filed with Form S-7, File No. 2-66659, effective March 12, 1980, as Exhibit 2-B-42). 4.43 Supplemental Indenture, dated as of March 1, 1980, supplementing said Mortgage (filed with Form S-16, File No. 2-68571, effective August 19, 1980, as Exhibit 2-B-43). 4.44 Supplemental Indenture, dated as of August 1, 1980, supplementing said Mortgage (filed with Form S-16, File No. 2-75951, effective February 23, 1982, as Exhibit 2-B-44). 4.45 Supplemental Indenture, dated as of March 1, 1982, supplementing said Mortgage (filed with Form S-3, File No. 2-78882, effective August 30, 1982, as Exhibit 4-B-45). 4.46 Supplemental Indenture, dated as of September 1, 1982, supplementing said Mortgage (filed with Form S-3, File No. 2-95931, effective April 1, 1985, as Exhibit 4-B-46). 4.47 Supplemental Indenture, dated as of May 1, 1983, supplementing said Mortgage (filed with Form S-3, File No. 2-95931, effective April 1, 1985, as Exhibit 4-B-47). 4.48 Supplemental Indenture, dated as of September 1, 1983, supplementing said Mortgage (filed with Form S-3, File No. 2-95931, effective April 1, 1985, as Exhibit 4-B-48). 4.49 Supplemental Indenture, dated as of September 1, 1984, supplementing said Mortgage (filed with Form S-3, File No. 2-95931, effective April 1, 1985, as Exhibit 4-B-49). 4.50 Supplemental Indenture, dated as of March 1, 1985, supplementing said Mortgage (filed with Form S-3, File No. 2-95931, effective April 1, 1985, as Exhibit 4-B-50). 4.51 Supplemental Indenture, dated as of December 1, 1985, supplementing said Mortgage (filed with Form S-3, File No. 33-5163, effective May 2, 1986, as Exhibit 4-B-51). 4.52 Supplemental Indenture, dated as of April 1, 1986, supplementing said Mortgage (filed with Form S-3, File No. 33-5163, effective May 2, 1986, as Exhibit 4-B-52). 4.53 Supplemental Indenture, dated as of May 1, 1986, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1986, File No. 1-4928, as Exhibit 4-B-53). 4.54 Supplemental Indenture, dated as of June 1, 1986, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1986, File No. 1-4928, as Exhibit 4-B-54). 4.55 Supplemental Indenture, dated as of February 1, 1987, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1986, File No. 1-4928, as Exhibit 4-B-55). 4.56 Supplemental Indenture, dated as of February 15, 1987, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1986, File No. 1-4928, as Exhibit 4-B-56). 4.57 Supplemental Indenture, dated as of March 1, 1987, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1986, File No. 1-4928, as Exhibit 4-B-57). 4.58 Supplemental Indenture, dated as of October 1, 1987, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1987, File No. 1-4928, as Exhibit 4-B-58). 4.59 Supplemental Indenture, dated as of February 1, 1990, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1989, File No. 1-4928, as Exhibit 4-B-59). 4.60 Supplemental Indenture, dated as of March 1, 1990, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1990, File No. 1-4928, as Exhibit 4-B-60). 4.61 Supplemental Indenture, dated as of May 1, 1990, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1990, File No. 1-4928, as Exhibit 4-B-61).
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EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 4.62 Supplemental Indenture, dated as of May 15, 1990, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1990, File No. 1-4928, as Exhibit 4-B-62). 4.63 Supplemental Indenture, dated as of March 1, 1991, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1990, File No. 1-4928, as Exhibit 4-B-63). 4.64 Supplemental Indenture, dated as of July 1, 1991, supplementing said Mortgage (filed with Form S-3, File No. 33-45501, effective February 13, 1992, as Exhibit 4-B-64). 4.65 Supplemental Indenture, dated as of December 1, 1991, supplementing said Mortgage (filed with Form S-3, File No. 33-44501, effective February 13, 1992, as Exhibit 4-B-65). 4.66 Supplemental Indenture, dated as of March 1, 1992, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1991, File No. 1-4928, as Exhibit 4-B-66). 4.67 Supplemental Indenture, dated as of June 1, 1992, supplementing said Mortgage (filed with Form S-3, File No. 33-50592, effective August 11, 1992, as Exhibit 4-B-67). 4.68 Supplemental Indenture, dated as of July 1, 1992, supplementing said Mortgage (filed with Form S-3, File No. 33-50592, effective August 11, 1992, as Exhibit 4-B-68). 4.69 Supplemental Indenture, dated as of September 1, 1992, supplementing said Mortgage (filed with Form S-3, File No. 33-53308, effective November 24, 1992, as Exhibit 4-B-69). 4.70 Supplemental Indenture, dated as of February 1, 1993, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1992, File No. 1-4928, as Exhibit 4-B-70). 4.71 Supplemental Indenture, dated as of March 1, 1993, supplementing said Mortgage (filed with Form S-3, No. 33-59448, effective March 17, 1993, as Exhibit 4-B-71). 4.72 Supplemental Indenture, dated as of April 1, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-72). 4.73 Supplemental Indenture, dated as of May 1, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-73). 4.74 Supplemental Indenture, dated as of June 1, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-74). 4.75 Supplemental Indenture, dated as of July 1, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-75). 4.76 Supplemental Indenture, dated as of August 1, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-76). 4.77 Supplemental Indenture, dated as of August 20, 1993, supplementing said Mortgage (filed with Form S-3, File No. 33-50543, effective October 20, 1993, as Exhibit 4-B-77). 4.78 Supplemental Indenture, dated as of May 1, 1994, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1994, File No. 1-4928, as Exhibit 4-B-78). 4.79 Supplemental Indenture, dated as of November 1, 1994, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1994, File No. 1-4928, as Exhibit 4-B-79). 4.80 Supplemental Indenture, dated as of August 1, 1995, supplementing said Mortgage (filed with Form 10-K for the year ended December 31, 1995, File No. 1-4928, as Exhibit 4-B-80). 4.81* Eighty-First Supplemental Indenture, dated as of February 25, 2003, supplementing said Mortgage. 4.82* Form of First and Refunding Mortgage Bond, 3.75% Series B due 2008 (included in Exhibit 4.81 filed herewith). 4.83* Registration Rights Agreement, dated as of February 25, 2003. 5.1* Opinion of Simpson Thacher & Bartlett. 5.2* Opinion of Robert T. Lucas III, Esq. 5.3* Opinion of Karol P. Mack, Esq. 12.1* Computation of Ratio of Earnings to Fixed Charges. 23.1* Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1 filed herewith). 23.2* Consent of Robert T. Lucas III, Esq. (included in Exhibit 5.2 filed herewith).
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EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 23.3* Consent of Karol P. Mack, Esq. (included in Exhibit 5.3 filed herewith). 23.4* Independent Auditors' Consent. 24.1* Power of Attorney of certain officers and directors of Duke Energy Corporation. 24.2* Resolution of the Board of Directors of Duke Energy Corporation. 25.1* Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Bond Trustee. 99.1* Form of Letter of Transmittal. 99.2* Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. 99.3* Form of Letter to Clients. 99.4* Form of Notice of Guaranteed Delivery.
- --------------- * Filed herewith. ITEM 22. UNDERTAKINGS (a) Undertaking related to Rule 415 offering: The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a posteffective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Undertaking related to filings incorporating subsequent Exchange Act documents by reference: The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration II-5 statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Undertaking related to acceleration of effectiveness: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by the director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (d) Undertaking related to requests for information: The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) Undertaking related to post-effective amendments: The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Charlotte, state of North Carolina, on May 16, 2003. DUKE ENERGY CORPORATION By: /s/ R.B. PRIORY ------------------------------------ Richard B. Priory Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- Chairman of the Board and May 16, 2003 ------------------------------------------------ Chief Executive Officer Richard B. Priory (Principal Executive Officer) Executive Vice President and May 16, 2003 ------------------------------------------------ Chief Financial Officer Robert P. Brace (Principal Financial Officer) Senior Vice President and Controller May 16, 2003 ------------------------------------------------ (Principal Accounting Officer) Keith G. Butler ------------------------------------------------ G. Alex Bernhardt, Sr. ------------------------------------------------ Robert J. Brown ------------------------------------------------ William T. Esrey ------------------------------------------------ Ann M. Gray ------------------------------------------------ George D. Johnson, Jr. A majority of the Directors May 16, 2003 ------------------------------------------------ Max Lennon ------------------------------------------------ Leo E. Linbeck, Jr.
II-7
SIGNATURE TITLE DATE --------- ----- ---- ------------------------------------------------ James G. Martin ------------------------------------------------ Richard B. Priory ------------------------------------------------ James T. Rhodes
Myron L. Caldwell, by signing his name hereto, does hereby sign this document on behalf of Duke Energy Corporation and on behalf of each of the above-named persons pursuant to a power of attorney duly executed by Duke Energy Corporation and such persons, filed with the Securities and Exchange Commission as an exhibit hereto. /s/ MYRON L. CALDWELL -------------------------------------- Myron L. Caldwell Attorney-in-Fact II-8 EX-4.81 3 y86343exv4w81.txt EIGHTY-FIRST SUPPLEMENTAL INDENTURE EXHIBIT 4.81 Conformed Copy ================================================================================ DUKE ENERGY CORPORATION TO JPMORGAN CHASE BANK, Trustee ---------- EIGHTY-FIRST SUPPLEMENTAL INDENTURE Dated as of February 25, 2003 ---------- CREATING AN ISSUE OF FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 AND 3.75% SERIES B DUE 2008 ---------- SUPPLEMENTAL TO FIRST AND REFUNDING MORTGAGE DATED AS OF DECEMBER 1, 1927 ================================================================================ SUPPLEMENTAL INDENTURE, bearing date as of the 25th day of February, 2003, made and entered into by and between Duke Energy Corporation, formerly known as Duke Power Company, a corporation duly organized and existing under the laws of the State of North Carolina, hereinafter called the "Corporation," party of the first part, and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank, formerly known as Chemical Bank (successor to Morgan Guaranty Trust Company of New York, as Trustee)), a New York banking corporation, having its principal place of business in the Borough of Manhattan, City and State of New York, hereinafter called the "Trustee," as Trustee, party of the second part. WHEREAS Duke Power Company, a New Jersey corporation, hereinafter called the "New Jersey Company," duly executed and delivered its First and Refunding Mortgage, dated as of December 1, 1927, to Guaranty Trust Company of New York, as Trustee, to secure its First and Refunding Mortgage Gold Bonds, to be issued from time to time in series as provided in said Mortgage, and has from time to time duly executed and delivered supplemental indentures, including supplemental indentures dated as of September 1, 1947 and February 1, 1949, to Guaranty Trust Company of New York (the corporate name of which has been changed to Morgan Guaranty Trust Company of New York), as Trustee, and a supplemental indenture dated as of February 1, 1960 to Morgan Guaranty Trust Company of New York, as Trustee, supplementing and modifying said Mortgage (said Mortgage, as so supplemented and modified, being hereinafter referred to as the "original indenture"); and WHEREAS bonds of a series known as the "First and Refunding Mortgage Bonds, 2.65% Series Due 1977" (herein called "bonds of the 2.65% Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 2 7/8% Series Due 1979" (herein called "bonds of the 1979 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 3/8% Series Due 1998" (herein called "bonds of the 1998 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, Pollution Control Facilities Revenue Refunding Series Due 2014" (herein called "bonds of the 1990 Pollution Control Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, City of Greensboro Series Due 2027" (herein called "bonds of the 2027 City of Greensboro Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, Medium-Term Notes Series" (herein called "bonds of the Medium-Term Notes Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 5/8% Series B Due 2003" (herein called "bonds of the 2003 Series B"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 3/8% Series Due 2008" (herein called "bonds of the 2008 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 5 7/8% Series C Due 2003" (herein called "bonds of the 2003 Series C"), bonds of a series known as the "First and Refunding Mortgage Bonds, Pollution Control Facilities Revenue Refunding Series Due 2014" (herein called "bonds of the 1993 Pollution Control Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 1/4% Series B 2004" (herein called "bonds of the 2004 Series B"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7% Series Due 2033" (herein called "bonds of the 2033 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 7/8% Series B Due 2023" (herein called "bonds of the 2023 Series B"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6 3/4% Series Due 2025" (herein called "bonds of the 2025 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7 7/8% Series Due 2024" (herein called "bonds of the 2024 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7 1/2% 2 Series B Due 2025" (herein called "bonds of the 2025 Series B"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7 1/2% Series Due 1999" (herein called "bonds of the 1999 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7% Series Due 2000" (herein called "bonds of the 2000 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 7% Series B Due 2000" (herein called "bonds of the 2000 Series B"), bonds of a series known as the "First and Refunding Mortgage Bonds, 6.625% Series due 2003" (herein called "bonds of the 2003 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 9 5/8% Series due 2020" (herein called "bonds of the 2020 Series"), bonds of a series known as the "First and Refunding Mortgage Bonds, 8 3/4% Series due 2021" (herein called "bonds of the 2021 Series"), bonds of a series known as "First and Refunding Mortgage Bonds, 7% Series due 2005" (herein called "bonds of the 2005 Series") and such other bonds that have been issued have heretofore been issued and (except for bonds of the 2.65% Series, bonds of the 1979 Series, bonds of the 1998 Series, bonds of the 1999 Series, bonds of the 2000 Series, bonds of the 2000 Series B, bonds of the 2003 Series, bonds of the 2020 Series, bonds of the 2021 Series, bonds of the 2005 Series, bonds of the 2025 Series B and other such bonds which have been redeemed or retired in their entirety) are the only bonds now outstanding under the original indenture as heretofore supplemented; and WHEREAS the Corporation has duly executed and delivered a supplemental indenture, dated as of June 15, 1964, to Morgan Guaranty Trust Company of New York, as Trustee, for the purpose of evidencing the succession by merger of the Corporation to the New Jersey Company and the assumption by the Corporation of the covenants and conditions of the New Jersey Company in the original indenture and to enable the Corporation to have and exercise the powers and rights of the New Jersey Company under the original indenture in accordance with the terms thereof and whereby the Corporation assumed and agreed to pay duly and punctually the principal of and interest on the bonds issued under the original indenture in accordance with the provisions of said bonds and the coupons thereto appertaining and the original indenture, and agreed to perform and fulfill all the terms, covenants and conditions of the original indenture binding upon the New Jersey Company; and WHEREAS Morgan Guaranty Trust Company of New York resigned as Trustee under the original indenture as heretofore supplemented and Chemical Bank was appointed successor Trustee, said resignation and appointment having taken effect on August 30, 1994 pursuant to an Instrument of Resignation, Appointment and Acceptance dated as of August 30, 1994 among the Corporation, Morgan Guaranty Trust Company of New York, as Trustee, and Chemical Bank (now known as JPMorgan Chase Bank), as successor Trustee; and WHEREAS the Corporation desires to create under the original indenture, as heretofore supplemented and as to be supplemented by this supplemental indenture, a new series of bonds, to be known as its "First and Refunding Mortgage Bonds, 3.75% Series A due 2008" and "First and Refunding Mortgage Bonds, 3.75% Series B due 2008" and to determine the terms and provisions and the forms of the bonds of such series; and WHEREAS for the purposes hereinabove recited, and pursuant to due corporate action, the Corporation has duly determined to execute and deliver to the Trustee a supplemental indenture in the form hereof supplementing the original indenture (the original indenture, as 3 supplemented by the aforesaid supplemental indenture dated as of June 15, 1964, by supplemental indentures dated as of February 1, 1968, March 1, 1990, May 15, 1990, July 1, 1991, February 1, 1993, March 1, 1993, April 1, 1993, May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993, May 1, 1994 and as hereby supplemented, being sometimes hereinafter referred to as the "Indenture"); and WHEREAS all conditions and requirements necessary to make this supplemental indenture a valid, legal and binding instrument in accordance with its terms have been done and performed, and the execution and delivery hereof have been in all respects duly authorized: NOW, THEREFORE, THIS INDENTURE WITNESSETH: That in consideration of the premises and of the sum of one dollar duly paid by the Corporation to the Trustee at or before the execution and delivery of these presents, the receipts whereof is hereby acknowledged, the Corporation hereby covenants and agrees with the Trustee and its successors in the trust under the Indenture as follows: PART ONE. BONDS OF THE 3.75% SERIES A DUE 2008 AND BONDS OF THE 3.75% SERIES B DUE 2008. SECTION 1. The Corporation hereby creates a new series of bonds to be issued under and secured by the Indenture and known as its First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (herein called "Series A Mortgage Bonds") and its First and Refunding Mortgage Bonds, 3.75% Series B due 2008 (herein called "Series B Mortgage Bonds", and together with the Series A Mortgage Bonds, the "bonds of the 3.75% Series"), and the Corporation hereby establishes, determines and fixes the terms and provisions of the bonds of the 3.75% Series as hereinafter in this Part One set forth. Each bond of the 3.75% Series shall be dated the date of its authentication (except that if any such bond shall be authenticated on any interest payment date, it shall be dated the following day) and interest shall be payable on the principal represented thereby commencing September 5, 2003, from the September 5 or March 5, as the case may be, next preceding the date thereof to which interest has been paid, unless such date of authentication is prior to September 5, 2003, in which case interest shall be payable from February 25, 2003; provided, however, that interest shall be payable on each bond of the 3.75% Series authenticated after the record date (as defined in the next succeeding paragraph of this Section 1) with respect to any interest payment date and prior to such interest payment date, only from such interest payment date. In addition, a special interest premium may accrue on the bonds of the 3.75% Series in the circumstances described in the Registration Rights Agreement. Interest on any bond of the 3.75% Series shall be paid to the person who, according to the bond register of the Corporation, is the registered holder of such bond of the 3.75% Series at the close of business on the applicable record date, and such interest payments shall be made by check mailed to such registered holder at his last address shown on such bond register or, at the 4 option of the Corporation, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date of payment by the Person entitled thereto (provided, that if the bonds of the 3.75% Series are represented by Global Securities held by the Depositary, payment may be made pursuant to the procedures of the Depositary); provided, however, that, if the Corporation shall default in the payment of the interest due on any interest payment date on any bond of the 3.75% Series, such defaulted interest shall be paid to the registered holder of such bond (or any bond or bonds of the 3.75% Series issued upon transfer, exchange or substitution thereof) on the date of subsequent payment of such defaulted interest or, at the election of the Corporation, to the person in whose name such bond (or any bond or bonds of the 3.75% Series issued upon transfer, exchange or substitution thereof) is registered on a subsequent record date established by notice given by mail by or on behalf of the Corporation to the holders of all bonds of the 3.75% Series not less than ten (10) days preceding such subsequent record date. The term "record date" as used in this Section 1 shall mean, with respect to any semi-annual interest payment date, the close of business on the 15th calendar day next preceding such interest payment date or, in the case of a payment of defaulted interest, the close of business on any subsequent record date established as provided above. SECTION 2. All bonds of the 3.75% Series shall mature as to principal on March 5, 2008, and shall bear interest at a rate of 3.75% per annum, payable semi-annually on the fifth day of March and September in each year. SECTION 3. The bonds of the 3.75% Series shall be fully registered bonds, without coupons, in denominations of one thousand dollars ($1,000) and any integral multiple of one thousand dollars ($1,000), all such bonds to be numbered, and shall be transferable and exchangeable as provided in the form of bond set forth in this supplemental indenture. The provisions of Section 1.19 and any other provision in the Indenture in respect of coupon bonds or reservation of coupon bond numbers shall be inapplicable to the bonds of the 3.75% Series. SECTION 4. The Bonds may be redeemed at the option of the Corporation, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the Bonds to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such Bonds (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to such redemption date. The bonds of the 3.75% Series are also subject to redemption through the operation of the Replacement Fund provided in Part Two of this supplemental indenture or through the application of moneys paid to the Trustee pursuant to the provisions of Section 5.05 of the Indenture, at any time or from time to time prior to maturity, upon prior notice as hereinafter provided, at the redemption prices specified in the fourth paragraph of the reverse side of the form of bond set forth in this supplemental indenture, together with interest accrued thereon to the date fixed for redemption thereof. 5 All such redemptions of bonds of the 3.75% Series shall be effected as provided in Article 3 of the Indenture except that, in case a part only of the bonds of the 3.75% Series is to be paid and redeemed, the particular bonds or part thereof shall be selected by the Trustee in such manner as the Trustee in its uncontrolled discretion shall determine to be fair and in any case where several bonds are registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one bond and except that when bonds are redeemed in part only the notice given to any particular holder need state only the principal amount of the bonds of that holder which are to be redeemed and except that notice to the holders of bonds to be redeemed shall be given by mailing to such holders a notice of such redemption, first class mail postage prepaid, not later than the thirtieth day, and not earlier than the sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the bond register of the Corporation. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to the holder of any bond designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other bond. No publication of notice of such redemption shall be required. SECTION 5. The limit upon the aggregate principal amount of the Series A Mortgage Bonds which may be authenticated and delivered pursuant to this Eighty-First Supplemental Indenture shall be $500,000,000; the limit upon the aggregate principal amount of the Series B Mortgage Bonds which may be authenticated and delivered pursuant to this Eighty-First Supplemental Indenture shall be $500,000,000; and at all times, the limit of the aggregate principal amount of Series A Mortgage Bonds plus Series B Mortgage Bonds shall be $500,000,000. SECTION 6. The place or places of payment (as to principal and premium, if any, and interest), redemption, transfer, exchange and registration of the bonds of the 3.75% Series shall be the office or offices or the agency or agencies of the Corporation in the Borough of Manhattan, The City of New York, designated from time to time by the Board of Directors of the Corporation (provided, that if the bonds of the 3.75% Series are represented by Global Securities held by or on behalf of the Depositary, the procedures of the Depositary may be followed for any action under this Section 6 of Part One). SECTION 7. The form of the Series A Mortgage Bonds and the certificate of the Trustee to be endorsed on such bonds, respectively, shall be in substantially the form set forth in Exhibit A hereto. The form of the Series B Mortgage Bonds and the certificate of the Trustee to be endorsed on such bonds, respectively, shall be in substantially the form set forth in Exhibit B hereto. PART TWO. REPLACEMENT FUND. SECTION 1. So long as any of the bonds of the 3.75% Series are outstanding, the Corporation will continue to maintain the Replacement Fund set forth in, and in accordance with 6 the applicable terms and conditions now contained in, Part Two of the supplemental indenture dated as of February 1, 1949, and the covenants on the part of the Corporation contained in such Part Two shall continue and remain in full force and effect, whether or not bonds of the 1979 Series are outstanding and to the same extent as though the words "or any bonds of the 3.75% Series" were inserted after the word "Series" appearing in the second line of Section 1 and the second line of Section 4 of said Part Two of said supplemental indenture dated as of February 1, 1949. SECTION 2. If at any time (a) bonds of the 3.75% Series are outstanding and (b) no bonds of the Medium-Term Notes Series, of the 2003 Series B, of the 2008 Series, of the 2003 Series C, of the 2004 Series B, of the 2033 Series, of the 2023 Series B, of the 2025 Series or of the 2024 Series are outstanding and (c) cash which shall have been deposited with the Trustee pursuant to such Replacement Fund shall not within five years from the date of deposit thereof have been paid out, or used or set aside by the Trustee for the payment, purchase or redemption of bonds, pursuant to such Replacement Fund, such cash shall, if in excess of fifty thousand dollars ($50,000), be applied to the redemption of bonds of the 3.75% Series in an aggregate principal amount sufficient to exhaust as nearly as possible the full amount of such cash. Anything in Section 5 of Part Two of the aforesaid supplemental indenture dated as of February 1, 1949, in Section 3 of Part Two of the supplemental indentures dated as of February 1, 1993, May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993 and May 1, 1994, in Section 3 of Part Three of the supplemental indenture dated as of March 1, 1990 and in Section 5 of Part Four of the supplemental indenture dated as of March 1, 1993 to the contrary notwithstanding, no cash shall be paid over to the Corporation thereunder if at the time any bonds of the 3.75% Series are then outstanding, and such cash shall in such event be applied as in this Part Two set forth. SECTION 3. Whenever all of the bonds of the 3.75% Series, the Medium-Term Notes Series, the 2003 Series B, the 2008 Series, the 2003 Series C, the 2004 Series B, the 2033 Series, the 2023 Series B, the 2025 Series and the 2024 Series shall have been paid, purchased or redeemed, the Trustee shall, upon application of the Corporation, pay to or upon the order of the Corporation all cash theretofore deposited with the Trustee pursuant to the provisions of the Replacement Fund and not previously disposed of pursuant to the provisions of the Replacement Fund, and shall deliver to the Corporation any bonds which shall theretofore have been deposited with the Trustee pursuant to the provisions of the Replacement Fund or paid, purchased or redeemed pursuant to the provisions of the Replacement Fund. PART THREE. ADDITIONAL COVENANTS OF THE CORPORATION. SECTION 1. Whether or not the covenants on the part of the Corporation contained in Part Three of the supplemental indenture dated as of February 1, 1949 are modified with the consent of the holders of bonds of the 1990 Pollution Control Series, the 2027 City of Greensboro Series, the Medium-Term Notes Series, the 2003 Series B, the 2008 Series, the 2003 Series C, the 1993 Pollution Control Series, the 2004 Series B, the 2033 Series, the 2023 Series B, the 2025 Series or the 2024 Series and whether or not the bonds of the 1990 Pollution Control Series, the 2027 City of Greensboro Series, the Medium-Term Notes Series, the 2003 Series B, 7 the 2008 Series, the 2003 Series C, the 1993 Pollution Control Series, the 2004 Series B, the 2033 Series, the 2023 Series B, the 2025 Series or the 2024 Series are outstanding, such covenants on the part of the Corporation contained in said Part Three shall continue and remain in full force and effect so long as any of the bonds of the 3.75% Series are outstanding and to the same extent as though the words "or so long as any bonds of the 3.75% Series are outstanding" were inserted after the words "so long as any of the bonds of the 1979 Series or any bonds of the 2.65% Series are outstanding" wherever such words appear in said Part Three of the supplemental indenture dated as of February 1, 1949. SECTION 2. Whether or not the second sentence of paragraph (a) of Section 2.08 of the original indenture (making certain provisions for the definition of the term "net amount" applicable while bonds of the 2.65% Series were outstanding and which was originally set forth in Section 4 of Article One of the supplemental indenture dated as of September 1, 1947 and which is corrected and clarified by Section 2 of Part Four of the supplemental indenture dated as of February 1, 1968) is modified with the consent of the holders of bonds of the 1990 Pollution Control Series, the 2027 City of Greensboro Series, Medium-Term Notes Series, the 2003 Series B, the 2008 Series, the 2003 Series C, the 1993 Pollution Control Series, the 2004 Series B, the 2033 Series, the 2023 Series B, the 2025 Series or the 2024 Series and whether or not bonds of the 1990 Pollution Control Series, the 2027 City of Greensboro Series, the Medium-Term Notes Series, the 2003 Series B, the 2008 Series, the 2003 Series C, the 1993 Pollution Control Series, the 2004 Series B, the 2033 Series, the 2023 Series B, the 2025 Series or the 2024 Series are outstanding, said sentence shall continue and remain in full force and effect so long as any bonds of the 3.75% Series are outstanding, and with the same force and effect as though said sentence had stated that such provisions were to be applicable so long as any of the bonds of the 3.75% Series are outstanding. PART FOUR. GLOBAL SECURITIES; TRANSFER AND EXCHANGE. SECTION 1. Global Securities. The bonds of the 3.75% Series shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary (which initially shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, bonds of the 3.75% Series represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise be issuable as, bonds of the 3.75% Series in definitive form. The Global Securities described in this Part Four may not be transferred except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or to a successor Depositary or its nominee. None of the Corporation, the Trustee nor any agent of the Corporation or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. A Global Security shall be exchangeable for bonds of the 3.75% Series registered in the names of persons other than the Depositary or its nominee only if (i) the Depositary notifies the 8 Corporation that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary shall have been appointed by the Corporation within 90 days of receipt by the Corporation of such notification, or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as such Depositary and no successor Depositary shall have been appointed by the Corporation within 90 days after it becomes aware of such cessation or (ii) the Corporation in its sole discretion determines that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for bonds of the 3.75% Series registered in such names as the Depositary shall direct. The bonds of the 3.75% Series will be resold by the initial purchasers only to QIBs in reliance on Rule 144A. Such bonds of the 3.75% Series may thereafter be transferred only to QIBs in accordance with the procedure described herein. Rule 144A Bonds shall be issued in the form of a permanent Global Security, without interest coupons, substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Eighty-First Supplemental Indenture, including the legends set forth in Section 2 of this Part Four below, deposited with the Trustee, as custodian for the Depositary. The Rule 144A Global Bond may be represented by more than one certificate if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. SECTION 2. Restrictive Legends. (a) Unless and until (i) a bond of the 3.75% Series is sold under an effective registration statement or (ii) a Series A Mortgage Bond is exchanged for a Series B Mortgage Bond in connection with an effective registration statement, each Rule 144A Global Bond (and all Series A Mortgage Bonds issued in exchange therefor or in substitution thereof) shall bear the following legend, in each case pursuant to the Registration Rights Agreement (the "Restricted Securities Legend"), subject to removal on or after the Resale Restriction Termination Date referred to in Section 3 of this Part Four (each defined term in the legend being defined as such for purposes of the legend only): "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY OR INTEREST OR PARTICIPATION THEREIN, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH PERIOD AS MAY BE REQUIRED BY ANY 9 SUBSEQUENT CHANGE IN APPLICABLE LAW) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH DUKE ENERGY CORPORATION (THE "CORPORATION") OR ANY AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE CORPORATION'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." (b) Each of the Global Securities shall bear the following legend (the "Depository Legend") on the face thereof: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." SECTION 3. Transfer and Exchange. (a) With respect to any proposed transfer of a Rule 144A Bond prior to the date which is two years after the later of the date of its original 10 issue (or such period as may be required by any subsequent change in applicable law) and the last date on which the Corporation or any affiliate of the Corporation was the owner of such Rule 144A Bonds (or any predecessor thereto) (the "Resale Restriction Termination Date"), a transfer of a Rule 144A Bond to a QIB shall be made upon the representation of the transferee in the form of certificate as set forth on the reverse of the bonds of the 3.75% Series that it is purchasing for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Corporation as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (b) Restricted Securities Legend. Upon the transfer, exchange or replacement of bonds of the 3.75% Series not bearing a Restricted Securities Legend, the Trustee shall deliver bonds of the 3.75% Series that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of bonds of the 3.75% Series bearing a Restricted Securities Legend, the Trustee shall deliver only bonds of the 3.75% Series that bear a Restricted Securities Legend unless there is delivered to the Trustee an opinion of counsel, certification and/or other information satisfactory to the Corporation and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (c) Notwithstanding anything herein to the contrary, the Trustee shall not have any responsibility to receive any letters, opinions or certifications, nor any responsibility to monitor compliance with any transfer restrictions, in connection with any transfer or exchange of any beneficial interest in a Global Security for a beneficial interest in the same Global Security. (d) If and when the Series A Mortgage Bonds may be exchanged for Series B Mortgage Bonds as provided in the Registration Rights Agreement, the Holder has the option of exchanging its Series A Mortgage Bonds for Series B Mortgage Bonds of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Series A Mortgage Bonds to be exchanged. The Series B Mortgage Bonds will have terms substantially identical in all material respects to the Series A Mortgage Bonds (except that the Securities Act transfer restrictions and the provision for an interest premium applicable to the Series A Mortgage Bonds will not be applicable to the Series B Mortgage Bonds), and will be treated, together with any outstanding Series A Mortgage Bonds, as a single series of securities under the Indenture. Whenever Series A Mortgage Bonds are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Series B Mortgage Bonds which the Holder making the exchange is entitled to receive. All Series B Mortgage Bonds issued upon any registration of transfer or exchange of Series A Mortgage Bonds shall be the valid obligations of the Corporation, evidencing the same debt, and entitled to the same benefits under this Eighty-First Supplemental Indenture, as the Series A Mortgage Bonds surrendered upon such registration of transfer or exchange. 11 Every Series A Mortgage Bond presented or surrendered for registration of transfer or for exchange shall (if so required by the Corporation or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of bonds of the 3.75% Series, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of bonds of the 3.75% Series. No Series B Mortgage Bond may be issued hereunder, except in exchange for a Series A Mortgage Bond in accordance with the Registration Rights Agreement. SECTION 4. Definitions. The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture. "Business day" means any day other than a day on which banks in New York City are required or authorized to be closed. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the bonds of the 3.75% Series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such bonds of the 3.75% Series. "Comparable Treasury Price" means with respect to any redemption date for bonds of the 3.75% Series, the average of three Reference Treasury Dealer Quotations for such redemption date. "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the bonds of the 3.75% Series, which Depositary shall initially be The Depository Trust Company. "Depository Legend" means a legend set forth in Section 2(b) of this Part Four. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Global Security" means a bond of the 3.75% Series in global form. "Holder" means a Person in whose name a bond of the 3.75% Series is registered in the registration books maintained by the Trustee. "Person" means any individual, corporation, partnership, limited liability company or corporation, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. 12 "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Quotation Agent" means a Reference Treasury Dealer appointed by the Corporation. "Reference Treasury Dealers" means Banc One Capital Markets, Inc., Deutsche Bank Securities Inc. and UBS Warburg LLC, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in the United States (a "Primary Treasury Dealer"), the Corporation shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of February 25, 2003, among the Corporation and Banc One Capital Markets, Inc., Deutsche Bank Securities Inc., UBS Warburg LLC, ABN AMRO Incorporated, Barclays Capital Inc., CIBC World Markets Corp., Scotia Capital (USA) Inc. and TD Securities (USA) Inc. "Restricted Securities Legend" means a legend set forth in Section 2(a) of this Part Four. "Rule 144A" means Rule 144A under the Securities Act. "Rule 144A Bonds" means all bonds of the 3.75% Series offered and sold to QIBs in reliance on Rule 144A. "Rule 144A Global Bonds" means all bonds of the 3.75% Series in global form offered and sold to QIBs in reliance on Rule 144A. "Securities Act" means the Securities Act of 1933, as amended. "Treasury Rate" means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the maturity date of the bonds of the 3.75% Series to be redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, 13 calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date. PART FIVE. MISCELLANEOUS. SECTION 1. (a) For the purposes of Section 2.10 of the Indenture and for the purposes of any modification of the provisions of the Replacement Fund referred to in Part Two of this supplemental indenture, the covenants and provisions on the part of the Corporation which are set forth or incorporated in Part Two of this supplemental indenture shall be for the benefit only of the holders of the bonds of the 3.75% Series. Such covenants and provisions shall remain in force and be applicable only so long as any bonds of the 3.75% Series shall be outstanding, and, subject to the provisions of paragraph (2) of subdivision (c) of Section 10.01 of the Indenture, any such covenants and provisions may be modified with the consent, in writing or by vote at a bondholders' meeting, of the holders of sixty-six and two-thirds per cent (66 2/3%) of the principal amount of the bonds of the 3.75% Series at the time outstanding and without the consent of the holders of any other bonds then outstanding under the Indenture; provided that no such consent shall be effective to waive any past default under such covenants and provisions, and its consequences, unless the consent of the holders of at least a majority in principal amount of all bonds then outstanding under the Indenture is obtained. Such covenants shall be deemed to be additional covenants and none of them shall affect or derogate from, or relieve the Corporation from, its obligation to comply with any of the other covenants, conditions, requirements or provisions of the Indenture or any other supplemental indenture. (b) For the purposes of Section 2.10 of the Indenture and for the purposes of any modification of the provisions of Part Three of this supplemental indenture, the covenants and provisions on the part of the Corporation which are set forth or incorporated in said Part Three shall be for the benefit only of the holders of the bonds of the 3.75% Series. Such covenants and provisions shall remain in force and be applicable only so long as any bonds of the 3.75% Series shall be outstanding, and, subject to the provisions of paragraph (2) of subdivision (c) of Section 10.01 of the Indenture, any such covenants and provisions may be modified with the consent, in writing or by vote at a bondholders' meeting, of the holders of sixty-six and two-thirds per cent (66 2/3%) of the principal amount of the bonds of the 3.75% Series at the time outstanding and without the consent of the holders of any other bonds then outstanding under the Indenture; provided that no such consent shall be effective to waive any past default under such covenants and provisions, and its consequences, unless the consent of the holders of at least a majority in principal amount of all bonds then outstanding under the Indenture is obtained. Such covenants shall be deemed to be additional covenants and none of them shall affect or derogate from, or relieve the Corporation from, its obligation to comply with any of the other covenants, conditions, requirements or provisions of the Indenture or any other supplemental indenture. SECTION 2. All terms contained in this supplemental indenture shall, except as specifically provided herein or except as the context may otherwise require, have the meanings given to such terms in the Indenture. 14 SECTION 3. In case any one or more of the provisions contained in this supplemental indenture should be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision contained in this supplemental indenture, and, to the extent, but only to the extent, that such provision is invalid, illegal or unenforceable, this supplemental indenture shall be construed as if such provision had never been contained herein. SECTION 4. The Trustee hereby accepts the trusts herein declared and provided upon the terms and conditions in the Indenture set forth. SECTION 5. This supplemental indenture may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. SECTION 6. In addition to the amendment provisions of the Indenture, the terms and conditions of this supplemental indenture and the bonds of the 3.75% Series may be modified, amended or supplemented by the Corporation and the Trustee, without the consent of the holders of the bonds of the 3.75% Series, and if not inconsistent with the Indenture, to cure ambiguities in this supplemental indenture or the bonds of the 3.75% Series, or correct defects or inconsistencies in the provisions of this supplemental indenture or the bonds of the 3.75% Series or to provide for such appropriate additional provisions in this supplemental indenture or the bonds of the 3.75% Series as are necessary for certificated bonds to be issued in lieu of Global Securities, to reflect additional provisions related to the issuance of Global Securities (including changes in the procedures of the Depositary) or to reflect restrictions on transfer in addition to the restrictions on transfer contained herein or in the bonds of the 3.75% Series in conformity with applicable law, including any changes in applicable law. IN WITNESS WHEREOF, Duke Energy Corporation, the party of the first part hereto, has caused this supplemental indenture to be signed in its name by one of its Vice Presidents and its corporate seal to be hereunto affixed, and the same to be attested by one of its Assistant Secretaries, and JPMorgan Chase Bank, the party of the second part hereto, in token of its acceptance of the trust hereby created, has caused this supplemental indenture to be signed in its name by one of its Vice Presidents and its corporate seal to be hereunto affixed, all as of the day and year first above written. DUKE ENERGY CORPORATION By: /s/ Myron L. Caldwell --------------------- Name: Myron L. Caldwell Title: Vice President, Corporate Finance ATTEST: /s/ Robert T. Lucas III - ----------------------- Name: Robert T. Lucas III Title: Assistant Secretary Signed, sealed, executed, acknowledged and delivered by Duke Energy Corporation, in the presence of: /s/ Delcia S. Dunlop - -------------------- /s/ Sue C. Harrington - --------------------- 16 JPMORGAN CHASE BANK, as Trustee By: /s/ Carol Ng ------------ Name: Carol Ng Title: Vice President ATTEST: /s/ Nicholas Sberlati - --------------------- Name: Nicholas Sberlati Title: Trust Officer Signed, sealed, executed, acknowledged and delivered by JPMorgan Chase Bank, in the presence of: /s/ David G. Safer - ------------------ David G. Safer /s/ Donna Fitzsimmons - --------------------- Donna Fitzsimmons State of New York ) ) ss.: County of New York ) Personally appeared before me, David G. Safer, and made oath that he saw Carol Ng, a Vice President, and Nicholas Sberlati, a Trust Officer, respectively, of JPMorgan Chase Bank, sign, attest and affix hereto the corporate seal of said JPMorgan Chase Bank, and, as the act and deed of said corporation, deliver the within written and foregoing deed, and that he, with Donna Fitzsimmons, witnessed the execution thereof. /s/ David G. Safer ------------------ David G. Safer 17 Sworn and subscribed before me this 25th day of February, 2003. /s/ Emily Fayan - --------------- Emily Fayan Notary Public, State of New York No. 01FA4737006 Qualified in Kings County Certificate Filed in New York County Commission Expires December 31, 2005 State of New York ) ) ss.: County of New York ) I, Emily Fayan, a Notary Public in and for the State and County aforesaid, certify that Nicholas Sberlati personally came before me this day and acknowledged that he is a Trust Officer of JPMorgan Chase Bank, a New York corporation, and that, by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by one of its Vice Presidents, sealed with its corporate seal, and attested by himself as one of its Trust Officers. Witness may hand and official seal, this 25th day of February, 2003. /s/ Emily Fayan --------------- Emily Fayan Notary Public, State of New York No. 01FA4737006 Qualified in Kings County Certificate Filed in New York County Commission Expires December 31, 2005 18 State of North Carolina ) ) ss.: County of Mecklenburg ) Personally appeared before me Delcia S. Dunlap and made oath that she saw Myron L. Caldwell, a Vice President, and Robert T. Lucas III, an Assistant Secretary, respectively, of Duke Energy Corporation, sign, attest and affix hereto the corporate seal of said Duke Energy Corporation, and, as the act and deed of said corporation, deliver the within written and foregoing deed, and that she, with Sue C. Harrington, witnessed the execution thereof. /s/ Delcia S. Dunlap -------------------- Delcia S. Dunlap Sworn and subscribed before me this 25th day of February, 2003. /s/ Phoebe P. Elliott - --------------------- Phoebe P. Elliott Notary Public Mecklenburg County, N.C. My Commission expires June 26, 2006 State of North Carolina ) ) ss.: County of Mecklenburg ) I, Phoebe P. Elliott, a Notary Public in and for the State and County aforesaid, certify that Robert T. Lucas III personally came before me this day and acknowledged that he is an Assistant Secretary of Duke Energy Corporation, a North Carolina corporation, and that, by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by one of its Vice Presidents, sealed with its corporate seal, and attested by himself as one of its Assistant Secretaries. My commission expires June 26, 2006 Witness my hand and official seal, this 25th day of February, 2003. /s/ Phoebe P. Elliott --------------------- Phoebe P. Elliott Notary Public Mecklenburg County, N.C. EXHIBIT A FORM OF DUKE ENERGY CORPORATION FIRST AND REFUNDING MORTGAGE BOND, 3.75% SERIES A DUE 2008 [FACE SIDE OF BOND] [RESTRICTED SECURITIES LEGEND, IF APPLICABLE] [DEPOSITORY LEGEND, IF APPLICABLE] DUKE ENERGY CORPORATION FIRST AND REFUNDING MORTGAGE BOND, 3.75% Series A due 2008 No. $ CUSIP No. 264399 EG 7 Duke Energy Corporation, a North Carolina corporation (hereinafter called the "Corporation"), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on March 5, 2008, in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to September 5, 2003, in which case from February 25, 2003, and unless the date hereof is subsequent to a record date (as defined below) and prior to the next succeeding September 5 or March 5, in which case from the next succeeding September 5 or March 5, as the case may be), at the rate of 3.75% per cent per annum, in like coin or currency, semi-annually on March 5 and September 5 in each year, commencing September 5, 2003, until the principal hereof shall become due and payable. Such interest payments shall be made by check mailed to the person in whose name this bond is registered at the close of business on the 15th calendar day preceding each semi-annual interest payment date (a "record date") (subject to certain exceptions provided in the Indenture hereinafter mentioned), at his last address as it shall appear upon the bond register of the Corporation. A special interest premium may accrue on the bonds of the 3.75% Series in the circumstances described in the Registration Rights Agreement. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth in this place. This bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon. A-1 IN WITNESS WHEREOF, the Corporation has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature, and its corporate seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated: DUKE ENERGY CORPORATION By: _______________________________ Name: Title: ATTEST: ______________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture. JPMorgan Chase Bank, as Trustee By: _______________________________ Authorized Officer A-2 [REVERSE SIDE OF BOND] This bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 3.75% Series A due 2008, of an authorized issue of bonds of the Corporation, without limit as to aggregate principal amount, designated generally as First and Refunding Mortgage Bonds, all issued and to be issued under and equally and ratably secured by an indenture dated as of December 1, 1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the "New Jersey Company"), to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York), as Trustee (JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, formerly known as Chemical Bank, successor Trustee), as supplemented and modified by indentures supplemental thereto, including supplemental indentures dated as of September 1, 1947, February 1, 1949, February 1, 1960, June 15, 1964 (under which the Corporation succeeded to and was substituted for the New Jersey Company), February 1, 1968, March 1, 1990, May 15, 1990, July 1, 1991, February 1, 1993, March 1, 1993, April 1, 1993, May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993, May 1, 1994 and February 25, 2003, the latter providing for said series (said indenture as so supplemented and modified being hereinafter referred to as the "Indenture"), to which Indenture reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Corporation and of the holders of the bonds, may be made with the consent of the Corporation by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided in the Indenture. In case an event of default as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable, at the time, in the manner and with the effect provided in the Indenture. The bonds of this series may be redeemed at the option of the Corporation, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of this series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such bonds (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semiannual basis A-3 (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to such redemption date. "Business day" means any day other than a day on which banks in New York City are required or authorized to be closed. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the bonds of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such bonds. "Comparable Treasury Price" means with respect to any redemption date for bonds of this series, the average of three Reference Treasury Dealer Quotations for such redemption date. "Quotation Agent" means a Reference Treasury Dealer appointed by the Corporation. "Reference Treasury Dealers" means Banc One Capital Markets, Inc., Deutsche Bank Securities Inc. and UBS Warburg LLC, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in the United States (a "Primary Treasury Dealer"), the Corporation shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of February 25, 2003, among the Corporation and Banc One Capital Markets, Inc., Deutsche Bank Securities Inc., UBS Warburg LLC, ABN AMRO Incorporated, Barclays Capital Inc., CIBC World Markets Corp., Scotia Capital (USA) Inc. and TD Securities (USA) Inc. "Treasury Rate" means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the maturity date of the Bonds to be redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week A-4 preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date. The bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental indenture dated as of February 25, 2003, providing for this series, or upon application of certain moneys included in the trust estate, at any time or from time to time prior to maturity, at 100% of their principal amount, in each case together with accrued interest to the date fixed for redemption. Redemption is in every case to be effected at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, upon at least thirty days' prior notice, given by mail as more fully provided in the Indenture. If this bond or any portion hereof ($1,000 or a multiple thereof) is called for redemption and payment is duly provided, this bond or such portion thereof shall cease to bear interest from and after the date fixed for such redemption. This bond is transferable, as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture; or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Corporation and receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Corporation for any stamp taxes or other governmental charges incident thereto. This bond is a corporate obligation only and no recourse whatsoever, either directly or through the Corporation or any trustee, receiver, assignee or any other person, shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon, or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past, present or future stockholder, officer or director of the Corporation as such, or of any successor or predecessor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, officers and directors being waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture. [END OF BOND FORM] A-5 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common UNIF GIFT MIN ACT- ______ Custodian _______ (Cust) (Minor) TEN ENT--as tenants by the entireties JT TEN--as joint tenants with rights of under Uniform Gifts to survivorship and not as tenants in common Minors Act ________________ (State) Additional abbreviations may also be used though not on the above list. FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto (please insert Social Security or other identifying number of assignee) PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE the within Bond and all rights thereunder, hereby irrevocably constituting and appointing agent to transfer said Bond on the books of the Corporation, with full power of substitution in the premises. Dated: ____________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement, or any change whatever. Signature Guarantee: ____________________ A-6 SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-7 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_______ principal amount of First and Refunding Mortgage Bonds, 3.75% Series A due 2008 held in (check applicable space) _____ book-entry or ___ definitive form by the undersigned. The undersigned has requested the Trustee by written order to exchange or register the transfer of a Bond or Bonds. In connection with any transfer of any of the Bonds evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Bonds are being transferred in accordance with its terms: CHECK ONE BOX BELOW 1. [ ] to the Corporation; or 2. [ ] to the Trustee for the registration in the name of the Holder, without transfer; or 3. [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933. ___________________________ Your Signature Signature Guarantee: Date: ___________________________ ___________________________ Signature must be guaranteed by a Signature of Signature participant in a recognized signature guaranty Guarantee medallion program or other signature guarantor acceptable to the Trustee A-8 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Bond for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Corporation as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided Rule 144A. Dated: ___________________________ ________________________________ NOTICE: To be executed by an executive officer A-9 EXHIBIT B FORM OF DUKE ENERGY CORPORATION FIRST AND REFUNDING MORTGAGE BOND, 3.75% SERIES B DUE 2008 [FACE SIDE OF BOND] [DEPOSITORY LEGEND, IF APPLICABLE] DUKE ENERGY CORPORATION FIRST AND REFUNDING MORTGAGE BOND, 3.75% Series B due 2008 No. $ Duke Energy Corporation, a North Carolina corporation (hereinafter called the "Corporation"), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on March 5, 2008, in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to September 5, 2003, in which case from February 25, 2003, and unless the date hereof is subsequent to a record date (as defined below) and prior to the next succeeding September 5 or March 5, in which case from the next succeeding September 5 or March 5, as the case may be), at the rate of 3.75% per cent per annum, in like coin or currency, semi-annually on March 5 and September 5 in each year, commencing September 5, 2003, until the principal hereof shall become due and payable. Such interest payments shall be made by check mailed to the person in whose name this bond is registered at the close of business on the 15th calendar day preceding each semi-annual interest payment date (a "record date") (subject to certain exceptions provided in the Indenture hereinafter mentioned), at his last address as it shall appear upon the bond register of the Corporation. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth in this place. This bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon. B-1 IN WITNESS WHEREOF, the Corporation has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature, and its corporate seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated: DUKE ENERGY CORPORATION By: _______________________________ Name: Title: ATTEST: ___________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture. JPMorgan Chase Bank, as Trustee By: ___________________________ Authorized Officer B-2 [REVERSE SIDE OF BOND] This bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 3.75% Series B due 2008, of an authorized issue of bonds of the Corporation, without limit as to aggregate principal amount, designated generally as First and Refunding Mortgage Bonds, all issued and to be issued under and equally and ratably secured by an indenture dated as of December 1, 1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the "New Jersey Company"), to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York), as Trustee (JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, formerly known as Chemical Bank, successor Trustee), as supplemented and modified by indentures supplemental thereto, including supplemental indentures dated as of September 1, 1947, February 1, 1949, February 1, 1960, June 15, 1964 (under which the Corporation succeeded to and was substituted for the New Jersey Company), February 1, 1968, March 1, 1990, May 15, 1990, July 1, 1991, February 1, 1993, March 1, 1993, April 1, 1993, May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993, May 1, 1994 and February 25, 2003, the latter providing for said series (said indenture as so supplemented and modified being hereinafter referred to as the "Indenture"), to which Indenture reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Corporation and of the holders of the bonds, may be made with the consent of the Corporation by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided in the Indenture. In case an event of default as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable, at the time, in the manner and with the effect provided in the Indenture. The bonds of this series may be redeemed at the option of the Corporation, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of this series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such bonds (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semiannual basis B-3 (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to such redemption date. "Business day" means any day other than a day on which banks in New York City are required or authorized to be closed. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the bonds of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such bonds. "Comparable Treasury Price" means with respect to any redemption date for bonds of this series, the average of three Reference Treasury Dealer Quotations for such redemption date. "Quotation Agent" means a Reference Treasury Dealer appointed by the Corporation. "Reference Treasury Dealers" means Banc One Capital Markets, Inc., Deutsche Bank Securities Inc. and UBS Warburg LLC, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in the United States (a "Primary Treasury Dealer"), the Corporation shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the maturity date of the Bonds to be redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date. B-4 The bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental indenture dated as of February 25, 2003, providing for this series, or upon application of certain moneys included in the trust estate, at any time or from time to time prior to maturity, at 100% of their principal amount, in each case together with accrued interest to the date fixed for redemption. Redemption is in every case to be effected at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, upon at least thirty days' prior notice, given by mail as more fully provided in the Indenture. If this bond or any portion hereof ($1,000 or a multiple thereof) is called for redemption and payment is duly provided, this bond or such portion thereof shall cease to bear interest from and after the date fixed for such redemption. This bond is transferable, as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the Corporation in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture; or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Corporation and receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Corporation for any stamp taxes or other governmental charges incident thereto. This bond is a corporate obligation only and no recourse whatsoever, either directly or through the Corporation or any trustee, receiver, assignee or any other person, shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon, or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past, present or future stockholder, officer or director of the Corporation as such, or of any successor or predecessor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, officers and directors being waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture. [END OF BOND FORM] B-5 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common UNIF GIFT MIN ACT- ______ Custodian _______ (Cust) (Minor) TEN ENT--as tenants by the entireties JT TEN--as joint tenants with rights of under Uniform Gifts to survivorship and not as tenants in common Minors Act ________________ (State) Additional abbreviations may also be used though not on the above list. FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto (please insert Social Security or other identifying number of assignee) PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE the within Bond and all rights thereunder, hereby irrevocably constituting and appointing agent to transfer said Bond on the books of the Corporation, with full power of substitution in the premises. Dated: ____________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement, or any change whatever. Signature Guarantee: ____________________ B-6 SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-7 EX-4.83 4 y86343exv4w83.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.83 Conformed Copy ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of February 25, 2003 between Duke Energy Corporation, as Issuer and Banc One Capital Markets, Inc., Deutsche Bank Securities Inc. UBS Warburg LLC ABN AMRO Incorporated Barclays Capital Inc. CIBC World Markets Corp. Scotia Capital (USA) Inc. TD Securities (USA) Inc. as Initial Purchasers ================================================================================ REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into this 25th day of February, 2003, by and between Duke Energy Corporation, a North Carolina corporation (the "Issuer"), and Banc One Capital Markets, Inc., Deutsche Bank Securities Inc., UBS Warburg LLC, ABN AMRO Incorporated, Barclays Capital Inc., CIBC World Markets Corp, Scotia Capital (USA) Inc. and TD Securities (USA) Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated February 20, 2003 (the "Purchase Agreement"), between the Issuer and the Initial Purchasers, which provides for the sale by the Issuer to the Initial Purchasers of an aggregate of $500,000,000 principal amount of the Issuer's First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (the "Bonds"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuer has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Bonds" shall have the meaning set forth in the preamble to this Agreement. "Closing Date" shall mean the Closing Time as defined in the Purchase Agreement. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Issuer, provided, however, that such depositary must have an address in the Borough of Manhattan, in The City of New York. "Exchange Bonds" shall mean the First and Refunding Mortgage Bonds, 3.75% Series B due 2008, issued by the Issuer under the Indenture containing terms identical to the Bonds, in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Bonds in exchange for Registrable Bonds pursuant to the Exchange Offer. "Exchange Offer" shall mean the exchange offer by the Issuer of Exchange Bonds for Registrable Bonds pursuant to Section 2.1 hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "Exchange Period" shall have the meaning set forth in Section 2.1 hereof. "Holder" shall mean each of the Initial Purchasers, for so long as it owns any Registrable Bonds, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Bonds under the Indenture. "Indenture" shall mean the First and Refunding Mortgage, dated as of December 1, 1927, by and among the Issuer and JPMorgan Chase Bank, as successor trustee, as amended and supplemented by various supplemental indentures, including the Eighty-First Supplemental Indenture, dated February 25, 2003, creating the Bonds and the Exchange Bonds. "Initial Purchasers" shall have the meaning set forth in the preamble to this Agreement. "Issuer" shall have the meaning set forth in the preamble and shall also include the Issuer's successors. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Bonds; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Bonds is required hereunder, Registrable Bonds held by the Issuer or any Affiliate (as defined under the 1933 Act) of the Issuer shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount. "Participating Broker-Dealer" shall mean Banc One Capital Markets, Inc., Deutsche Bank Securities Inc., UBS Warburg LLC, ABN AMRO Incorporated, Barclays Capital Inc., CIBC World Markets Corp, Scotia Capital (USA) Inc. and TD Securities (USA) Inc. and any other broker-dealer which makes a market in the Bonds and exchanges Registrable Bonds in the Exchange Offer for Exchange Bonds. "Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or incorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Bonds covered 2 by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Issuer with this Agreement, including without limitation: (i) all SEC or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, (ii) all reasonable fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Bonds or Registrable Bonds and any filings with the NASD) such fees not to exceed $7,500, (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements of counsel for the Issuer and of the independent public accountants of the Issuer, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vi) the fees and expenses of the Trustee, and any escrow agent or custodian, (vii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of counsel to the Initial Purchasers in connection therewith, and (viii) the reasonable fees and disbursements traditionally borne by the Issuer in connection with registered security offerings as set forth in the underwriting agreement customarily used by the Issuer. "Registrable Bonds" shall mean the Bonds of any Holder; provided, however, that such Bonds shall cease to be Registrable Bonds when (i) a Registration Statement with respect to such Bonds shall have been declared effective under the 1933 Act and such Bonds shall have been disposed of pursuant to such Registration Statement, (ii) such Bonds can be sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Bonds shall have ceased to be outstanding or (iv) the Exchange Offer is consummated (except in the case of Bonds purchased from the Issuer and continued to be held by the Initial Purchasers). "Registration Statement" shall mean any registration statement of the Issuer which covers any of the Exchange Bonds or Registrable Bonds pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the United States Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission. 3 "Shelf Registration" shall mean a registration effected pursuant to Section 2.2 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuer pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Bonds, on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Bonds under the Indenture. 2. Registration Under the 1933 Act. 2.1. Exchange Offer. The Issuer shall (A) prepare and, as soon as practicable but not later than 130 calendar days following the Closing Date, file with the SEC an Exchange Offer Registration Statement with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Bonds, a like principal amount of Exchange Bonds, (B) use its reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act not later than 180 calendar days following the Closing Date, (C) use its reasonable best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its reasonable best efforts to cause the Exchange Offer to be consummated within 210 calendar days following the Closing Date. The Exchange Bonds will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Issuer shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Bonds for Exchange Bonds (assuming that such Holder (a) is not an affiliate of the Issuer within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Bonds acquired directly from the Issuer for its own account, (c) acquired the Exchange Bonds in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing the Exchange Bonds) to transfer such Exchange Bonds from and after their receipt without any limitations or restrictions under the 1933 Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. In connection with the Exchange Offer, the Issuer shall: (a) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement together with an appropriate letter of transmittal and related documents; (b) keep the Exchange Offer open for acceptance for a period of not less than 20 business days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period"); (c) utilize the services of the Depositary for the Exchange Offer; 4 (d) permit Holders to withdraw tendered Registrable Bonds at any time prior to 5:00 p.m. (Eastern Time) on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Bonds delivered for exchange, and a statement that such Holder is withdrawing his election to have such Bonds exchanged; (e) notify each Holder that any Registrable Bonds not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (f) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. As soon as practicable after the close of the Exchange Offer, the Issuer shall: (i) accept for exchange all Registrable Bonds duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto; (ii) deliver to the Trustee for cancellation all Registrable Bonds so accepted for exchange; and (iii)cause the Trustee promptly to authenticate and deliver the Exchange Bonds to each Holder of Registrable Bonds so accepted for exchange in a principal amount equal to the principal amount of the Registrable Bonds of such Holder so accepted for exchange. The Issuer shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Participating Broker-Dealers subject to the prospectus delivery requirements of the 1933 Act for such period of time as such Participating Broker-Dealers must comply with such requirements in order to resell the Exchange Bonds; provided, however, that (i) such period shall be the lesser of 90 days after the consummation of the Exchange Offer and the date on which all Participating Broker-Dealers have sold all Exchange Bonds held by them (unless such period is extended pursuant to Section 3(k) below) and (ii) the Issuer shall make such Prospectus, and any amendment or supplement thereto, available to any such Participating Broker-Dealer for use in connection with any resale of any Exchange Bonds for a period of the lesser of 90 days after the consummation of the Exchange Offer and the date on which all Participating Broker-Dealers have sold all Exchange Bonds held by them (unless such period is extended pursuant to Section 3(k) below). Interest on the Exchange Bonds will accrue from the most recent interest payment date to which interest has been paid on the Registrable Bonds surrendered in exchange therefor or, if no interest has been paid on such Registrable Bonds, from the date of original issuance. The Exchange Offer shall not be subject to any conditions, other than (i) that the Exchange 5 Offer, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Bonds in accordance with the Exchange Offer, (iii) that each Holder of Registrable Bonds exchanged in the Exchange Offer shall have represented that all Exchange Bonds to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Bonds and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the judgment of the Issuer, would reasonably be expected to impair the ability of the Issuer to proceed with the Exchange Offer. The Issuer shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Bonds in the Exchange Offer. 2.2. Shelf Registration. (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Issuer is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer is not consummated within 210 calendar days after the Closing Date (provided that the Issuer is not then actively pursuing such effectiveness or consummation, as the case may be), (iii) after consummation of the Exchange Offer and upon the written request of the Initial Purchasers with respect to any Registrable Bonds which it acquired directly from the Issuer then in case of each of clauses (i) through (iii) the Issuer shall, at their cost: (a) As promptly as practicable, file with the SEC, and thereafter shall use its reasonable best efforts to cause to be declared effective as promptly as practicable but no later than 210 calendar days after the Closing Date, except in the case of clause (iii) of the preceding paragraph, which shall be no later than 90 days following such request, a Shelf Registration Statement relating to the offer and sale of the Registrable Bonds by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement. (b) Use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be usable by Holders for a period ending on the earliest of (i) two years from the date the Registrable Bonds were originally issued by the Issuer, (ii) the date on which the Registrable Bonds become eligible for resale without volume limitations pursuant to Rule 144 under the 1933 Act, or (iii) for such shorter period that will terminate when all Registrable Bonds covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Bonds. (c) Notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus 6 forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Issuer further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Bonds copies of any such supplement or amendment promptly as reasonably practicable after its being used or filed with the SEC. 2.3. Expenses. The Issuer shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Bonds pursuant to the Shelf Registration Statement. 2.4. Effectiveness. (a) The Issuer will be deemed not to have used its reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Issuer voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the holders of Registrable Bonds covered thereby not being able to exchange or offer and sell such Registrable Bonds during that period as and to the extent contemplated hereby, unless such action is required by applicable law. (b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Bonds pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Bonds pursuant to such Registration Statement may legally resume. 2.5. Interest. If the Exchange Offer is not consummated and the Shelf Registration Statement is not declared effective on or prior to the date that is 210 days after the Closing Date, the interest rate on the Bonds will be increased by 0.25% per annum commencing the date that is 210 days after the Closing Date, until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective by the SEC; provided, that in the case of a Shelf Registration Statement, (i) if the Issuer is unable to cause such Shelf Registration Statement to become effective because Holders of Registrable Bonds have not provided information with respect to themselves as required by law to be included therein pursuant to the Issuer's request as provided herein, such 0.25% increase in the interest rate shall be payable only 7 to Holders that have furnished such information required by law to be included therein to the Issuer pursuant to its request hereunder from but excluding the date such information is provided to the Issuer to but excluding the date the Shelf Registration Statement is declared effective by the SEC and (ii) in the case of a Shelf Registration Statement required under clause (iii) of the first paragraph of Section 2.2, such interest rate increase shall commence on the date that is 90 days following the request related to filing the Shelf Registration Statement. 2.6. Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuer acknowledges that any failure by the Issuer to comply with its obligations under Sections 2.1 and 2.2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuer's obligations under Sections 2.1 and 2.2 hereof. 3. Registration Procedures. In connection with the obligations of the Issuer with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Issuer shall: (a) prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Issuer, (ii) shall in the case of a Shelf Registration, be available for the sale of the Registrable Bonds by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the 1933 Act, and use their best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act and comply with the provisions of the 1933 Act applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Bonds, at least 5 business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Bonds is being filed and advising such Holders that the distribution of Registrable Bonds will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Bonds and to each underwriter of an underwritten offering of Registrable Bonds, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other 8 documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Bonds; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Bonds in connection with the offering and sale of the Registrable Bonds covered by the Prospectus or any amendment or supplement thereto; (d) use its best efforts to register or qualify the Registrable Bonds under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Bonds covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Bonds shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Bonds owned by such Holder; provided, however, that the Issuer shall not be required to (i) qualify as a foreign corporation or as a dealer in Securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject; (e) notify promptly each Holder of Registrable Bonds under a Shelf Registration or any Participating Broker-Dealer who has notified the Issuer that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below, and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for addition information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Bonds covered thereby, the representations and warranties of the Issuer contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Registrable Bonds or the Exchange Bonds, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (f) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution" which section shall include all information that the Initial Purchasers may reasonably request, 9 and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Registrable Bonds acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of Exchange Bonds to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchasers and their counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Bonds for Registrable Bonds pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Bonds, (ii) furnish to each Participating Broker-Dealer who has delivered to the Issuer the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any person subject to the prospectus delivery requirement of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Bonds covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "if the exchange offeree is a broker-dealer holding Registrable Bonds acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Bonds received in respect of such Registrable Bonds pursuant to the Exchange Offer;" and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with any resale of Exchange Bonds, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; (g) (i) in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Bonds copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; 10 (i) in the case of a Shelf Registration, furnish to each Holder of Registrable Bonds, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Bonds to facilitate the timely preparation and delivery of certificates representing Registrable Bonds to be sold and not bearing any restrictive legends; and enable such Registrable Bonds to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least 3 business days prior to the closing of any sale of Registrable Bonds; (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(ii), (iii), (iv), (v) and (vi) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document, each as required in the reasonable determination of the Issuer so that, as thereafter delivered to the purchasers of the Registrable Bonds or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified; (l) in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, an amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Issuer as shall be reasonably requested by the Holders of Registrable Bonds, or the Initial Purchasers on behalf of such Holders, available for discussion of such document; (m) obtain a CUSIP number of all Exchange Bonds or Registrable Bonds, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Bonds or the Registrable Bonds, as the case may be, in a form eligible for deposit with the Depositary; (n) (i) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, (the "TIA") in connection with the registration of the Exchange Bonds or Registrable Bonds, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; 11 (o) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Bonds and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to the Holders of such Registrable Bonds and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (ii) obtain opinions of counsel to the Issuer and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Bonds being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof from the independent certified public accountants who have certified the financial statements of the Issuer and any other entity included or incorporated by reference in the Registration Statement addressed to the underwriters, if any, and use reasonable efforts to have such letter addressed to the selling Holders of Registrable Bonds (to the extent consistent with SAS 72), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Bonds, which agreement shall be in form, substances and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures customarily provided by the Issuer to underwriters in similar types of transactions with respect to the underwriters and all other parties to be indemnified pursuant to Section 4 hereof; and (vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Bonds being sold and the managing underwriters, if any. 12 The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereof) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder; (p) in the case of a Shelf Registration, make available for inspection by representatives of the Holders of the Registrable Bonds and any underwriters participating in any disposition pursuant to a Shelf Registration Statement and any counsel or accountant retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Issuer reasonably requested by any such persons and use its reasonable best efforts to cause the respective officers, directors, employees, and any other agents of the Issuer to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Issuer available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; provided that any confidential or proprietary information may only be inspected subject to customary confidentiality agreements or procedures that the Issuer requires; (q) (i) in the case of an Exchange Offer Registration Statement, within a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and make such changes in any such document prior to the filing thereof as the Initial Purchasers may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Bonds shall reasonably object, and make the representatives of the Issuer available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and (ii) in the case of a Shelf Registration, within a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Bonds, to the Initial Purchasers, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Bonds, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders or the Initial Purchasers on behalf of the Holders of Registrable Bonds or any underwriter may reasonably object and make the representatives of the Issuer available for discussion of such document as shall be reasonably requested by the Holders of Registrable Bonds, the Initial Purchasers on behalf of such Holders, or any underwriter. (r) in the case of a Shelf Registration, use their reasonable best efforts to cause all Registrable Bonds to be listed on any securities exchange on which similar debt securities issued by the Issuer are then listed if requested by the Majority Holders, or if 13 requested by the underwriter or underwriters of an underwritten offering of Registrable Bonds, if any; provided, however, the Issuer shall not have reasonably objected to such request and, for the avoidance of doubt, it shall be reasonable for the Issuer to object to such request if at such time the Issuer does not routinely list its debt securities on a securities exchange; (s) in the case of a Shelf Registration, use their reasonable best efforts to cause the Registrable Bonds to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Bonds, if any; (t) otherwise comply with all applicable rules and regulations of the SEC and make available to security holders, in accordance with the Issuer's Exchange Act filing obligations, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; (u) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel; and (v) upon consummation of an Exchange Offer, if requested by the Trustee, obtain a customary opinion of counsel to the Issuer addressed to the Trustee for the benefit of all Holders of Registrable Bonds participating in the Exchange Offer, and which includes an opinion that (i) the Issuer has duly authorized, executed and delivered the Exchange Bonds and the related indenture and (ii) the Exchange Bonds and related indenture constitute a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its respective terms (with customary exceptions). In the case of a Shelf Registration Statement, the Issuer may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Bonds to furnish to the Issuer such information regarding the Holder and the proposed distribution by such Holder of such Registrable Bonds as the Issuer may from time to time reasonably request in writing for use in connection with any Shelf Registration Statement or Prospectus included therein, including, without limitation, information specified in item 507 of Regulation S-K under the 1933 Act. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuer all information required to be disclosed with respect to such Holder in order to make any information with respect to such Holder previously furnished to the Issuer by such Holder not materially misleading. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Issuer of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii), (iii), (iv), (v) and (vi) hereof, such Holder will forthwith discontinue disposition of Registrable Bonds pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Issuer, such Holder will deliver to the Issuer (at its expense) all copies in such Holder's possession, other than permanent file copies then in such 14 Holder's possession, of the Prospectus covering such Registrable Bonds current at the time of receipt of such notice. If any of the Registrable Bonds covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Bonds included in such offering and shall be acceptable to the Issuer. No Holder of Registrable Bonds may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Bonds on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting agreement. 4. Indemnification; Contribution. (a) The Issuer agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act (such indemnified parties, the "Holders and/or Underwriters," as the case may be), as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with written information furnished to the Issuer by any Holder or Underwriter expressly for use in the Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Issuer; and (iii) against any and all expense whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) of this subsection (a) of Section 4. 15 In no case shall the Issuer be liable under this indemnity agreement with respect to any claim made against any Holder or Underwriter or any such controlling Person unless the Issuer shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure so to notify the Issuer shall not relieve it from any liability which it may have otherwise than under subsections 4(a) and 4(b). The Issuer shall be entitled to participate at its own expense in the defense, or, if it so elects, within a reasonable time after receipt of such notice, to assume the defense of any suit brought to enforce any such claim, but if it so elects to assume the defense, such defense shall be conducted by counsel chosen by it and approved by the Holder, Underwriter, Holders or Underwriters or controlling Person, or defendant or defendants in any suit so brought, which approval shall not be unreasonably withheld. In any such suit, any Holder or Underwriter or any such controlling Person shall have the right to employ its own counsel, but the fees and expenses of such counsel shall be at the expense of such Holder or Underwriter or such controlling Person unless (i) the Issuer and such Holder or Underwriter shall have mutually agreed to the employment of such counsel, or (ii) the named parties to any such action (including any impleaded parties) include both such Holder or Underwriter or such controlling Person and the Issuer and such Holder or Underwriter or such controlling Person shall have been advised by such counsel that a conflict of interest between the Issuer and such Holder or Underwriter or such controlling Person may arise and for this reason it is not desirable for the same counsel to represent both the indemnifying party and also the indemnified party (it being understood, however, that the Issuer shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all such Holders and Underwriters and all such controlling Persons, which firm shall be designated in writing by the majority of such indemnified parties). The Issuer agrees to notify any Holder or Underwriter within a reasonable time of the assertion of any claim against it, any of its officers or directors or any Person who controls the Issuer within the meaning of Section 15 of the 1933 Act, in connection with any sale of the Bonds; provided, that the Issuer shall not be required to notify any Holder or Underwriter if such claim relates to a Registration Statement or Prospectus that does not name such Holder or Underwriter. (b) Each Holder and Underwriter severally agrees that it will indemnify and hold harmless the Issuer, each other Underwriter and each of their respective directors and each of the officers of the Issuer who signed the Registration Statement and each Person, if any, who controls the Issuer within the meaning of Section 15 of the 1933 Act to the same extent as the indemnity contained in subsection (a) of this Section 4, but only with respect to statements or omissions made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Issuer by such Holder or Underwriter expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto). In case any action shall be brought against the Issuer or any person so indemnified based on the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) and in respect of which indemnity may be sought against any Holder or Underwriter, such Holder or Underwriter shall have the rights and duties given to the Issuer, and the Issuer and each person so indemnified shall have the rights and duties given to the Holders and Underwriters, by the provisions of subsection (a) of this Section 4. 16 (c) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in this Section 4 is unavailable to or insufficient to hold harmless an indemnified party in respect of any and all loss, liability, claim, damage and expense whatsoever (or actions in respect thereof) that would otherwise have been indemnified under the terms of such indemnity, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and the Holders or Underwriters, severally, on the other from the sale of the Bonds. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Issuer on the one hand and the Holders or Underwriters on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense (or actions in respect thereof), as well as any other relevant equity considerations. The relative benefits received by the Issuer on the one hand and the Holders or Underwriters, severally, on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) of the Bonds and any Registrable Bonds (taken together) received by the Issuer bear to (i) the benefits of the Initial Purchasers from the total compensation received by the Initial Purchasers in respect of the discount as set forth in the table on the cover page of the Offering Memorandum, dated February 20, 2003 pursuant to which the Bonds were issued, (ii) the benefits of any Holders (including, if applicable, any Initial Purchaser who is also a Holder) from receiving Bonds registered under the 1933 Act, or (iii) the benefits of any Participating Broker-Dealer or Underwriter from the total compensation received by such Participating Broker-Dealer or Underwriters in respect of underwriting discounts and commissions received in the sales of the Bonds which resulted in such indemnified claims. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer on the one hand or the Holders or Underwriters, severally, on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuer and the Holders and Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 4 were determined by pro rata allocation (even if the Holders and Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The amount paid or payable by an indemnified party as a result of the losses, liabilities, claims, damages or expenses (or actions in respect thereof) referred to above in this subsection (d) of Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4, (i) no Holder (including, if applicable, any Initial Purchaser who is also a Holder) shall be required to contribute any amount in excess of the amount by which the total price at which the Bonds were sold by it 17 exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Initial Purchaser, Participating Broker-Dealer or Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Bonds underwritten or sold on commission by it exceeds the amount of any damages which such Initial Purchaser, Participating Broker-Dealer or Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders and Underwriters' obligations to contribute are several in proportion to the principal amount of Bonds purchased by them and not joint. 5. Miscellaneous. 5.1. Rule 144 and Rule 144A. The Issuer covenants that while any of the Registrable Bonds remain "restricted securities" within the meaning of the 1933 Act, it will upon the request of any Holder of Registrable Bonds make available the information specified in Rule 144A(d)(4) under the 1933 Act unless the Issuer is then subject to Section 13 or 15(d) of the 1934 Act. 5.2. No Inconsistent Agreements. The Issuer has not entered into and the Issuer will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Bonds in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with the rights granted to the Holders of the Issuer's other issued and outstanding Bonds under any such agreements. 5.3. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers of consents to departures from the provisions hereof may not be given unless the Issuer has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Bonds affected by such amendment, modification, supplement, waiver or departure. 5.4. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Issuer by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Issuer initially at the Issuer's address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is 18 acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person given the same to the Trustee under the Indenture, at the address specified in such Indenture. 5.5. Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Bonds in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Bonds, in any manner, whether by operation of law or otherwise, such Registrable Bonds shall be held subject to all of the terms of this Agreement, and by taking any holding such Registrable Bonds such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 5.6. Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Bonds) shall be a third party beneficiary to the agreements made hereunder between the Issuer, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. Each Holder of Registrable Bonds shall be a third party beneficiary to the agreements made hereunder between the Issuer, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. 5.7. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 5.8. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 5.10. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. DUKE ENERGY CORPORATION as Issuer By: /s/ David L. Hauser __________________________________________ Name: David L. Hauser Title: Senior Vice President and Treasurer Confirmed and accepted as of the date first above written:
BANC ONE CAPITAL MARKETS, INC. DEUTSCHE BANK SECURITIES INC. UBS WARBURG LLC By: /s/ Robert Nordlinger By: /s/ Charles W. Chigas By: /s/ Kimberly Blue _________________________ _________________________ __________________________ Name: Robert Nordlinger Name: Charles W. Chigas Name: Kimberly Blue Title: Managing Director Title: Managing Director Title: Managing Director By: /s/ Nigel Cree By: /s/ Scott D. Whitney _________________________ __________________________ Name: Nigel Cree Name: Scott D. Whitney Title: Managing Director Title: Director
Acting severally on behalf of themselves and the several Initial Purchasers named in Schedule I to the Purchase Agreement. 20 EX-5.1 5 y86343exv5w1.txt OPINION OF SIMPSON THACHER & BATLETT EXHIBIT 5.1 [Letterhead of Simpson Thacher & Bartlett] May 16, 2003 Duke Energy Corporation 422 South Church Street Charlotte, NC 28201 Ladies and Gentlemen: We have acted as counsel to Duke Energy Corporation, a North Carolina corporation (the "Company"), in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the issuance by the Company of $500,000,000 aggregate principal amount of First and Refunding Mortgage Bonds, 3.75% Series B due 2008 (the "Exchange Securities"). The Exchange Securities will be issued under a First and Refunding Mortgage, dated as of December 1, 1927 (the "Original Mortgage"), between the Company and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee, as supplemented and amended by various supplemental indentures, including by the Eighty-First Supplemental Indenture, dated as of February 25, 2003 (the Original Mortgage, as amended and supplemented, being referred to as the "Indenture"). The Exchange Securities will be offered by the Company in exchange for $500,000,000 aggregate principal amount of its outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (the "Securities"). We have examined the Registration Statement and the Indenture, which has been filed with the Commission as an exhibit to the Registration Statement. We also have examined the Duke Energy Corporation -2- May 16, 2003 originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company. In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We also have assumed that the Indenture is the valid and legally binding obligation of the Trustee. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 1. When the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indenture upon the exchange, the Exchange Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms. Our opinion set forth above is subject to the effects of (1) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (2) general equitable principles (whether considered in a proceeding in equity or at law) and (3) an implied covenant of good faith and fair dealing. Insofar as the opinions expressed herein relate to or are dependent upon matters governed by the laws of the State of North Carolina, we have relied upon the opinion of Robert T. Lucas III, Esq., Associate General Counsel and Assistant Secretary of the Company, dated the date Duke Energy Corporation -3- May 16, 2003 hereof. Insofar as opinions expressed herein relate to or are dependent upon matters governed by the laws of the State of South Carolina, we have relied upon the opinion of Karol P. Mack, Esq., Assistant General Counsel of the Company, dated the date hereof. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the Delaware General Corporation Law, the Delaware Revised Uniform Limited Partnership Act, the law of the State of New York and the federal law of the United States and, to the extent set forth herein, the laws of the States of North Carolina and South Carolina. We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-5.2 6 y86343exv5w2.txt OPINION OF ROBERT T. LUCAS III, ESQ EXHIBIT 5.2 May 16, 2003 Duke Energy Corporation 422 South Church Street Charlotte, NC 28201 Dear Sirs and Mesdames: I have acted as counsel to Duke Energy Corporation (the "Corporation") in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Corporation with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, the issuance by the Corporation of $500,000,000 aggregate principal amount of First and Refunding Exchange Securities, 3.75% Series B due 2008 (the "Exchange Securities") of the Corporation. The Exchange Securities will be offered by the Corporation in exchange for $500,000,000 aggregate principal amount of its outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (the "Securities"). The Exchange Securities will be issued under and secured by a First and Refunding Mortgage, dated as of December 1, 1927 (the "Original Mortgage"), between the Corporation and JPMorgan Chase Bank, as successor trustee (the "Trustee"), as amended and supplemented by various supplemental indentures, including the Eighty-First Supplemental Indenture, dated as of February 25, 2003, creating the Exchange Securities (the Original Mortgage, as amended and supplemented, being referred to as the "Mortgage"). I have relied as to certain factual matters on information obtained from public officials, officers of the Corporation and other sources believed by me to be responsible, have examined, and have relied as to matters of fact upon, the documents delivered to you at the closing (except the certificates representing the Exchange Securities, of which I have examined specimens), and have made such other and further investigations as I deemed necessary to express the opinions hereinafter set forth. In such examination, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such latter documents. Based upon the foregoing, I am of the opinion that: (i) When the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Mortgage upon the exchange, the Exchange Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms. Duke Energy Corporation May 16, 2003 Page 2 of 2 My opinion in paragraph (i) above is subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. I am a member of the Bar of the State of North Carolina, and I do not express any opinion herein concerning any law other than the laws of the State of North Carolina. With your permission, I am relying as to all matters of the laws of the State of South Carolina on the opinion dated hereof of Karol P. Mack, Esq., a copy of which is attached hereto. I hereby consent to (i) the filing of this opinion with the Securities and Exchange Commission as an exhibit to the above-mentioned Registration Statement and to the use of my name and the reference made to me under the caption "Legal Matters" in such Registration Statement and (ii) the reliance of Simpson Thacher & Bartlett, as counsel to the Corporation, on the opinions expressed herein for purposes of its opinion letter to the Corporation, of even date herewith. This opinion is rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose or, except as set forth above, relied upon by or furnished to any other person without my prior written consent. Very truly yours, /s/ Robert T. Lucas III ------------------------- Robert T. Lucas III, Esq. Associate General Counsel and Assistant Secretary EX-5.3 7 y86343exv5w3.txt OPINION OF KAROL P. MACK, ESQ EXHIBIT 5.3 May 16, 2003 Robert T. Lucas III, Esq. Associate General Counsel and Assistant Secretary Duke Energy Corporation 422 South Church Street Charlotte, NC 28201-1244 Dear Mr. Lucas: I have acted as counsel to Duke Energy Corporation (the "Corporation") in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Corporation with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the issuance by the Corporation of $500,000,000 aggregate principal amount of First and Refunding Exchange Securities, 3.75% Series B due 2008 (the "Exchange Securities"). The Exchange Securities will be offered by the Corporation in exchange for $500,000,000 aggregate principal amount of its outstanding First and Refunding Exchange Securities, 3.75% Series A due 2008 (the "Securities"). The Exchange Securities will be issued under and secured by a First and Refunding Mortgage, dated as of December 1, 1927 (the "Original Mortgage"), between the Corporation and JPMorgan Chase Bank, as successor trustee (the "Trustee"), as amended and supplemented by various supplemental indentures, including the Eighty-First Supplemental Indenture, dated as of February 25, 2003, creating the Exchange Securities (the Original Mortgage, as amended and supplemented, being referred to as the "Mortgage"). I have relied as to certain factual matters on information obtained from public officials, officers of the Corporation and other sources believed by me to be responsible, have examined, and have relied as to matters of fact upon, the documents delivered at the closing (except the certificates representing the Exchange Securities, of which I have examined specimens), and have made such other and further investigations as I deemed necessary to express the opinions hereinafter set forth. In such examination, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such latter documents. Based upon the foregoing, I am of the opinion that: (i) When the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Mortgage upon the exchange, the Exchange Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms. Robert T. Lucas III, Esq. May 16, 2003 Page 2 of 2 My opinion in paragraph (i) above is subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. I am a member of the Bar of the State of South Carolina, and I do not express any opinion herein concerning any law other than the laws of the State of South Carolina. I hereby consent to (i) the filing of this opinion with the Securities and Exchange Commission as an exhibit to the above-mentioned Registration Statement and to the use of my name and the reference made to me under the caption "Legal Matters" in such Registration Statement and (ii) the reliance of Simpson Thacher & Bartlett, as counsel to the Corporation, on the opinions expressed herein for purposes of its opinion letter to the Corporation, of even date herewith. This opinion is rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose or, except as set forth above, relied upon by or furnished to any other person without my prior written consent. Very truly yours, /s/ Karol P. Mack _________________________ Karol P. Mack Assistant General Counsel EX-12.1 8 y86343exv12w1.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges is calculated using the Securities and Exchange Commission guidelines.
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED ----------------------------------------------------------- MARCH 31, 2003 2002 2001 2000 1999 1998 ------------------ -------- --------- --------- -------- -------- (DOLLARS IN MILLIONS) Earnings as defined for fixed charges calculation Add: Pretax income from continuing operations(a) $ 600 $ 1,540 $ 3,303 $ 3,000 $ 1,331 $ 2,055 Fixed charges 399 1,488 1,128 1,123 757 599 Distributed income of equity investees 82 369 156 138 111 94 Deduct: Preference security dividend requirements of consolidated subsidiaries 29 142 170 126 87 44 Interest capitalized(b) 19 193 139 54 37 15 ====== ======== ========= ========= ======== ======== Total earnings $1,033 $ 3,062 $ 4,278 $ 4,081 $ 2,075 $ 2,689 ====== ======== ========= ========= ======== ======== Fixed charges: Interest on debt, including capitalized portions $ 359 $ 1,302 $ 924 $ 970 $ 644 $ 533 Estimate of interest within rental expense 10 44 34 27 26 22 Preference security dividend requirements of consolidated subsidiaries 29 142 170 126 87 44 ====== ======== ========= ========= ======== ======== Total fixed charges $ 398 $ 1,488 $ 1,128 $ 1,123 $ 757 $ 599 ====== ======== ========= ========= ======== ======== Ratio of earnings to fixed charges 2.6 2.1 3.8 3.6 2.7 4.5
(a) Excludes minority interest expenses and income or loss from equity investees (b) Excludes equity costs related to Allowance for Funds Used During Construction that are included in Other Income and Expenses in the Consolidated Statements of Income EX-23.4 9 y86343exv23w4.txt INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Duke Energy Corporation on Form S-4 of our report dated March 12, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" on January 1, 2001 and the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002), appearing in the Annual Report on Form 10-K of Duke Energy Corporation for the year ended December 31, 2002 and to the reference to us under the heading "Experts" in the Prospectus, which is a part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP - ------------------------- Charlotte, North Carolina May 16, 2003 EX-24.1 10 y86343exv24w1.txt POWER OF ATTORNEY EXHIBIT 24.1 DUKE ENERGY CORPORATION POWER OF ATTORNEY A maximum of $500,000,000 aggregate public offering price of First and Refunding Mortgage Bonds, 3.75% Series B due 2008 (the "Securities"). The undersigned DUKE ENERGY CORPORATION, a North Carolina corporation, and certain of its officers and/or directors, do each hereby constitute and appoint Richard B. Priory, Robert P. Brace, David L. Hauser, Myron L. Caldwell and Robert T. Lucas III, and each of them, to act as attorneys-in-fact for and in the respective names, places, and stead of the undersigned, to execute, seal, sign, and file with the Securities and Exchange Commission a Registration Statement or Registration Statements of said Duke Energy Corporation on Form S-3, Form S-4 or any other applicable forms and any and all amendments thereto for the purpose of registering under the Securities Act of 1933 the Securities, hereby granting to said attorneys-in-fact, and each of them, full power and authority to do and perform all and every act and thing whatsoever requisite, necessary, or proper to be done in and about the premises, as fully to all intents and purposes as the undersigned, or any of them, might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. Executed as of the 24th day of April, 2003. DUKE ENERGY CORPORATION By: /s/ R.B. Priory ------------------------------------ Chairman and Chief Executive Officer (Corporate Seal) ATTEST: /s/ Robert T. Lucas III - ---------------------------------------- Assistant Secretary /s/ R.B. PRIORY Chairman and Chief Executive Officer - ---------------------------------------- (Principal Executive Officer and Richard B. Priory Director) /s/ ROBERT P. BRACE Executive Vice President and Chief - ---------------------------------------- Financial Officer Robert P. Brace (Principal Financial Officer) /s/ KEITH G. BUTLER Senior Vice President and Controller - ---------------------------------------- (Principal Accounting Officer) Keith G. Butler /s/ G. ALEX BERNHARDT, SR. - ---------------------------------------- G. Alex Bernhardt, Sr. (Director) /s/ ROBERT J. BROWN - ---------------------------------------- Robert J. Brown (Director) /s/ WILLIAM T. ESREY - ---------------------------------------- William T. Esrey (Director) /s/ ANN M. GRAY - ---------------------------------------- Ann M. Gray (Director) /s/ GEORGE DEAN JOHNSON, JR. - ---------------------------------------- George Dean Johnson, Jr. (Director) /s/ MAX LENNON - ---------------------------------------- Max Lennon (Director) /s/ LEO E. LINBECK, JR. - ---------------------------------------- Leo E. Linbeck, Jr. (Director) /s/ JAMES G. MARTIN - ---------------------------------------- James G. Martin (Director) MICHAEL E.J. PHELPS - ---------------------------------------- Michael E.J. Phelps (Director) JAMES T. RHODES - ---------------------------------------- James T. Rhodes (Director) EX-24.2 11 y86343exv24w2.txt RESOLUTION OF THE BOARD OF DIRECTORS EXHIBIT 24.2 DUKE ENERGY CORPORATION CERTIFICATE The undersigned officer of DUKE ENERGY CORPORATION, a North Carolina corporation (the "Corporation"), does hereby certify that attached hereto is a true and complete copy of a resolution adopted by the Board of Directors of the Corporation with respect to the Registration Statement, which resolution is presently in full force and effect. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the seal of the Corporation this 16th day of May, 2003. /s/ Robert T. Lucas III --------------------------- Robert T. Lucas III Assistant Secretary (Corporate Seal) FURTHER RESOLVED, That each officer and director who may be required to execute such Registration Statement or any amendment thereto (whether on behalf of the Corporation or as an officer or director thereof or by attesting the seal of the Corporation or otherwise) be and hereby is authorized to execute a power of attorney appointing Richard B. Priory, Robert P. Brace, David L. Hauser, Myron L. Caldwell and Robert T. Lucas III, and each of them, as true and lawful attorneys and agents to execute in his name, place and stead (in any such capacity) such Registration Statement and any and all amendments thereto and all instruments necessary or advisable in connection therewith, to attest the seal of the Corporation thereon and to file the same with the Securities and Exchange Commission, each of said attorneys and agents to have power to act with or without the others and to have full power and authority to do and perform in the name and on behalf of each of such officers and directors, or both, as the case may be, every act whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as any such officer or director might or could do in person; EX-25.1 12 y86343exv25w1.txt STATEMENT OF ELIGIBILITY EXHIBIT 25.1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ---------------------------------------- JPMORGAN CHASE BANK (Exact name of trustee as specified in its charter) NEW YORK 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 PARK AVENUE NEW YORK, NEW YORK 10017 (Address of principal executive offices) (Zip Code)
William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) -------------------------------------------- DUKE ENERGY CORPORATION NORTH CAROLINA 56-0205520 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 526 SOUTH CHURCH STREET CHARLOTTE, NORTH CAROLINA 28202 (Address of principal executive offices) (Zip Code)
------------------------------------------------------- FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008 (Title of the indenture securities) ----------------------------------------------------------------- GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor and Guarantors. If the obligor or any Guarantor is an affiliate of the trustee, describe each such affiliation. None. - 2 - Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Restated Organization Certificate of the Trustee dated March 25, 1997 and the Certificate of Amendment dated October 22, 2001 (see Exhibit 1 to Form T-1 filed in connections with Registration Statement No. 333-76894, which is incorporated by reference.) 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank. 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement 333-76894, which is incorporated by reference.) 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank. 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, JPMorgan Chase Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 14th day of May, 2003. JPMORGAN CHASE BANK By /s/ Carol Ng ------------------------------- Carol Ng Vice President Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF JPMorgan Chase Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2002, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS ASSETS IN MILLIONS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ............................................................... $ 18,102 Interest-bearing balances ....................................................... 8,392 Securities: Held to maturity securities ......................................................... 396 Available for sale securities ....................................................... 79,372 Federal funds sold and securities purchased under agreements to resell Federal funds sold in domestic offices .......................................... 16,164 Securities purchased under agreements to resell ................................. 67,327 Loans and lease financing receivables: Loans and leases held for sale .................................................. 24,545 Loans and leases, net of unearned income ........................................ $ 159,647 Less: Allowance for loan and lease losses ....................................... 3,572 Loans and leases, net of unearned income and allowance ....................................................................... 156,075 Trading Assets ...................................................................... 194,198 Premises and fixed assets (including capitalized leases) ............................ 6,280 Other real estate owned ............................................................. 104 Investments in unconsolidated subsidiaries and associated companies ............................................................ 678 Customers' liability to this bank on acceptances outstanding ..................................................................... 349 Intangible assets Goodwill .................................................................... 2,159 Other Intangible assets ..................................................... 3,315 Other assets ........................................................................ 44,932 TOTAL ASSETS ........................................................................ $ 622,388 ===========
- 4 - LIABILITIES Deposits In domestic offices ............................................................. $ 171,786 Noninterest-bearing ............................................................. $ 75,101 Interest-bearing ................................................................ 96,685 In foreign offices, Edge and Agreement subsidiaries and IBF's .......................................................... 128,780 Noninterest-bearing ............................................................. $ 7,380 Interest-bearing ................................................................ 121,400 Federal funds purchased and securities sold under agree- ments to repurchase: Federal funds purchased in domestic offices ..................................... 5,701 Securities sold under agreements to repurchase .................................. 120,579 Trading liabilities ................................................................. 118,113 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) ....................................... 8,388 Bank's liability on acceptances executed and outstanding ............................ 356 Subordinated notes and debentures ................................................... 8,528 Other liabilities ................................................................... 24,520 TOTAL LIABILITIES ................................................................... 586,751 Minority Interest in consolidated subsidiaries ...................................... 97 EQUITY CAPITAL Perpetual preferred stock and related surplus ....................................... 0 Common stock ........................................................................ 1,785 Surplus (exclude all surplus related to preferred stock)....................... 16,304 Retained earnings ................................................................... 16,347 Accumulated other comprehensive income .............................................. 1,104 Other equity capital components ..................................................... 0 TOTAL EQUITY CAPITAL ................................................................ 35,540 ----------- TOTAL LIABILITIES, MINORITY INTEREST, AND EQUITY CAPITAL ............................ $ 622,388 ===========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct. WILLIAM B. HARRISON, JR.) ELLEN V. FUTTER )DIRECTORS FRANK A. BENNACK, JR. ) EX-99.1 13 y86343exv99w1.txt LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR TENDER OF ALL OUTSTANDING FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 IN EXCHANGE FOR FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008 OF DUKE ENERGY CORPORATION THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003 (THE "EXPIRATION DATE") UNLESS EXTENDED BY DUKE ENERGY CORPORATION. The Exchange Agent(the "Exchange Agent") is: JPMORGAN CHASE BANK For Delivery by Regular Mail: For Delivery by Registered or By Facsimile Transmission Certified Mail; Hand or (for Eligible Guarantor JPMorgan Chase Bank Overnight Delivery: Institutions Only): ITS Bond Events P.O. Box 2320 JPMorgan Chase Bank (214) 468-6494 Dallas, TX 75221 ITS Bond Events Attention: Frank Ivins 2001 Bryan Street, 9th Floor Dallas, TX 75201 Attention: Frank Ivins
For Information Call: (800) 275-2048 For Confirmation by Telephone: (214) 468-6464 ------------------ DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated May , 2003 (the "Prospectus") of Duke Energy Corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange its First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Bonds") for each of its outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (the "Outstanding Bonds" and, together with the Exchange Bonds, the "Bonds") from the holders thereof. The terms of the Exchange Bonds are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Bonds for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Bonds are freely transferable by holders thereof (except as provided herein or in the Prospectus) and are not subject to any covenant regarding registration under the Securities Act. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. 2 The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. List below the Outstanding Bonds to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto.
- -------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OUTSTANDING BONDS TENDERED HEREWITH - -------------------------------------------------------------------------------------------------------------------- AGGREGATE PRINCIPAL AMOUNT REPRESENTED NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE BY OUTSTANDING PRINCIPAL AMOUNT (PLEASE FILL IN) NUMBER(S)* BONDS** TENDERED** - -------------------------------------------------------------------------------------------------------------------- TOTAL:
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Bonds. See Instruction 2. - -------------------------------------------------------------------------------- Holders of Outstanding Bonds whose Outstanding Bonds are not immediately available or who cannot deliver all other required documents to the Exchange Agent prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Outstanding Bonds according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Outstanding Bonds are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Bonds are held of record by The Depository Trust Company ("DTC"). 3 [ ] CHECK HERE IF TENDERED OUTSTANDING BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) - -------------------------------------------------------------------------------- Name of Eligible Guarantor Institution that Guaranteed Delivery --------------- Date of Execution of Notice of Guaranteed Delivery ----------------------------- If Delivered by Book-Entry Transfer: Name of Tendering Institution - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- [ ] CHECK HERE IF EXCHANGE BONDS ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL: Name - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- [ ] CHECK HERE IF EXCHANGE BONDS ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: Name - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING BONDS FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO: Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Bonds. If the undersigned is a broker-dealer that will receive Exchange Bonds for its own account in exchange for Outstanding Bonds that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Outstanding Bonds acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the Exchange Bonds to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Outstanding Bonds from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 4 Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Outstanding Bonds indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Outstanding Bonds tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Outstanding Bonds as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company, in connection with the Exchange Offer) to cause the Outstanding Bonds to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Bonds and to acquire Exchange Bonds issuable upon the exchange of such tendered Outstanding Bonds, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Outstanding Bonds, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Outstanding Bonds or transfer ownership of such Outstanding Bonds on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Outstanding Bonds by the Company and the issuance of Exchange Bonds in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement, dated as of February 25, 2003, among the Company, Banc One Capital Markets, Inc., Deutsche Bank Securities Inc., UBS Warburg LLC, ABN AMRO Incorporated, Barclays Capital Inc., CIBC World Markets Corp., Scotia Capital (USA) Inc. and TD Securities (USA) Inc. (the "Registration Rights Agreement"), and that the Company shall have no further obligations or liabilities thereunder except as provided in Section 4 of such agreement. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer -- Certain Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Outstanding Bonds tendered hereby and, in such event, the Outstanding Bonds not exchanged will be returned to the undersigned at the address shown below unless indicated otherwise above, promptly following the expiration or termination of the Exchange Offer. In addition, the Company may amend the Exchange Offer at any time prior to the Expiration Date if any of the conditions set forth under "The Exchange Offer -- Certain Conditions to the Exchange Offer" occur. The undersigned understands that tenders of Outstanding Bonds pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Company's acceptance for exchange of such tendered Outstanding Bonds, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Outstanding Bonds. By tendering Outstanding Bonds and executing this Letter of Transmittal, the undersigned represents that Exchange Bonds acquired in the exchange will be obtained in the ordinary course of business of the undersigned, that the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Bonds, that the undersigned is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that if the 5 undersigned or the person receiving such Exchange Bonds, whether or not such person is the undersigned, is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Bonds. If the undersigned or the person receiving such Exchange Bonds, whether or not such person is the undersigned, is a broker-dealer that will receive Exchange Bonds for its own account in exchange for Outstanding Bonds that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Any holder of Outstanding Bonds using the Exchange Offer to participate in a distribution of the Exchange Bonds (i) cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or similar interpretive letters and (ii) must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale transaction. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Outstanding Bonds may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable. Certificates for all Exchange Bonds delivered in exchange for tendered Outstanding Bonds and any Outstanding Bonds delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. 6 The undersigned, by completing the box entitled "Description of Outstanding Bonds Tendered Herewith" above and signing this letter, will be deemed to have tendered the Outstanding Bonds as set forth in such box. TENDERING HOLDER(S) SIGN HERE (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OUTSTANDING BONDS HEREBY TENDERED OR IN WHOSE NAME OUTSTANDING BONDS ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Date --------------------------------------------------------------------------- Name(s) - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- (INCLUDING ZIP CODE) Daytime Area Code and Telephone No. ----------------------------------------------------------------- Taxpayer Identification No. ------------------------------------------------------------------------------ GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTION 3) Authorized Signature - -------------------------------------------------------------------------------- Dated - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- Address of Firm - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. --------------------------------------------------------------------------- 7 SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if Exchange Bonds or Outstanding Bonds not tendered are to be issued in the name of someone other than the registered holder of the Outstanding Bonds whose name(s) appear(s) above. Issue: [ ] Outstanding Bonds not tendered to: [ ] Exchange Bonds to: Name(s) - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. -------------------------------------------- - -------------------------------------------------------------------------------- Tax Identification No. - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if Exchange Bonds or Outstanding Bonds not tendered are to be sent to someone other than the registered holder of the Outstanding Bonds whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail: [ ] Outstanding Bonds not tendered to: [ ] Exchange Bonds to: Name(s) - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES A holder of Outstanding Bonds may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Outstanding Bonds being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Outstanding Bonds may tender Outstanding Bonds by book-entry transfer by crediting the Outstanding Bonds to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Outstanding Bonds acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal and the DTC participant confirms on behalf of itself and the beneficial owners of such Outstanding Bonds all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. DELIVERY OF THE AGENT'S MESSAGE BY DTC WILL SATISFY THE TERMS OF THE EXCHANGE OFFER AS TO EXECUTION AND DELIVERY OF A LETTER OF TRANSMITTAL BY THE PARTICIPANT IDENTIFIED IN THE AGENT'S MESSAGE. DTC PARTICIPANTS MAY ALSO ACCEPT THE EXCHANGE OFFER BY SUBMITTING A NOTICE OF GUARANTEED DELIVERY THROUGH ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING BONDS AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OUTSTANDING BONDS OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Holders whose Outstanding Bonds are not immediately available or who cannot deliver their Outstanding Bonds and all other required documents to the Exchange Agent prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Outstanding Bonds pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Guarantor Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from such Eligible Guarantor Institution either a properly completed and duly executed Notice of Guaranteed Delivery, by facsimile transmission, mail or hand delivery, or a properly transmitted agent's message relating to guaranteed delivery, setting forth the name and address of the tendering holder, the names in which such Outstanding Bonds are registered, and, if applicable, the certificate numbers of the Outstanding Bonds to be tendered; and (iii) all tendered Outstanding Bonds (or a confirmation of any book-entry transfer of such Outstanding Bonds into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal or an agent's 9 message, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter or facsimile transmission, all as provided in the Prospectus. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Bonds for exchange. 2. PARTIAL TENDERS; WITHDRAWALS If less than the entire principal amount of Outstanding Bonds evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Outstanding Bonds tendered in the box entitled "Description of Outstanding Bonds Tendered Herewith." A newly issued certificate for the Outstanding Bonds submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Outstanding Bonds delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Outstanding Bonds, a written notice of withdrawal must: (i) be received by the Exchange Agent at the address for the Exchange Agent set forth above before the Company notifies the Exchange Agent that it has accepted the tender of Outstanding Bonds pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Outstanding Bonds to be withdrawn; (iii) identify the Outstanding Bonds to be withdrawn (including the principal amount of such Outstanding Bonds, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Outstanding Bonds and the principal amount of Outstanding Bonds represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Outstanding Bonds exchanged; and (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee as provided in the Prospectus). The Exchange Agent will return the properly withdrawn Outstanding Bonds promptly following receipt of notice of withdrawal. If Outstanding Bonds have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Bonds or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Any Outstanding Bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Bonds which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Bonds tendered by book-entry transfer into the Exchange Agent's account at the book entry transfer facility pursuant to the book-entry transfer procedures described above, such Outstanding Bonds will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Bonds may be retendered by following one of the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEES OF SIGNATURES If this Letter of Transmittal is signed by the registered holder(s) of the Outstanding Bonds tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. 10 If any of the Outstanding Bonds tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Outstanding Bonds registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Outstanding Bonds. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include any entity whose name appears on a security listing as the owner of the Outstanding Bonds) of Outstanding Bonds listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Outstanding Bonds listed, such Outstanding Bonds must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Outstanding Bonds. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Guarantor Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution, unless Outstanding Bonds are tendered: (i) by a holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Guarantor Institution (as defined below). In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an Eligible Guarantor Institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Guarantor Institution"). If Outstanding Bonds are registered in the name of a person other than the signer of this Letter of Transmittal, the Outstanding Bonds surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Guarantor Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS Tendering holders should indicate, as applicable, the name and address to which the Exchange Bonds or certificates for Outstanding Bonds not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Outstanding Bonds by book-entry transfer may request that Outstanding Bonds not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. 5. TRANSFER TAXES Except as set forth in this Instruction 5, the Company will pay or cause to be paid any transfer taxes with respect to the transfer of Outstanding Bonds to it, or to its order, pursuant to the Exchange Offer. If Exchange Bonds are to be issued or delivered to, or if Outstanding Bonds not tendered or exchanged are to be registered in the name of, any persons other than the registered owners, or if tendered Outstanding 11 Bonds are registered in the name of any persons other than the persons signing this Letter of Transmittal, the amount of transfer taxes (whether imposed on the registered holder or such other person) payable on account of the transfer to such other person will be billed to the holder unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. 6. WAIVER OF CONDITIONS The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES Any holder whose Outstanding Bonds have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. SUBSTITUTE FORM W-9 Each holder of Outstanding Bonds whose Outstanding Bonds are accepted for exchange (or other recipient of any Exchange Bonds) is required to provide the Exchange Agent with a correct taxpayer identification number ("TIN") (generally the holder's Social Security or federal employer identification number) and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other person) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other person) to a $50 penalty imposed by the Internal Revenue Service and 30% federal income tax backup withholding on payments made in connection with the Outstanding Bonds. The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or other person) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is not provided by the time any payment is made in connection with the Outstanding Bonds, 30% of all such payments will be withheld until a TIN is provided and, if a TIN is not provided within 60 days, such withheld amounts will be paid over to the Internal Revenue Service. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. 10. IRREGULARITIES All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Outstanding Bonds will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to the particular Outstanding Bonds covered by any Letter of Transmittal or tendered pursuant to such Letter of Transmittal. Neither the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in tenders of incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OUTSTANDING BONDS OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 12 IMPORTANT TAX INFORMATION Under federal income tax law, a holder whose tendered Outstanding Bonds are accepted for exchange is required to provide the Exchange Agent with the holder's current TIN on Substitute Form W-9 below, or, alternatively, to establish another basis for an exemption from backup withholding. If the holder is an individual, the TIN is his or her Social Security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, any payment made to the holder or other payee with respect to Outstanding Bonds exchanged pursuant to the Exchange Offer or to Exchange Bonds may be subject to a 30% back-up withholding tax. Certain holders of Outstanding Bonds (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. However, exempt holders of Outstanding Bonds should indicate their exempt status on Substitute Form W-9. For example, a corporation should complete the Substitute Form W-9, providing its TIN and indicating that it is exempt from backup withholding. In order for a foreign individual to qualify as an exempt recipient, the holder must submit a properly completed Internal Revenue Service Form W-8BEN or other appropriate Form W-8 (a "Form W-8"), signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Paying Agent is required to withhold 30% of any payments made to the holder of Outstanding Bonds or other payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on any payment made to a holder or other payee with respect to Outstanding Bonds exchanged pursuant to the Exchange Offer or to Exchange Bonds, the holder is required to notify the Exchange Agent of the holder's current TIN (or the TIN of any other payee) by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that the holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that the holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the holder that the holder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The holder of Outstanding Bonds is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Outstanding Bonds. If the Outstanding Bonds are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 13
- ------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: DUKE ENERGY CORPORATION - ------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX --------------------------------------- FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Name DEPARTMENT OF THE BELOW. --------------------------------------- TREASURY Social Security Number INTERNAL REVENUE OR SERVICE --------------------------------------- Employer Identification Number --------------------------------------- PART 3 -- Awaiting TIN [ ] --------------------------------------------------------------------------------------
PAYER'S REQUEST PART 2 -- CERTIFICATION -- Under the penalties of perjury, I certify that: FOR TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I NUMBER (TIN) am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien). -------------------------------------------------------------------------------------- CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). -------------------------------------------------------------------------------------- The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. SIGN HERE 4 SIGNATURE ------------------------------------------ DATE ---------------------- - -------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 30% of all reportable payments made to me will be withheld. SIGNATURE ------------------------------ DATE ------------------------- 14 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYER. Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service.
- -------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of the individuals (joint account or, if combined account) fund, the first individual on the account.(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee(1) revocable savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) that is not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - --------------------------------------------------
- -------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, The legal entity(4) estate, or pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or The broker or nominee registered nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) BOND: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 15 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or custodian. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Bond: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. Exempt payees described above must file Form W-9 or a substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE. -- Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 30% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 16 EX-99.2 14 y86343exv99w2.txt LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS EXHIBIT 99.2 DUKE ENERGY CORPORATION OFFER TO EXCHANGE FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION. May , 2003 To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees: As described in the enclosed Prospectus, dated May , 2003 (the "Prospectus"), and form of Letter of Transmittal (the "Letter of Transmittal"), Duke Energy Corporation (the "Company") is offering to exchange up to $500,000,000 aggregate principal amount of the Company's First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which have been registered under the Securities Act of 1933, as amended (collectively, the "Exchange Bonds"), for up to $500,000,000 aggregate principal amount of outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (collectively, the "Outstanding Bonds") (the "Exchange Offer"). The terms of the Exchange Bonds are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Bonds for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Bonds are freely transferable by holders thereof, upon the terms and subject to the conditions of the enclosed Prospectus. The Company will accept for exchange any and all Outstanding Bonds properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. The Company will not pay any fees or commissions to you for soliciting tenders of Outstanding Bonds pursuant to the Exchange Offer. However, you will be reimbursed by the Company for customary and reasonable mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients, including the reasonable expenses of overnight courier services. The Company will pay all transfer taxes, if any, applicable to the tender of the Outstanding Bonds to it or its order, except as otherwise provided in the Prospectus and Letter of Transmittal. For your information and for forwarding to your clients for whom you hold the Bonds held of record in your name or in the name of your nominee, enclosed are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal for your use and for the information of your clients, together with a Substitute Form W-9 and Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (providing information relating to U.S. federal income tax backup withholding); 3. A form of Notice of Guaranteed Delivery; and 4. A printed form of letter, including a Letter of Instructions, which you may use to correspond with your clients for whose accounts you hold Outstanding Bonds held of record in your name or in the name of your nominee, with space provided for obtaining such clients' instructions regarding the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE TO OBTAIN THEIR INSTRUCTIONS. Any inquiries you may have with respect to the Exchange Offer should be addressed to JPMorgan Chase Bank, the exchange agent for the Exchange Offer, at their address and telephone number set forth in the enclosed Prospectus and Letter of Transmittal. Additional copies of the enclosed materials may be obtained from the exchange agent. Very truly yours, Duke Energy Corporation NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF EITHER OF THEM IN CONNECTION WITH THE EXCHANGE OFFER, OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS EXPRESSLY CONTAINED THEREIN. 2 EX-99.3 15 y86343exv99w3.txt LETTER TO CLIENTS EXHIBIT 99.3 DUKE ENERGY CORPORATION OFFER TO EXCHANGE FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION. May , 2003 To Our Clients: Enclosed for your consideration are a Prospectus, dated , 2003 (the "Prospectus"), and form of Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by Duke Energy Corporation (the "Company") to exchange up to $500,000,000 aggregate principal amount of the Company's First and Refunding Mortgage Bonds, 3.75% Series B due 2008, which have been registered under the Securities Act of 1933, as amended (collectively, the "Exchange Bonds"), for up to $500,000,000 aggregate principal amount of outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (collectively, the "Outstanding Bonds"). The terms of the Exchange Bonds are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Bonds for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Bonds are freely transferable by holders thereof, upon the terms and subject to the conditions of the enclosed Prospectus. The Company will accept for exchange any and all Outstanding Bonds properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. This material is being forwarded to you as the beneficial owner of Outstanding Bonds held by us for your account but not registered in your name. A tender of such Outstanding Bonds may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Outstanding Bonds registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if such beneficial owners wish to tender Outstanding Bonds in the Exchange Offer. Accordingly, we request instructions as to whether you wish to tender any or all of such Outstanding Bonds held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. If you wish to have us do so, please so instruct us by completing, executing and returning to us the instruction form that appears on the reverse side hereof. We urge you to read carefully the Prospectus and the Letter of Transmittal before instructing us as to whether or not to tender your Outstanding Bonds. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer by the Company with respect to the Outstanding Bonds. This will instruct you, the registered holder, to tender the principal amount of the Outstanding Bonds indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal.
- --------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT HELD FOR ACCOUNT HOLDER(S) PRINCIPAL AMOUNT TO BE TENDERED* - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
* Unless otherwise indicated, the entire principal amount held for the account of the undersigned will be tendered. SIGN HERE Dated ---------------------------------------------------------------------- Signature(s) ---------------------------------------------------------------------- Print Name(s) ---------------------------------------------------------------------- Address: ---------------------------------------------------------------------- ---------------------------------------------------------------------- (Please include Zip Code) Telephone Number ---------------------------------------------------------------------- (Please include Area Code) Tax Identification Number ---------------------------------------------------------------------- (Social Security Number or Employer Identification Number) My Account Number With You ---------------------------------------------------------------------------- 2 EX-99.4 16 y86343exv99w4.txt NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.4 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES A DUE 2008 IN EXCHANGE FOR FIRST AND REFUNDING MORTGAGE BONDS, 3.75% SERIES B DUE 2008 OF DUKE ENERGY CORPORATION Registered holders of outstanding First and Refunding Mortgage Bonds, 3.75% Series A due 2008 (the "Outstanding Bonds") who wish to tender their Outstanding Bonds in exchange for a like principal amount of new First and Refunding Mortgage Bonds, 3.75% Series B due 2008 (the "Exchange Bonds") and whose Outstanding Bonds are not immediately available or who cannot deliver their Outstanding Bonds and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to JPMorgan Chase Bank (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by facsimile transmission, mail or hand delivery to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus. The Exchange Agent is: JPMORGAN CHASE BANK
For Delivery by Regular For Delivery by Registered By Facsimile Transmission Mail: or Certified Mail; Hand or (for Eligible Guarantor Overnight Delivery: Institutions Only): JPMorgan Chase Bank ITS Bond Events JPMorgan Chase Bank (214) 468-6494 P.O. Box 2320 ITS Bond Events Attention: Frank Ivins Dallas, TX 75221 2001 Bryan Street, 9th Floor Dallas, TX 75201 Attention: Frank Ivins
For Information Call: (800) 275-2048 For Confirmation by Telephone: (214) 468-6464 --------------------- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Guarantor Institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Outstanding Bonds indicated below, upon the terms and subject to the conditions contained in the Prospectus dated , 2003 of Duke Energy Corporation (the "Prospectus"), receipt of which is hereby acknowledged.
- ----------------------------------------------------------------------------------------------- DESCRIPTION OF OUTSTANDING BONDS TENDERED - ----------------------------------------------------------------------------------------------- NAME AND ADDRESS OF CERTIFICATE NUMBER(S) REGISTERED HOLDER AS OF OUTSTANDING BONDS IT APPEARS ON THE TENDERED (OR PRINCIPAL AMOUNT OUTSTANDING BONDS ACCOUNT NUMBER AT OF OUTSTANDING NAME OF TENDERING HOLDER (PLEASE PRINT) BOOK-ENTRY FACILITY) BONDS TENDERED - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
SIGN HERE Name of Registered or Acting Holder: - ------------------------------------------------------------------------ Signature(s): - -------------------------------------------------------------------------------- Name(s) (please print): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Telephone Number: - -------------------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- IF OUTSTANDING BONDS WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: - -------------------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- 2 THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Outstanding Bonds (or a confirmation of book-entry transfer of such Outstanding Bonds into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) or agent's message in lieu thereof, with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date (as defined in the Letter of Transmittal). Name of Firm: ---------------------------------- ----------------------------------------- (Authorized Signature) Address: Title: - ----------------------------------------- ----------------------------------------- - ----------------------------------------- Name: ----------------------------------------- (Zip Code) (Please type or print) Area Code and Telephone No.: - ----------------------------------------- Date: -----------------------------------------
NOTE: DO NOT SEND OUTSTANDING BONDS WITH THIS NOTICE OF GUARANTEED DELIVERY. OUTSTANDING BONDS SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 -----END PRIVACY-ENHANCED MESSAGE-----