-----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, VrZYqhMpXrUtBZLG+WC5Y7ZDXuAHI1Cxpdfk/NPldUZg0+zw4JmA+3dDUzzxbN5q 4tako8gMzuEvXigAzWiTZA== 0001169232-05-001376.txt : 20050228 0001169232-05-001376.hdr.sgml : 20050228 20050228172421 ACCESSION NUMBER: 0001169232-05-001376 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041216 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050228 DATE AS OF CHANGE: 20050228 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04928 FILM NUMBER: 05646820 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 8-K 1 d62762_8k.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report: December 16, 2004 (Date of earliest event reported): DUKE ENERGY CORPORATION (Exact name of registrant as specified in charter) NORTH CAROLINA 1-4928 52-0205520 (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 526 South Church Street Charlotte, North Carolina 28202-1904 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 704-594-6200 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 1 ITEM 1.01 Entry Into a Material Definitive Agreement On February 22, 2005, the Compensation Committee of the Board of Directors of Duke Energy Corporation took the actions described below. In addition, this Report on Form 8-K covers certain actions taken by the Compensation Committee on December 16, 2004, that have not previously been reported on Form 8-K. 1. Certification of Chairman and Chief Executive Officer 2004 Performance Goals On February 22, 2005, the Compensation Committee of the Board of Directors certified 2004 performance for vesting of performance shares granted to Paul M. Anderson, the registrant's Chairman and Chief Executive Officer, on November 1, 2003, resulting in the vesting of 120,000 of Mr. Anderson's performance shares as of December 31, 2004. The performance shares were granted under the Duke Energy Corporation 1998 Long-Term Incentive Plan, which, as amended, was approved by the registrant's shareholders on April 24, 2003 and filed as Exhibit 1 to the registrant's Schedule 14A filed March 28, 2003. Vested performance shares will be paid to Mr. Anderson in shares of Duke Energy Common Stock following termination of his employment with the registrant. Dividend equivalents granted to Mr. Anderson with respect to those performance shares provide for payment of dividend equivalents in cash while the performance shares remain outstanding but unpaid, payable at the time that cash dividends are paid on the outstanding shares of Duke Energy Common Stock. 2. Approval of Payment of 2004 Executive Officer Short-Term Incentives On February 22, 2005, following evaluation of 2004 performance compared against 2004 short-term incentive goals, the Compensation Committee certified 2004 performance under the Duke Energy Corporation Executive Short-Term Incentive Plan, resulting in the payment to executive officers, including Fred J. Fowler, David L. Hauser, Jimmy W. Mogg and Ruth G. Shaw (together with Mr. Anderson, the Named Executive Officers), but excluding Mr. Anderson, of 2004 annual cash incentives. The Duke Energy Corporation Executive Short-Term Incentive Plan, as amended, was approved by the registrant's shareholders on April 24, 2003 and filed as Exhibit 2 to the registrant's Schedule 14A filed March 28, 2003. The approved payments to Named Executive Officers were as follows: Mr. Fowler, $1,055,939; Mr. Hauser, $562,710; Mr. Mogg, $580,183; and Dr. Shaw, $534,254. These payments do not include any payment on account of one individual objective for each of Messrs. Fowler and Hauser and Dr. Shaw that cannot be determined until the filing of the registrant's 2004 Form 10-K; an additional 2004 short-term incentive payment to these individuals may be made if and when the Compensation Committee certifies performance of this objective. 2 3. Establishment of Chairman and Chief Executive Officer 2005 Performance Goals On February 22, 2005, the Compensation Committee established 2005 performance goals for performance shares granted on November 1, 2003 to Mr. Anderson under the Duke Energy Corporation 1998 Long-Term Incentive Plan. Up to 120,000 performance shares will vest as of December 31, 2005, if the 2005 performance goals are achieved. Mr. Anderson's 2005 performance goals will be based on the registrant's earnings per share (EPS), return on capital employed (ROCE) and individual objectives, weighted 50%, 30% and 20%, respectively. The performance shares will be forfeited and will cease to be outstanding to the extent the 2005 performance goals are not achieved. The terms of the performance shares are described above under "Certification of Chairman and Chief Executive Officer 2004 Performance Goals", and are more fully described in the Employment Agreement between Mr. Anderson and the registrant dated November 2003, as amended, filed as Exhibits 10-18 and 10-18.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2003. With respect to the EPS component of the performance goal (which also applies to the executive officer short-term incentive opportunities described below), the target, which is tied to ongoing basic EPS, is $1.60 per share. The minimum, which is the threshold for any earnings-related bonus payout, will also be tied to ongoing basic EPS and has been established at $1.45 per share. The $1.60 and $1.45 ongoing basic EPS compensation target and minimum amounts, respectively, for 2005 represent non-GAAP financial measures as they exclude any "special items," as defined by the registrant. The most directly comparable GAAP measure is basic earnings per share that will be based upon reported earnings available for common stockholders for 2005. Due to the forward-looking nature of these non-GAAP financial measures, information to reconcile such non-GAAP financial measures to the most directly comparable GAAP financial measure is not available at this time as the registrant is unable to forecast any "special items" for 2005. 4. 2005 Executive Officer Base Salaries, Short-Term Incentive Opportunities and Long-Term Incentive Opportunities On December 16, 2004, the Compensation Committee established, effective January 1, 2005, the base salaries, the 2005 short-term incentive (STI) opportunities under the Duke Energy Corporation Executive Short-Term Incentive Plan and the 2005 long-term incentive (LTI) opportunities under the Duke Energy Corporation 1998 Long-Term Incentive Plan for executive officers, including the Named Executive Officers other than Mr. Anderson. The base salaries and target STI and LTI opportunities for the Named Executive Officers other than Mr. Anderson are set forth in the table below. - -------------------------------------------------------------------------------- Target opportunity, as a percentage of Base Salary base salary --------------------------------------- STI Opportunity LTI Opportunity - -------------------------------------------------------------------------------- Mr. Fowler $755,500 90% 330% - -------------------------------------------------------------------------------- Mr. Hauser $520,000 80% 250% - -------------------------------------------------------------------------------- Mr. Mogg $520,000 80% 250% - -------------------------------------------------------------------------------- Dr. Shaw $510,000 75% 250% - -------------------------------------------------------------------------------- 3 Short-Term Incentives The amounts payable under the STI opportunities are based on achievement of financial measures and individual objectives, which consist of a combination of strategic and operational measures. The financial measures for 2005 are based upon the registrant's earnings per share (EPS) and return on capital employed (ROCE). In addition, Dr. Shaw has financial measures associated with Duke Power's earnings before interest and taxes (EBIT), Duke Power's ROCE, and Duke Power's cash flow. The financial goals established are consistent with the 2005 financial plan but exclude certain potential transactions contemplated in the financial plan that the Compensation Committee did not consider to be representative of ongoing operations. Performance levels for Duke Energy EPS and ROCE, and Duke Power EBIT, ROCE and cash flow may be adjusted by the Compensation Committee for certain types of transactions. The Compensation Committee approved the Duke Energy ROCE and Duke Power ROCE estimated performance target on December 16, 2004 and approved the final Duke Energy ROCE and Duke Power ROCE targets on February 22, 2005. The Compensation Committee approved the performance targets for each of the other goals on December 16, 2004. 2005 STI performance goals for each Named Executive Officer other than Mr. Anderson were weighted as follows: - -------------------------------------------------------------------------------- 2005 STI Goals Weighting, as percentage of performance goal --------------------------------------------- Messrs. Fowler, Hauser and Mogg Dr. Shaw - -------------------------------------------------------------------------------- EPS 50% 25% - -------------------------------------------------------------------------------- ROCE 30% 15% - -------------------------------------------------------------------------------- Duke Power EBIT -- 20% - -------------------------------------------------------------------------------- Duke Power ROCE -- 10% - -------------------------------------------------------------------------------- Duke Power Cash Flow -- 10% - -------------------------------------------------------------------------------- Individual Objectives 20% 20% - -------------------------------------------------------------------------------- Depending on performance, the foregoing Named Executive Officers could receive from 0% to 190% of their STI targets. Long-Term Incentives Although the Compensation Committee approved the LTI opportunity and underlying performance goals, as applicable, on December 16, 2004, it did not authorize the actual grants for executive officers, including the Named Executive Officers other than Mr. Anderson, until February 22, 2005. The actual grant was made effective February 28, 2005. The number of performance shares and phantom stock units awarded was determined based 4 on the closing price of Duke Energy Common Stock on the business day immediately preceding the date of the grant. The number of phantom stock units and performance shares granted to Named Executive Officers other than Mr. Anderson were as follows: - -------------------------------------------------------------------------------- Phantom Stock Units Performance shares(1) - -------------------------------------------------------------------------------- Mr. Fowler 45,480 56,850 - -------------------------------------------------------------------------------- Mr. Hauser 23,710 29,640 - -------------------------------------------------------------------------------- Mr. Mogg 23,710 29,640 - -------------------------------------------------------------------------------- Dr. Shaw 23,260 29,080 - -------------------------------------------------------------------------------- (1) The number of shares awarded represents the number of shares of Duke Energy Common Stock payable upon achievement of the TSR goal at the maximum performance level (i.e. 125% of target award shares). One-half the value of the 2005 LTI award was granted in the form of performance shares, and the other half was granted in the form of phantom stock. o The determination of the actual number of performance shares earned is based on the registrant's target total shareholder return (TSR) over the three-year performance period from January 1, 2005 to December 31, 2007 as compared to the TSR of the S&P 500 for that period. The actual number of performance shares that can be earned ranges from 0% to 125% of target award shares. To achieve the threshold, target and maximum payments indicated above, the registrant's TSR ranking must be at the 55th percentile, 70th percentile and 80th percentile, respectively. Performance shares earned are interpolated for TSR performance between these percentiles. The threshold and maximum payments represent 50% and 125%, respectively, of the target number of shares. For each performance share earned, participants receive one share of Duke Energy Common Stock. Payment of any shares earned will be made following the determination in early 2008 of the extent to which the performance goal has been achieved, unless (to the extent permitted by applicable law) an election is made by the executive to defer payment of the performance shares until termination of employment. Any shares not earned are forfeited. In addition, following determination that the performance goal has been achieved, participants will receive a cash payment equal to the amount of cash dividends paid on one share of Duke Energy Common Stock during the performance period multiplied by the number of performance shares earned, unless (to the extent permitted by applicable law) an election is made by the executive to defer payment of the performance shares and tandem dividend equivalents until termination of employment. If the executive's employment terminates during the performance period as a result of retirement, death, disability, or by the registrant without cause or as a result of a divestiture, following determination that the TSR goal has been achieved the number of shares earned will be adjusted to reflect actual service during the performance period. If the executive's employment terminates during the performance period for any other reason, all shares under the award will be forfeited. In the event of a "change in control" (as defined in the Duke Energy 1998 Long-Term Incentive Plan) prior to determination that the TSR goal has been achieved, target TSR performance is assumed and the number of 5 shares earned are adjusted to reflect actual service during the performance period prior to the change in control. The form of performance award agreement for each Named Executive Officer other than Mr. Anderson is attached hereto as Exhibit 10.1. o Phantom stock is represented by units denominated in shares of Duke Energy Common Stock. Each phantom stock unit that vests represents the right to receive one share of Duke Energy Common Stock. The phantom stock awards also grant an equal number of dividend equivalents, which represent the right to receive cash payments equivalent to the cash dividends paid on the number of shares of Duke Energy Common Stock represented by unvested phantom units. One fifth of the 2005 LTI phantom stock award will vest on each of the first five anniversaries of the grant date provided the recipient continues to be employed by the registrant or his or her employment terminates on account of retirement. If the recipient's employment terminates as a result of death, disability, or by the registrant without cause or as a result of a divestiture, units in the award are reduced to reflect actual service during the installment vesting period and are immediately vested, and any remaining unvested units are forfeited. If the recipient's employment terminates other than on account of retirement, death, disability, or by the registrant without cause or as a result of divestiture, any units remaining unvested on the termination date are forfeited. If the executive's employment is terminated by Duke Energy without cause within two years following a "change in control" (as defined in the Duke Energy 1998 Long-Term Incentive Plan), all outstanding unvested units will vest upon separation of service, as defined by Internal Revenue Code Section 409A. The form of phantom stock award agreement for each Named Executive Officer other than Mr. Anderson is attached hereto as Exhibit 10.2. 5. Approval of Award of Phantom Stock to Nonemployee Directors In May 2004, the Board approved the payment of compensation to each nonemployee director in the form of an annual stock retainer with a value of $50,000. On February 22, 2005, as payment of the 2005 annual stock retainer, the Board of Directors approved the grant of 2005 long-term incentive awards in the form of phantom stock units to all nonemployee directors under the Duke Energy Corporation 1998 Long-Term Incentive Plan, effective as of February 28, 2005. The number of units in each award (1,820) was calculated by dividing $50,000 by the closing price of Duke Energy Common Stock on the business day immediately preceding the date of the grant. The units will vest ratably over five years, or, if earlier, upon (1) termination of service after attaining age 70, (2) termination of service after attaining age 62 with at least 10 years of service, (3) termination of service due to death or disability, or (4) upon a change of control while serving as director. ITEM 7.01 Regulation FD Disclosure The information (including exhibits) that is being furnished pursuant to this Item 7.01 shall not be deemed to be "filed" for the purposes of Section 18 of the Exchange Act or otherwise 6 subject to liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended. This report under Item 7.01 is not an admission as to the materiality of any information in this report. The registrant has developed a worksheet to facilitate the understanding of the estimated pro-forma financial implications associated with the registrant's announced sale of the general partner of TEPPCO Partners L.P. (TEPPCO) and of the registrant's limited partner units in TEPPCO, and the announced restructuring of Duke Energy Field Services LLC (DEFS), as announced on February 24, 2005. This worksheet is intended to be a pro-forma review of impact to 2004 segment earnings as if these transactions had taken effect January 1, 2004. Specifically, the spreadsheet reflects the impact on DEFS 2004 reported segment Earnings Before Interest and Taxes (EBIT) from continuing operations; the impact on Natural Gas Transmission 2004 reported segment EBIT; a statement on the estimated impact to the registrant's reported consolidated interest expense as a result of the reduction in ownership percentage of DEFS; and a breakdown of the estimated pre-tax and after-tax cash proceeds associated with these transactions. A copy of the worksheet is attached hereto as Exhibit 99.1. ITEM 9.01. Financial Statements And Exhibits. (c) Exhibits. 10.1 Form of Performance Award Agreement dated February 28, 2005, pursuant to Duke Energy Corporation 1998 Long-Term Incentive Plan by and between Duke Energy Corporation and each Fred J. Fowler, David L. Hauser, Jimmy W. Mogg and Ruth G. Shaw 10.2 Form of Phantom Stock Award Agreement dated February 28, 2005, pursuant to Duke Energy Corporation 1998 Long-Term Incentive Plan by and between Duke Energy Corporation and each Fred J. Fowler, David L. Hauser, Jimmy W. Mogg and Ruth G. Shaw 99.1 Worksheet of pro-forma 2004 results relating to divestiture of TEPPCO Partners L.P. (TEPPCO) general partner, divestiture of TEPPCO limited partner units and Duke Energy Field Services LLC restructuring 7 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DUKE ENERGY CORPORATION By: /s/ Edward M. Marsh, Jr. ------------------------------------- Edward M. Marsh, Jr. Assistant Secretary and Deputy General Counsel Date: February 28, 2005 8 EX-10.1 2 d62762_ex10-1.txt PERFORMANCE AWARD AGREEMENT Exhibit 10.1 PERFORMANCE AWARD AGREEMENT This Performance Award Agreement (the "Agreement") has been made as of _____________, 2005 (the "Date of Award") between Duke Energy Corporation, a North Carolina corporation, with its principal offices in Charlotte, North Carolina (the "Corporation"), and __________ (the "Grantee"). RECITALS Under the Duke Energy Corporation 1998 Long-Term Incentive Plan as amended, and as it may, from time to time, be further amended (the "Plan"), the Compensation Committee of the Board of Directors of the Corporation (the "Committee"), or its delegatee, has determined the form of this Agreement and selected the Grantee, as an Employee, to receive the award evidenced by this Agreement (the "Award") and the Performance Shares and tandem Dividend Equivalents that are subject hereto. The applicable provisions of the Plan are incorporated in this Agreement by reference, including the definitions of terms contained in the Plan. AWARD In accordance with the Plan, the Corporation has made this Award, effective as of the Date of Award and upon the following terms and conditions: Section 1. Number and Nature of Performance Shares and Tandem Dividend Equivalents. The number of Performance Shares and the number of tandem Dividend Equivalents subject to this Award are each __________ (______). The number of such Performance Shares that may become vested upon determination of achievement of the Performance Goal at Target, as provided in Section 2(a), is __________ (__). Each Performance Share, upon becoming vested before its expiration, represents a right to receive payment in the form of one (1) share of Common Stock. Each tandem Dividend Equivalent, after its tandem Performance Share vests, represents a right to receive a cash payment equivalent in amount to the aggregate cash dividends declared and paid on one (1) share of Common Stock for the period beginning on the Date of the Award and ending on the date the vested, tandem Performance Share is paid or deferred. Performance Shares and Dividend Equivalents are used solely as units of measurement, and are not shares of Common Stock and the Grantee is not, and has no rights as, a shareholder of the Corporation by virtue of this Award. Section 2. Vesting of Performance Shares. (a) Provided Grantee's continuous employment by the Corporation, including Subsidiaries, has not terminated, or as otherwise provided in Sections 2(b) or 2(c), Performance Shares subject to this Award shall become vested upon the written determination by the Committee, or its delegatee, in its sole discretion, of the achievement of the Performance Goal, which is the Corporation's Total Shareholder Return ("TSR") percentile ranking among Standard & Poor's 500 companies, with higher percentile ranking from more positive/less negative TSR, for the period beginning January 1, 2005 and ending December 31, 2007 ("Performance Period"), above the 40th percentile, in accordance with the applicable vesting percentage specified for such percentile ranking in the following schedule: Percentile Ranking Vesting Percentage ------------------ ------------------ 40th or lower 0% * * 55th 40% * * 70th - Target 80% * * 80th or higher 100% * When such determination is of a percentile ranking between those specified, the Committee, or its delegatee, in its sole discretion, shall interpolate to determine the applicable vesting percentage. and such Performance Shares that do not so become vested shall be forfeited. For purposes of this Agreement, TSR means the change in fair market value over a specified period of time, expressed as a percentage, of an initial investment in specified common stock, with dividends reinvested, all as determined utilizing such methodology as the Committee, or its delegate, shall approve, with the average TSR for the final 30 business days of the period considered the TSR at the end of the period and with Common Stock valued for the beginning of the period as of the last preceding business day. (b) In the event that, prior to the date that the determination of the achievement of the Performance Goal is made, the Grantee's continuous employment by the Corporation, including Subsidiaries, terminates, the Performance Shares subject to this Award are thereupon forfeited, except that if such employment terminates (i) at a time when Grantee is eligible for an immediately payable early or normal retirement benefit under the Duke Energy Retirement Cash Balance Plan, or under another retirement plan of the Corporation or a Subsidiary which plan the Committee, or its delegatee, in its sole discretion, determines to be the functional equivalent of the Duke Energy Retirement Cash Balance Plan ("Functional Equivalent Plan"), unless the Corporation, in its sole discretion, determines that Grantee is in violation of any obligation identified in Section 3, (ii) as the result of the Grantee's death, (iii) as the result of the Grantee's permanent and total disability within the meaning of Code Section 22(e)(3), (iv) as the result of the termination of such employment by the Corporation, or employing Subsidiary, other than for cause, as determined by the Corporation or employing Subsidiary, in its sole discretion, or (v) as the direct and sole result, as determined by the Corporation, or employing Subsidiary, in its sole discretion, of the divestiture of assets, a business, or a 2 company, by the Corporation or a Subsidiary, the Performance Shares subject to this Award shall vest upon such determination of the achievement of the Performance Goal, at such vesting percentage determined by the Committee, or its delegatee, in its sole discretion, by prorating on the basis of the portion of the Performance Period that such employment continued while Grantee was entitled to payment of salary. In the event that Grantee is on an employer-approved, personal leave of absence on the date that the determination of the achievement of the Performance Goal is made, then, unless prohibited by law, vesting shall be postponed and shall not occur unless and until Grantee returns to active service in accordance with the terms of the approved personal leave of absence and before the tenth anniversary of the Date of Award. Further, in the event that such determination is made and during any portion of the Performance Period the Grantee was on employer-approved, personal leave of absence, the applicable vesting percentage shall be determined by the Committee, or its delegatee, in its sole discretion, to reflect only that portion of the Performance Period during which such employment continued while the Grantee was entitled to payment of salary. (c) In the event that a Change in Control occurs before the Performance Period has ended and (i) before the Grantee's continuous employment by the Corporation, including Subsidiaries, terminates, or (ii) after such employment terminates during the Performance Period, (A) at a time when Grantee is eligible for an immediately payable, early or normal retirement benefit under the Duke Energy Retirement Cash Balance Plan, or Functional Equivalent Plan, unless the Corporation, in its sole discretion, determines that Grantee is in violation of any obligation identified in Section 3, or (B) as the result of an event listed in items (ii) - (v) of the first sentence of Section 2(b), the Performance Shares subject to this Award shall vest upon such occurrence, at such vesting percentage determined by the Committee, or its delegatee, in its sole discretion, by prorating down from a maximum vesting percentage of 80% on the basis of the portion of the Performance Period that has elapsed prior to the time of such occurrence (or such earlier termination of employment), and the remaining Performance Shares shall be forfeited, irrespective of any subsequent determination of the achievement of the Performance Goal. Section 3. Violation of Grantee Obligation. In consideration of the continued vesting opportunity provided under Section 2 following the termination of Grantee's continuous employment by the Corporation, including Subsidiaries, if, at any time of such termination of employment, Grantee is eligible for an immediately payable early or normal retirement benefit under the Duke Energy Retirement Cash Balance Plan or Functional Equivalent Plan, Grantee agrees that during the period beginning with such termination of employment and ending with the third anniversary of the Date of Award ("Restricted Period"), Grantee shall not (i) without the prior written consent of the Corporation, or its delegatee, become employed by, serve as a principal, partner, or member of the board of directors of, or in any similar capacity with, or otherwise provide service to, a competitor, to the detriment, of the Corporation or any Subsidiary, or (ii) violate any of Grantee's other noncompetition obligations, or any of Grantee's nonsolicitation or nondisclosure obligations, to the Corporation or any Subsidiary. The 3 noncompetition obligations of clause (i) of the preceding sentence shall be limited in scope and shall be effective only to competition with the Corporation or any Subsidiary in the businesses of: production, transmission, distribution, or retail or wholesale marketing or selling of electricity; gathering, processing or transmission of natural gas, resale or arranging for the purchase or for the resale, brokering, marketing, or trading of natural gas, electricity or derivatives thereof; energy management and the provision of energy solutions; gathering, compression, treating, processing, fractionation, transportation, trading, marketing of natural gas components, including natural gas liquids; management of land holdings and development of commercial, residential and multi-family real estate projects; development and management of fiber optic communications systems; development and operation of power generation facilities, and sales and marketing of electric power and natural gas, domestically and abroad; and any other business in which the Corporation, including Subsidiaries, is engaged at the termination of Grantee's continuous employment by the Corporation, including Subsidiaries; and within the following geographical areas (i) any country in the world where the Corporation, including Subsidiaries, has at least US$25 million in capital deployed as of termination of Grantee's continuous employment by Corporation, including Subsidiaries; (ii) the continent of North America; (iii) the United States of America and Canada; (iv) the United States of America; (v) the states of North Carolina, South Carolina, Virginia, Georgia, Florida, Texas, California, Massachusetts, Illinois, Michigan, New York, Colorado, Oklahoma and Louisiana: (vi) the states of North Carolina, South Carolina, Texas and Colorado; and (vii) any state or states with respect to which was conducted a business of the Corporation, including Subsidiaries, which business constituted a substantial portion of Grantee's employment. The Corporation and Grantee intend the above restrictions on competition in geographical areas to be entirely severable and independent, and any invalidity or enforceability of this provision with respect to any one or more of such restrictions, including areas, shall not render this provision unenforceable as applied to any one or more of the other restrictions, including areas. If any part of this provision is held to be unenforceable because of the duration, scope or area covered, the Corporation and Grantee agree to modify such part, or that the court making such holding shall have the power to modify such part, to reduce its duration, scope or area, including deletion of specific words and phrases, i.e.,"blue penciling", and in its modified, reduced or blue pencil form, such part shall become enforceable and shall be enforced. Nothing in Section 3 shall be construed to prohibit Grantee being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict Grantee providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law. Section 4. Forfeiture/Expiration. Any Performance Share subject to this Award shall be forfeited upon the termination of the Grantee's continuous employment by the Corporation, including Subsidiaries, from the Date of Award, except to the extent otherwise provided in Section 2, and, if not previously vested and paid, or deferred, or forfeited, shall expire immediately before the tenth (10th) anniversary of the Date of Award. Any Dividend Equivalent subject to this Award shall expire at the time its 4 tandem Performance Share (i) is vested and paid, or deferred, (ii) is forfeited, or (iii) expires. Section 5. Dividend Equivalent Payment. Payment with respect to any Dividend Equivalent subject to this Award that is in tandem with a Performance Share that is vested and paid shall be paid in cash to the Grantee as soon as practicable following the vesting and payment of the Performance Share, or, if the vested Performance Share is deferred by Grantee as provided in Section 6, payment with respect to the tandem Dividend Equivalent shall likewise be deferred. The Dividend Equivalent payment amount shall equal the aggregate cash dividends declared and paid with respect to one (1) share of Common Stock for the period beginning on the Date of the Award and ending on the date the vested, tandem Performance Share is paid or deferred and before the Dividend Equivalent expires. However, should the timing of a particular payment under Section 6 to the Grantee in shares of Common Stock in conjunction with the timing of a particular cash dividend declared and paid on Common Stock be such that the Grantee receives such shares without the right to receive such dividend and the Grantee would not otherwise be entitled to payment under the expiring Dividend Equivalent with respect to such dividend, the Grantee, nevertheless, shall be entitled to such payment. Dividend Equivalent payments shall be subject to withholding for taxes. Section 6. Payment of Performance Shares. Payment of Performance Shares subject to this Award shall be made to the Grantee as soon as practicable following the time such Performance Shares become vested in accordance with Section 2 prior to their expiration, except to the extent deferred by the Grantee in accordance with such procedure as the Committee, or its designee, may prescribe. Payment shall be subject to withholding for taxes. Payment shall be in the form of one (1) share of Common Stock for each full vested Performance Share, and any fractional vested Performance Share shall be rounded up to the next whole share for purposes of both vesting under Section 2 and payment under Section 6. Notwithstanding the foregoing, to the extent Grantee fails to timely tender to the Corporation sufficient cash to satisfy withholding for tax requirements, such unsatisfied withholding shall be applied to reduce the number of shares of Common Stock that would otherwise be paid (valued at Fair Market Value on the date the respective Performance Shares became vested). In the event that payment, after any such reduction in the number of shares of Common Stock to satisfy withholding for tax requirements, would be for less than ten (10) shares of Common Stock, then, if so determined by the Committee, or its delegate, in its sole discretion, payment, instead of being made in shares of Common Stock, shall be made in a cash amount equal in value to the shares of Common Stock that would otherwise be paid, valued at Fair Market Value on the date the respective Performance Shares became vested. Section 7. No Employment Right. Nothing in this Agreement or in the Plan shall confer upon the Grantee the right to continued employment with the Corporation or any Subsidiary, or affect the right of the Corporation or any Subsidiary to terminate the employment or service of the Grantee at any time for any reason. 5 Section 8. Nonalienation. The Performance Shares and Dividend Equivalents subject to this Award are not assignable or transferable by Grantee. Upon any attempt to transfer, assign, pledge, hypothecate, sell or otherwise dispose of any such Performance Share or Dividend Equivalent, or of any right or privilege conferred hereby, or upon the levy of any attachment or similar process upon such Performance Share or Dividend Equivalent, or upon such right or privilege, such Performance Share or Dividend Equivalent, or such right or privilege, shall immediately become null and void. Section 9. Determinations. Determinations by the Committee, or its delegatee, shall be final and conclusive with respect to the interpretation of the Plan and this Agreement. Section 10. Governing Law. This Agreement shall be governed, construed and enforced in accordance with the laws of the State of North Carolina applicable to transactions that take place entirely within that state. Section 11. Conflicts with Plan, Correction of Errors, and Grantee's Consent. In the event that any provision of this Agreement conflicts in any way with a provision of the Plan, such Plan provision shall be controlling and the applicable provision of this Agreement shall be without force and effect to the extent necessary to cause such Plan provision to be controlling. In the event that, due to administrative error, this Agreement does not accurately reflect an Award properly granted to the Grantee pursuant to the Plan, the Corporation, acting through its Executive Compensation and Benefits Department, reserves the right to cancel any erroneous document and, if appropriate, to replace the cancelled document with a corrected document. It is the intention of the Corporation and the Grantee that this Award not result in unfavorable tax consequences to Grantee under Code Section 409A. Accordingly, Grantee consents to such amendment of this Agreement as the Corporation may reasonably make in furtherance of such intention, and the Corporation shall promptly provide, or make available to, Grantee a copy of any such amendment. Notwithstanding the foregoing, this Award is subject to cancellation by the Corporation in its sole discretion unless the Grantee, by not later than _________ __, 2005, has signed a duplicate of this Agreement, in the space provided below, and returned the signed duplicate to the Executive Compensation and Benefits Department - Performance Award (PB04A), Duke Energy Corporation, P.O. Box 1244, Charlotte, NC 28201-1244, which, if, and to the extent, permitted by the Executive Compensation and Benefits Department, may be accomplished by electronic means. 6 IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed and granted in Charlotte, North Carolina, to be effective as of the Date of Award. ATTEST DUKE ENERGY CORPORATION By: By: ------------------------------- --------------------------------------- Corporate Secretary Its: Chairman and Chief Executive Officer 7 Acceptance of Performance Award IN WITNESS OF Grantee's acceptance of this Performance Award and Grantee's agreement to be bound by the provisions of this Agreement and the Plan, Grantee has signed this Agreement this _____ day of _____________________, 2005. -------------------------------- Grantee's Signature -------------------------------- (print name) -------------------------------- (social security number) -------------------------------- (address) 8 EX-10.2 3 d62762_ex10-2.txt PHANTOM STOCK AWARD AGREEMENT Exhibit 10.2 PHANTOM STOCK AWARD AGREEMENT This Phantom Stock Award Agreement (the "Agreement") has been made as of ______________________, 2005, (the "Date of Award") between Duke Energy Corporation, a North Carolina corporation, with its principal offices in Charlotte, North Carolina (the "Corporation"), and ________ (the "Grantee"). RECITALS Under the Duke Energy Corporation 1998 Long-Term Incentive Plan as amended, and as it may, from time to time, be further amended (the "Plan"), the Compensation Committee of the Board of Directors of the Corporation (the "Committee"), or its delegatee, has determined the form of this Agreement and selected the Grantee, as an Employee, to receive the award evidenced by this Agreement (the "Award") and the Phantom Stock units and tandem Dividend Equivalents that are subject hereto. The applicable provisions of the Plan are incorporated in this Agreement by reference, including the definitions of terms contained in the Plan. AWARD In accordance with the Plan, the Corporation has made this Award, effective as of the Date of Award and upon the following terms and conditions: Section 1. Number and Nature of Phantom Stock Units and Tandem Dividend Equivalents. The number of Phantom Stock units and the number of tandem Dividend Equivalents subject to this Award are each ___________ (____). Each Phantom Stock unit, upon becoming vested before its expiration, represents a right to receive payment in the form of one (1) share of Common Stock. Each tandem Dividend Equivalent represents a right to receive cash payments equivalent to the amount of cash dividends declared and paid on one (1) share of Common Stock after the Date of Award and before the Dividend Equivalent expires. Phantom Stock units and Dividend Equivalents are used solely as units of measurement, and are not shares of Common Stock and the Grantee is not, and has no rights as, a shareholder of the Corporation by virtue of this Award. Section 2. Vesting of Phantom Stock Units. The specified percentage of the Phantom Stock units subject to this Award, and not previously forfeited, shall vest, with such percentage considered satisfied to the extent such Phantom Stock units have previously vested, as follows: (a) Upon Grantee remaining continuously employed by the Corporation, including Subsidiaries, through the specified anniversary of the Date of Award, Vesting Percentage Anniversary ------------------ ----------- 20% 1st 40% 2nd 60% 3rd 80% 4th 100% 5th For purposes of vesting under this Section 2(a), if such employment terminates at a time when Grantee is eligible for an immediately payable early or normal retirement benefit under the Duke Energy Retirement Cash Balance Plan, or under another retirement plan of the Corporation or Subsidiary which plan the Committee, or the delegatee, in its sole discretion, determines to be the functional equivalent of the Duke Energy Retirement Cash Balance Plan, Grantee shall be considered to have "retired" and such employment shall be considered to continue, with continued vesting under this Section 2(a), unless the Corporation, in its sole discretion, determines that Grantee is in violation of any obligation identified in Section 3, or until Grantee's death and, upon such determination or death, any such Phantom Stock units not previously vested, or vested by application of the following sentence shall be forfeited. If such employment terminates, and constitutes a "separation from service" under Code Section 409A, (i) as the result of Grantee's death, (ii) as the result of Grantee's permanent and total disability within the meaning of Code Section 22(e)(3), (iii) as the result of termination of such employment by the Corporation, or employing Subsidiary, other than for cause, as determined by the Corporation, or employing Subsidiary, in its sole discretion, or (iv) as the direct and sole result, as determined by the Corporation, or employing Subsidiary, in its sole discretion, of the divestiture of assets, a business or a company, by the Corporation or a Subsidiary, the Phantom Stock units subject to this Award shall vest at such vesting percentage determined by the Committee, or its delegatee, in its sole discretion, by prorating from the above schedule to reflect only that portion of the period beginning on the Date of Award and ending with the fifth (5th) anniversary of the Date of Award during which such employment continued while Grantee was entitled to payment of salary, and any such Phantom Stock units not then or previously vested shall be forfeited. In the event that at a time when vesting would otherwise occur under this Section 2(a), Grantee is on an employer-approved, personal leave of absence, then, unless prohibited by law, vesting shall be postponed and shall not occur unless and until Grantee returns to active service in accordance with the terms of the approved personal leave of absence and before the tenth anniversary of the Date of Award. (b) 100%, if, following the occurrence of a Change in Control and before the second anniversary of such occurrence, such employment is terminated involuntarily, and 2 not for cause, by the Corporation, or employing Subsidiary, and constitutes a "separation from service" under Code Section 409A. Section 3. Violation of Grantee Obligation. In consideration of the continued vesting opportunity provided under Section 2 following the termination of Grantee's continuous employment by the Corporation, including Subsidiaries, if Grantee is considered "retired", Grantee agrees that during the period beginning with such termination of employment and ending with the fifth anniversary of the Date of Award ("Restricted Period"), Grantee shall not (i) without the prior written consent of the Corporation, or its delegatee, become employed by, serve as a principal, partner, or member of the board of directors of, or in any similar capacity with, or otherwise provide service to, a competitor, to the detriment, of the Corporation or any Subsidiary, or (ii) violate any of Grantee's other noncompetition obligations, or any of Grantee's nonsolicitation or nondisclosure obligations, to the Corporation or any Subsidiary. The noncompetition obligations of clause (i) of the preceding sentence shall be limited in scope and shall be effective only to competition with the Corporation or any Subsidiary in the businesses of: production, transmission, distribution, or retail or wholesale marketing or selling of electricity; gathering, processing or transmission of natural gas, resale or arranging for the purchase or for the resale, brokering, marketing, or trading of natural gas, electricity or derivatives thereof; energy management and the provision of energy solutions; gathering, compression, treating, processing, fractionation, transportation, trading, marketing of natural gas components, including natural gas liquids; management of land holdings and development of commercial, residential and multi-family real estate projects; development and management of fiber optic communications systems; development and operation of power generation facilities, and sales and marketing of electric power and natural gas, domestically and abroad; and any other business in which the Corporation, including Subsidiaries, is engaged at the termination of Grantee's continuous employment by the Corporation, including Subsidiaries; and within the following geographical areas (i) any country in the world where the Corporation, including Subsidiaries, has at least US$25 million in capital deployed as of termination of Grantee's continuous employment by Corporation, including Subsidiaries; (ii) the continent of North America; (iii) the United States of America and Canada; (iv) the United States of America; (v) the states of North Carolina, South Carolina, Virginia, Georgia, Florida, Texas, California, Massachusetts, Illinois, Michigan, New York, Colorado, Oklahoma and Louisiana: (vi) the states of North Carolina, South Carolina, Texas and Colorado; and (vii) any state or states with respect to which was conducted a business of the Corporation, including Subsidiaries, which business constituted a substantial portion of Grantee's employment. The Corporation and Grantee intend the above restrictions on competition in geographical areas to be entirely severable and independent, and any invalidity or enforceability of this provision with respect to any one or more of such restrictions, including areas, shall not render this provision unenforceable as applied to any one or more of the other restrictions, including areas. If any part of this provision is held to be unenforceable because of the duration, scope or area covered, the Corporation and Grantee agree to modify such part, or that the court making such holding shall have the power to modify such part, to reduce its duration, scope or area, including deletion of specific words and phrases, i.e.,"blue penciling", and in its modified, reduced 3 or blue pencil form, such part shall become enforceable and shall be enforced. Nothing in Section 3 shall be construed to prohibit Grantee being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict Grantee providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law. Section 4. Forfeiture/Expiration. Any Phantom Stock unit subject to this Award shall be forfeited upon the termination of Grantee's continuous employment by the Corporation, including Subsidiaries, from the Date of Award, except to the extent otherwise provided in Section 2, and, if not previously vested and paid, or deferred, or forfeited, shall expire immediately before the tenth anniversary of the Date of Award. Any Dividend Equivalent subject to this Award shall expire at the time the unit of Phantom Stock with respect to which the Dividend Equivalent is in tandem (i) is vested and paid, or deferred, (ii) is forfeited, or (iii) expires. Section 5. Dividend Equivalent Payments. Payments with respect to any Dividend Equivalent subject to this Award shall be paid in cash to the Grantee as soon as practicable following any time cash dividends are declared and paid with respect to the Common Stock on or after the Date of Award and before the Dividend Equivalent expires. However, should the timing of a particular payment under Section 6 to the Grantee in shares of Common Stock in conjunction with the timing of a particular cash dividend declared and paid on Common Stock be such that the Grantee receives such shares without the right to receive such dividend and the Grantee would not otherwise be entitled to payment under the expiring Dividend Equivalent with respect to such dividend, the Grantee, nevertheless, shall be entitled to such payment. Dividend Equivalent payments shall be subject to withholding for taxes. Section 6. Payment of Phantom Stock Units. Payment of Phantom Stock units subject to this Award shall be made to the Grantee as soon as practicable following the time such units become vested in accordance with Section 2 prior to their expiration, except to the extent deferred by Grantee in accordance with such procedure as the Committee, or its delegatee, may prescribe. However, in the event such units become vested in accordance with Section 2(b), or upon termination of employment in accordance with the last sentence of the first paragraph of Section 2(a), then, unless waived by the Corporation upon its determination that Grantee is not a "specified employee" under Code Section 409A, such units shall not be payable before the date which is 6 months after the date of "separation from service" under Code Section 409A (or, if earlier, the date of death of the Grantee). Payment shall be subject to withholding for taxes. Payment shall be in the form of one (1) share of Common Stock for each full vested unit of Phantom Stock and any fractional vested unit of Phantom Stock shall not be payable unless and until subsequent vesting results in a full unit of Phantom Stock becoming vested. Notwithstanding the foregoing, to the extent that Grantee fails to timely tender to the Corporation sufficient cash to satisfy withholding for tax requirements, the number of shares of Common Stock that would otherwise be paid (valued at Fair Market Value on the date the respective unit of Phantom Stock became vested, or if later, payable) shall be reduced by the Committee, or its delegatee, in its sole discretion, to fully satisfy such 4 requirements. In the event that payment, after any such reduction in the number of shares of Common Stock to satisfy withholding for tax requirements, would be less than ten (10) shares of Common Stock, then, if so determined by the Committee, or its delegate, in its sole discretion, payment, instead of being made in shares of Common Stock, shall be made in a cash amount equal in value to the shares of Common Stock that would otherwise be paid, valued at Fair Market Value on the date the respective Phantom Stock units became vested, or if later, payable. Section 7. No Employment Rights. Nothing in this Agreement or in the Plan shall confer upon the Grantee the right to continued employment by the Corporation or any Subsidiary, or affect the right of the Corporation or any Subsidiary to terminate the employment or service of the Grantee at any time for any reason. Section 8. Nonalienation. The Phantom Stock units and Dividend Equivalents subject to this Award are not assignable or transferable by the Grantee. Upon any attempt to transfer, assign, pledge, hypothecate, sell or otherwise dispose of any such Phantom Stock unit or Dividend Equivalent, or of any right or privilege conferred hereby, or upon the levy of any attachment or similar process upon such Phantom Stock unit or Dividend Equivalent, or upon such right or privilege, such Phantom Stock unit or Dividend Equivalent or right or privilege, shall immediately become null and void. Section 9. Determinations. Determinations by the Committee, or its delegatee, shall be final and conclusive with respect to the interpretation of the Plan and this Agreement. Section 10. Governing Law. The validity and construction of this Agreement shall be governed by the laws of the state of North Carolina applicable to transactions taking place entirely within that state. Section 11. Conflicts with Plan, Correction of Errors, and Grantee's Consent. In the event that any provision of this Agreement conflicts in any way with a provision of the Plan, such Plan provision shall be controlling and the applicable provision of this Agreement shall be without force and effect to the extent necessary to cause such Plan provision to be controlling. In the event that, due to administrative error, this Agreement does not accurately reflect a Phantom Stock Award properly granted to Grantee pursuant to the Plan, the Corporation, acting through its Executive Compensation and Benefits Department, reserves the right to cancel any erroneous document and, if appropriate, to replace the cancelled document with a corrected document. It is the intention of the Corporation and the Grantee that this Award not result in unfavorable tax consequences to Grantee under Code Section 409A. Accordingly, Grantee consents to such amendment of this Agreement as the Corporation may reasonably make in furtherance of such intention, and the Corporation shall promptly provide, or make available to, Grantee a copy of any such amendment. Notwithstanding the foregoing, this Award is subject to cancellation by the Corporation in its sole discretion unless the Grantee, by not later than _________ __, 5 2005, has signed a duplicate of this Agreement, in the space provided below, and returned the signed duplicate to the Executive Compensation and Benefits Department - Phantom Stock (PB04A), Duke Energy Corporation, P. O. Box 1244, Charlotte, NC 28201-1244, which, if, and to the extent, permitted by the Executive Compensation and Benefits Department, may be accomplished by electronic means. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed and granted in Charlotte, North Carolina, to be effective as of the Date of Award. ATTEST: DUKE ENERGY CORPORATION By: By: ----------------------------- -------------------------------------- Corporate Secretary Its: Chairman and Chief Executive Officer 6 Acceptance of Phantom Stock Award IN WITNESS OF Grantee's acceptance of this Award and Grantee's agreement to be bound by the provisions of this Agreement and the Plan, Grantee has signed this Agreement this _____ day of _____________________, 2005. ----------------------------------- Grantee's Signature ----------------------------------- (print name) ----------------------------------- (social security number) ----------------------------------- (address) 7 EX-99.1 4 d62762_ex99-1.txt WORKSHEET OF PRO-FORMA 2004 RESULTS EXHIBIT 99.1 Duke Energy Corporation 2004 PRO FORMA TRANSACTION REVIEW - Disposition of TEPPCO Partners L.P. (TEPPCO) general partner and TEPPCO limited partner units; restructuring of Duke Energy Field Services LLC ($ in millions) SEGMENT EARNINGS BEFORE INTEREST AND TAXES (EBIT) FROM CONTINUING OPERATIONS - -------------------------------------------------------------------------------- The following pro-forma calculations assume the transactions for the TEPPCO asset sales and the change in ownership were effective as of January 1, 2004 The amounts included in the transaction detail sections assume the tax basis is the same for both ConocoPhillips and Duke Energy. Also there are no adjustments for purchase accounting included in these calculations. EBIT numbers for announced transactions assume depreciation and amortization equal to 1/3 of EBITDA numbers provided during the February 24, 2005 webcast. - ------------------------------------------------------------------------------------------------------------ Field Services Segment 2004 Reported segment EBIT from Continuing Operations (A) $ 380 Special Items: Net loss on asset sales (15) Asset impairments (10) Enron settlement 1 -------- 2004 Ongoing segment EBIT from Continuing Operations at Field Services (Duke Energy level) (B) $ 404 ======== Impact of Transaction Detail at DEFS level (Duke Energy %): Sale of TEPPCO GP - loss of 69.7% (no depreciation charge) $ (29) Transfer of DEFS Canadian assets to DEGT - loss of 69.7% (16) New assets contributed by ConocoPhillips - increase at 50% level 31 -------- Net change in segment EBIT from Continuing Operations (C) $ (14) -------- Impact of Transaction Detail at Duke Energy level: Sale of TEPPCO LP units (4) Change in ownership from 69.7% to 50% - from $404MM (see table below) (149) -------- Net change in segment EBIT from Continuing Operations (D) (153) -------- Total Net Change (C)+(D) (167) -------- 2004 Ongoing segment EBIT from Continuing Operations at Field Services as adjusted for above transactions (B)+(C)+(D) $ 237 ======== Adjustment for change in ownership from 69.7% to 50% (from $404 ongoing segment EBIT to $380 reported segment EBIT) (E) 7 -------- 2004 Reported segment EBIT from Continuing Operations at Field Services as adjusted for above transactions (A)+(C)+(D)+(E) $ 219 ======== - ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Natural Gas Transmission Segment 2004 Reported segment EBIT (F) $ 1,310 Special Items: Net gains on asset sales 32 -------- 2004 Ongoing segment EBIT (G) $ 1,278 -------- Impact of Transaction Detail: Transfer of DEFS Canadian assets $ 23 Empress asset contributed by COP 29 -------- Net change in segment EBIT (H) $ 52 -------- 2004 Ongoing segment EBIT at DEGT as adjusted for above transactions (G)+(H) $ 1,330 ======== 2004 Reported segment EBIT at DEGT as adjusted for above transactions (F)+(H) $ 1,362 ======== - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------- CALCULATION FOR CHANGE OF OWNERSHIP PERCENTAGE FROM 69.7% TO 50% Ongoing Reported -------- -------- 2004 Segment EBIT from Continuing Operations (A) $ 404 380 at Field Services (Duke Energy level at 69.7%) Subtract impact of TEPPCO GP and Canadian Assets already accounted for above (B) (46) (46) -------- -------- Adjusted 2004 Segment EBIT from Continuing Operations at Field Services (Duke Energy level at 69.7%) (C) = (A) - (B) 358 334 Add back impact from hedging activity at Corporate Level 172 172 Subtract EBIT associated with TEPPCO LP/Class B (4) (4) -------- -------- Total Corporate Level Activity (D) 168 168 Adjusted Segment EBIT from Continuing Operations at Field Services (Duke Energy 69.7%) excluding Corporate Level Activity (E) = (C) + (D) 526 502 -------- -------- Calculation of 100% DEFS EBIT, as adjusted (F) = (E) / 69.7% 755 721 Calculation of 50% Share (new Duke Energy level) (G) = (F) * 50% 378 360 Change in ownership from 69.7% to 50% (E) - (G) $ 149 $ 142 ======== ======== Difference from Ongoing to Reported $ 7 ======== - ---------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE - -------------------------------------------------------------------------------- Pretax 2004 expense due to interest expense for Duke Energy is expected to be approximately $30 million lower with the change in DEFS ownership from 69.7% to 50%. Reduction in 2004 consolidated interest expense (100% DEFS) due to deconsolidation 162 Increase in minority interest expense due to DEFS interest expense resulting from deconsolidation (49) Pretax decrease in equity in earnings due to interest expense (Duke Energy 50%) (81) -------- Pretax increase in 2004 earnings due to DEFS interest $ 32 (approximately $30 million) ========
ESTIMATED CASH TRANSACTIONS - -------------------------------------------------------------------------------- Proceeds for TEPPCO GP (less minority interest share of $330) $ 770 Proceeds for TEPPCO LP units (100%) 100 Minimum cash contribution from ConocoPhillips 500 -------- Total estimated cash proceeds before taxes 1,370 Estimated net tax payment related to above transactions (570) -------- Estimated after-tax cash proceeds $ 800 ======== Non-GAAP Financial Measures The primary performance measure used by management to evaluate segment performance is segment EBIT from continuing operations, which at the segment level represents all profits from continuing operations (both operating and non-operating) before deducting interest and taxes, and is net of the minority interest expense related to those profits. Management believes segment EBIT from continuing operations, which is the GAAP measure used to report segment results, is a good indicator of each segment's operating performance as it represents the results of our ownership interests in continuing operations without regard to financing methods or capital structures. Duke Energy's management uses ongoing segment EBIT as a measure of the historical and anticipated future segment performance. Ongoing segment EBIT is a non-GAAP financial measure as it represents reported segment EBIT adjusted for special items. Special items represent certain charges which management believes will not be recurring on a regular basis. Management believes that the presentation of ongoing segment EBIT provides useful information to investors, as it allows them to more accurately compare a segment's ongoing performance across all periods. The most directly comparable GAAP measure for ongoing segment EBIT is reported segment EBIT, which represents EBIT from continuing operations, including any special items -----END PRIVACY-ENHANCED MESSAGE-----