-----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, NaYH0XQZ0sqtUHHhTLUo5jtP9abtY5RstxRRv6sEadl5Jw5Hz54nivUacLng1zMJ WpA0b1ZsTXqgR2gBosLxGw== 0000350563-98-000021.txt : 19980515 0000350563-98-000021.hdr.sgml : 19980515 ACCESSION NUMBER: 0000350563-98-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAMPA ELECTRIC CO CENTRAL INDEX KEY: 0000096271 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590475140 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05007 FILM NUMBER: 98620181 BUSINESS ADDRESS: STREET 1: 702 N FRANKLIN ST STREET 2: TECO PLZA CITY: TAMPA STATE: FL ZIP: 33602 BUSINESS PHONE: 8132284111 MAIL ADDRESS: STREET 1: TAMPA ELECTRIC CO STREET 2: TECO PLAZA 702 N FRANKLIN ST CITY: TAMPA STATE: FL ZIP: 33602 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-5007 TAMPA ELECTRIC COMPANY (Exact name of registrant as specified in its charter) FLORIDA 59-0475140 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 702 North Franklin Street, Tampa, Florida 33602 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813) 228-4111 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (April 30, 1998): Common Stock, Without Par Value 10 The registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. FORM 10-Q PART I. FINANCIAL INFORMATION Item 1. Financial Statements In the opinion of management, the unaudited financial statements include all adjustments necessary to present fairly the results for the three-month periods ended March 31, 1998 and 1997. The 1997 financial statements include the results of Peoples Gas System, Inc., and West Florida Natural Gas Company, both of which were merged into Tampa Electric Company in June 1997. Both mergers were accounted for as poolings of interests. Reference should be made to the explanatory notes affecting the income and balance sheet accounts contained in Tampa Electric Company's Annual Report on Form 10-K for the year ended Dec. 31, 1997 and to the notes on pages 6 through 8 of this report. - 2 - FORM 10-Q BALANCE SHEETS (in millions) March 31, Dec. 31, 1998 1997 Assets Property, plant and equipment, at original cost Utility plant in service Electric $3,652.6 $3,632.0 Gas 481.2 471.1 Construction work in progress 42.2 40.6 4,176.0 4,143.7 Accumulated depreciation (1,630.2) (1,595.3) 2,545.8 2,548.4 Other property 6.8 6.5 2,552.6 2,554.9 Current assets Cash and cash equivalents 1.3 2.8 Receivables, less allowance for uncollectibles 127.8 161.4 Inventories, at average cost Fuel 83.2 69.5 Materials and supplies 46.0 45.6 Prepayments 6.8 7.3 265.1 286.6 Deferred debits Unamortized debt expense 17.0 17.5 Deferred income taxes 113.1 112.2 Regulatory asset - tax related 41.2 41.8 Other 81.2 85.9 252.5 257.4 $3,070.2 $3,098.9 Liabilities and Capital Capital Common stock $1,012.1 $ 972.1 Retained earnings 283.1 289.6 1,295.2 1,261.7 Long-term debt, less amount due within one year 726.7 727.1 2,021.9 1,988.8 Current liabilities Long-term debt due within one year 4.2 4.1 Notes payable 140.6 219.1 Accounts payable 105.6 118.4 Customer deposits 78.1 77.3 Interest accrued 25.8 18.7 Taxes accrued 16.6 8.5 370.9 446.1 Deferred credits Deferred income taxes 423.9 415.6 Investment tax credits 48.5 49.7 Regulatory liability - tax related 75.8 77.0 Other 129.2 121.7 677.4 664.0 $3,070.2 $3,098.9 The accompanying notes are an integral part of the financial statements. - 3 - FORM 10-Q STATEMENTS OF INCOME (in millions) For the three months ended March 31, 1998 1997 Operating revenues Electric $273.4 $272.8 Gas 80.7 76.8 354.1 349.6 Operating expenses Operation Fuel - electric generation 89.1 88.7 Purchased power 11.3 10.8 Natural gas sold 38.0 38.0 Other 51.2 52.2 Maintenance 21.8 18.0 Non-recurring charge 9.6 -- Depreciation 41.3 39.9 Taxes, federal and state income 16.1 20.5 Taxes, other than income 29.8 29.6 308.2 297.7 Operating income 45.9 51.9 Other income Allowance for other funds used during construction -- .1 Other income (expense), net (1.9) (.3) (1.9) (.2) Income before interest charges 44.0 51.7 Interest charges Interest on long-term debt 12.2 12.7 Other interest 4.6 4.0 16.8 16.7 Net income 27.2 35.0 Preferred dividend requirements -- .2 Balance applicable to common stock $ 27.2 $ 34.8 The accompanying notes are an integral part of the financial statements. - 4 - FORM 10-Q STATEMENTS OF CASH FLOWS (in millions) For the three months ended March 31, 1998 1997 Cash flows from operating activities Net income $ 27.2 $ 35.0 Adjustments to reconcile net income to net cash: Depreciation 41.3 39.9 Deferred income taxes 7.2 (5.5) Investment tax credits, net (1.2) (1.2) Allowance for funds used during construction -- (.1) Deferred recovery clause 4.2 1.2 Deferred revenue (8.7) (7.3) Refund to customers -- (5.9) Non-recurring charge 9.6 -- Receivables, less allowance for uncollectibles 33.6 31.6 Inventories (14.1) (6.7) Taxes accrued 8.1 2.9 Accounts payable (12.8) 8.4 Other 16.1 (.6) 110.5 91.7 Cash flows from investing activities Capital expenditures (39.4) (31.3) Allowance for funds used during construction -- .1 (39.4) (31.2) Cash flows from financing activities Proceeds from contributed capital from parent 40.0 -- Repayment of long-term debt (.3) (.3) Net decrease in short-term debt (78.5) (17.7) Dividends (33.8) (37.0) (72.6) (55.0) Net increase (decrease) in cash and cash equivalents (1.5) 5.5 Cash and cash equivalents at beginning of period 2.8 3.5 Cash and cash equivalents at end of period $ 1.3 $ 9.0 The accompanying notes are an integral part of the financial statements. - 5 - FORM 10-Q NOTES TO FINANCIAL STATEMENTS A. Tampa Electric Company is a wholly owned subsidiary of TECO Energy, Inc. B. In June 1997, TECO Energy completed its mergers with Lykes Energy, Inc. (the Peoples companies) and West Florida Gas Inc. (West Florida). Concurrent with these mergers, the regulated natural gas distribution utilities acquired began operating as the Peoples Gas System division of Tampa Electric Company. These mergers were accounted for as poolings of interests and, accordingly, Tampa Electric Company's financial statements for 1997 include the results of Peoples Gas System. The company's combined restated revenues and net income for the three-month period ended March 31, 1997 were as follows: Combining Results (unaudited) Three Months Ended March 31, 1997 Net (millions) Revenues Income Tampa Electric pre-merger (1) $272.8 $27.9 Peoples Gas System pre-merger 69.7 6.4 West Florida Gas pre-merger 7.1 .7 Combined $349.6 $35.0 (1) The 1997 amounts were previously reported on Form 10-Q for the quarter ended March 31, 1997. C. The company has made certain commitments in connection with its continuing construction program. Total construction expenditures during 1998 are estimated to be $128 million for the electric division and $59 million for Peoples Gas System. D. D u ring the first quarter of 1998, the electric division recognized $8.7 million of revenues that had been deferred in 1995 and - 6 - FORM 10-Q 1996 pursuant to regulatory agreements approved by the Florida Public Service Commission (FPSC). During the first three months of last year, the electric division recognized $7.3 million of revenues previously deferred and refunded $5.9 million to customers under these agreements. As of March 31, 1998, $22.6 million of deferred revenues were included in other deferred credits. Accrued interest on these deferred revenues was $8.5 million at March 31, 1998. Effective Oct. 1, 1997, electric customers began receiving a $25- million temporary base rate reduction over a 15-month period pursuant to the same agreements. E. In June 1997, the Financial Accounting Standards Board issued Financial Accounting Standards (FAS) 130, Reporting Comprehensive Income, effective for fiscal periods beginning after Dec. 15, 1997. The new standard requires that comprehensive income, which includes net income as well as certain changes in assets and liabilities recorded in common equity, be reported in the financial statements. For the three-month periods ended March 31, 1998 and 1997, there were no components of comprehensive income other than net income. F. As discussed in Tampa Electric Company's 1997 Annual Report on Form 10-K, the FPSC in September 1997 ruled that costs associated with two Tampa Electric long-term wholesale power sales contracts should be assigned to the wholesale jurisdiction and that for retail rate making purposes the costs transferred from retail to wholesale should reflect average costs rather than the lower incremental costs on which the two contracts are based. As a result of this decision and the related - 7 - FORM 10-Q reduction of the retail rate base upon which Tampa Electric is allowed to earn a return, these contracts became uneconomic. One contract was terminated in 1997. Tampa Electric has entered into firm power purchase contracts for the balance of its obligation with other electric power suppliers for replacement power through 1999. The cost of power under the replacement contracts exceeds the revenues expected from the remaining contract. As a result, Tampa Electric recorded a one-time $5.9-million after-tax charge in the first quarter of 1998. - 8 - FORM 10-Q Item 2. Management's Narrative Analysis of Results of Operations Three months ended March 31, 1998: Net income for the three-month period ended March 31, 1998, including a non-recurring after-tax charge of $5.9 million, was $27.2 million, compared to $35.0 million for the same period last year. In 1998's first quarter, the electric division recorded a charge associated with actions to mitigate the effects of the 1997 FPSC ruling that separated certain wholesale power sales contracts from the retail jurisdiction through 1999. Operating income for the quarter of $51.8 million, excluding the charge discussed above and on page 9, was unchanged from 1997's first quarter as the effect of increased therm sales at Peoples Gas System was partially offset by increased depreciation expense at the electric division, the result of higher plant balances. Contributions by operating division Operating income (millions) 1998 1997 Electric division (1) $ 41.4 $ 41.8 Peoples Gas System 10.4 10.1 51.8 51.9 Non-recurring charge, after tax (5.9) -- $ 45.9 $ 51.9 (1) Operating income for 1998 excludes the after-tax non-recurring charge discussed above and on page 9. Electric division Operating revenues for the quarter were unchanged from 1997, as the adverse effect of unusual weather and the impact of the temporary base rate reduction discussed in Note D on page 7 was offset by - 9 - FORM 10-Q customer growth of 2.1 percent. Retail energy sales were unchanged from the prior year's period. Depreciation expense increased in the current year's first quarter as a result of higher plant balances. Operations and maintenance expenses were unchanged from the prior year's period. As discussed in Note F on pages 7 and 8, Tampa Electric recorded a one-time $5.9-million after-tax charge in the first quarter of 1998 related to the 1997 FPSC ruling that separated certain wholesale power sales contracts from the retail jurisdiction through 1999. Peoples Gas System At Peoples Gas System, operating income was three percent higher in the first quarter of 1998. Total revenues were up five percent from 1997's first quarter, with residential and commercial natural gas sales (therms) eight percent higher than in last year's first quarter due to customer growth and increased usage. Derivatives and Hedging Policy Peoples Gas System enters into futures, swaps and options contracts, from time to time, to limit the effects of natural gas price increases on the prices it charges customers. Tampa Electric Company does not use derivatives or other financial products for speculative purposes. - 10 - FORM 10-Q PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 TECO Energy, Inc., Annual Incentive Compensation Plan, as amended and restated as of April 15, 1998. 10.2 Agreement and General Release between Tampa Electric Company and Keith S. Surgenor dated March 20, 1998. 12. Ratio of earnings to fixed charges. 27.1 Financial data schedule - three months ended March 31, 1998. (EDGAR filing only) 27.2 Restated financial data schedule - three months ended March 31, 1997. (EDGAR filing only) (b) No reports on Form 8-K were filed during the quarter to which this report relates. - 11 - FORM 10-Q SIGNATURES 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 thereunto duly authorized. TAMPA ELECTRIC COMPANY (Registrant) Dated: May 14, 1998 By: /s/ W. L. Griffin W. L. Griffin Vice President - Controller (Principal Accounting Officer) - 12 - FORM 10-Q INDEX TO EXHIBITS Exhibit No. Description of Exhibits Page No. 10.1 TECO Energy, Inc., Annual Incentive Compensation 14 Plan, as amended and restated as of April 15, 1998. 10.2 Agreement and General Release between Tampa 17 Electric Company and Keith S. Surgenor dated March 20, 1998. 12. Ratio of earnings to fixed charges 26 27.1 Financial data schedule - three months ended March 31, 1998 (EDGAR filing only) -- 27.2 Restated financial data schedule - three months ended March 31, 1997 (EDGAR filing only) -- - 13 - EX-10.1 2 Exhibit 10.1 April 15,1998 TECO ENERGY, INC. ANNUAL INCENTIVE COMPENSATION PLAN REVISED APRIL, 1998 14 Exhibit 10.1 ANNUAL INCENTIVE COMPENSATION PLAN BASIC PLAN CONCEPT The Annual Incentive Compensation Plan provides a consistent framework for applying annual incentive pay to officers of TECO Energy and each of its operating units. Each participant is assigned a target award amount, expressed as a percentage of salary range midpoint, which will represent an appropriate incentive payment when performance is at the targeted level. Smaller awards (or none at all) may be earned when performance is below target, and larger awards may be earned when performance exceeds target. While not anticipated to be a common occurrence, the Board may occasionally decide that the plan formula would unduly penalize or reward management. In such cases, award funds may be increased or decreased to better meet the plan's intent of relating rewards to management performance. Performance for each participant will be measured, in part, against a combination of one or more quantifiable profit and operational goals. These goals will be set at the corporate and operating levels, and most participants will have a portion of their awards related to each. The remaining portion of each participant's performance that is not measured by the quantified goals mentioned above will be evaluated on a subjective basis considering overall contribution level and achievement of other individual goals. Each participant will have a Business Challenge goal, to reflect the participant s contribution to: (a) mitigating the impact of unexpected adverse business or regulatory developments on the business unit or (b) enhancing profitability or capacity for profit, through effective management initiatives beyond those included in the business plan. ELIGIBILITY Officers are recommended by the respective President of their organization for participation in the annual incentive plan each year. All recommended officers that are approved by the Chief Executive Officer of TECO Energy and the Compensation Committee of the TECO Energy Board will be eligible to participate. TARGET AWARD LEVELS Target award levels are established at a level that, when combined with each participant's base salary midpoint, will provide a fully competitive total cash compensation opportunity. The incentive portion of the total compensation opportunity reflects compensation "at risk" which is directly related to performance and results achieved. Generally, the portion of compensation "at risk" (i.e., the target award level) is influenced by the level of the participant's accountability for contributing to bottom-line results, the degree of influence the participant has over results and competitive practice. 15 Exhibit 10.1 ESTABLISHING PERFORMANCE GOALS AND WEIGHTINGS For each plan year, profit, growth and/or operational effectiveness goals will be established for TECO Energy and each of its operating units. The number of goals set for each unit and each operating unit should not normally exceed five or six so as not to dilute plan focus. Once goals have been established that represent the target level of performance, threshold and maximum levels should also be established. Threshold performance represents the minimum acceptable performance that still warrants incentive recognition (paid at 50 percent of the target award level), and maximum performance represents the highest level likely to be attained (paid at 150 percent of the target award level for all goals, except the Business Challenge goal which can be paid at 200%). Regardless of the degree of achievement of each established goal, there will not be any plan payout to any participant for any year unless a corporate "shareholder protection" threshold, i.e., that TECO Energy's net earnings for that year be at least 80 percent of that year's targeted net earnings, is achieved. Additionally, a further performance threshold of 90 percent of operating income target must be achieved by each operating unit for its participants to be eligible for an award. TECO Energy must achieve 90 percent of its net income target for its participants to be eligible. A determination will be made for each participant regarding their portion of the award that will be based on corporate, operating unit or individual performance. Generally, the weightings among these three measurement groups will vary by organizational level. AWARD DETERMINATION At the end of each plan year, a four step process will be followed in determining actual incentive awards. Step 1: The actual degree of achievement for each goal at the corporate, operating unit and individual level is determined. Levels of achievement can range up to 200% for the Business Challenge goal and up to 150% for all other goals. Step 2: Corporate, operating unit and individual performance factors are determined by multiplying levels of goal achievement by the weightings assigned to each goal. Step 3: The total of all performance factors is multiplied by the target award, producing the calculated award. Step 4: The calculated award may be adjusted up or down by the Compensation Committee of the TECO Energy Board with respect to the senior officers and by the Chief Executive Officer of TECO Energy with respect to other officers based on the participant's total performance during the plan year. The actual award, as so adjusted, may not exceed 150 percent of the target award level. 16 Exhibit 10.1 PLAN ADMINISTRATION The Compensation Committee of the TECO Energy Board, the Chief Executive Officer of TECO Energy and the respective Presidents shall perform the functions set forth in this plan. The Compensation Committee may elect to discharge its responsibility in the form of recommendations to the TECO Energy Board. The Vice President-Human Resources of TECO Energy is responsible for administering the plan. OTHER CONSIDERATIONS For any year in which a participant's employment is terminated or an officer first becomes eligible for participation in the plan, whether any incentive award shall be granted for that year and the amount of any such award shall be determined by the Compensation Committee of the TECO Energy Board with respect to senior officers and by the Chief Executive Officer of TECO Energy with respect to other officers. Notwithstanding the foregoing, for any year in which a participant's employment terminates for any reason following a change in control of TECO Energy, as defined in the TECO Energy 1996 Equity Incentive Plan, such participant shall be entitled to receive an incentive award equal to (a) the number of days employed during that year divided by 365 multiplied by (b) the greater of (i) the participant's target award for the year in which the change in control occurred or (ii) the incentive award actually paid to the participant with respect to the year immediately preceding the year in which the termination of employment occurred. 17 EX-10.2 3 Exhibit 10.2 TAMPA ELECTRIC COMPANY AGREEMENT AND GENERAL RELEASE THIS AGREEMENT AND GENERAL RELEASE (the "Agreement") is made and entered into this day of March, 1998, by and between KEITH S. SURGENOR, 15103 Contoy Place, Tampa, Florida 33618 (the "Officer") and TAMPA ELECTRIC COMPANY (the "Company"). WHEREAS, the Officer is currently employed in the position of President and Chief Operating Officer; and WHEREAS, the Officer and the Company have agreed that it is in their mutual best interests that the Officer no longer serve in his present position or to continue his employment with the Company commencing April 1, 1998, subject to the terms and conditions of this Agreement, and; WHEREAS, in recognition of the Officer's service to the Company, the Company desires to extend certain benefits and to make certain payments to the Officer in order to effect a just separation; and WHEREAS, the parties have mutually agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is agreed as follows: 1. RESIGNATION DATE (a) The Officer hereby resigns his employment with the Company effective as of April 1, 1998 (the "Resignation Date"). (b) Contemporaneously with the Officer's execution and delivery of this Agreement, the Officer agrees to deliver the attached letter of resignation from his position of President and Chief Operating Officer of Tampa Electric Company. (c) The Officer and the Company agree to cooperate in the development of joint internal and external announcements prior to the Resignation Date in connection with his resignation. Upon issuance of such announcements, the Officer agrees that he will refer all inquiries from the news media to the Company for handling. The Officer and the Company shall approve a statement which sets out the reason for the Officer's resignation which shall be used in the event that the Company is contacted by any prospective employer or by any person or company seeking information about the reason for such Officer's resignation. 17 Exhibit 10.2 2. COMPENSATION AND BENEFITS (a) From the date of this Agreement up to the Resignation Date, the Officer shall remain a full-time employee of the Company in the aforesaid position, shall continue to receive his monthly base salary of $26,667.00 per month and shall remain eligible for all of the Company's employee benefit plans in accordance with their terms. From the date of this Agreement, the Officer shall have no duties and responsibilities and shall not represent or hold himself out to have a u thority to represent the Company unless he is specifically authorized to do so in writing by the Company's Chief Executive Officer or his designee. (b) Subject to the issuance of the announcement contemplated by Section 1(c), the Company shall make payments to the Officer as follows: (i) a lump-sum payment for his accrued but unused vacation allowance for 1998 as specified in Administrative Policy I.3.1, Paragraph III B; (ii) a lump-sum payment comprised of the following: (x) an amount equal to two times the sum of the Officer's base salary as of the Resignation Date and the average of his incentive payments for the calendar years 1996 and 1997; and (y) an amount equal to the present value of two (2) additional years of age and service credit under the Officer's Supplemental Executive Retirement Plan (the "SERP"). (iii) a payment equal to the present value of the Officer's SERP as of the Resignation Date, paid as a lump- sum in accordance with the Officer's election. (c) All of the restricted stock granted to the Officer under the TECO Energy, Inc. 1996 Equity Incentive Plan shall vest for the benefit of the Officer as of the Resignation Date subject to the provisions of such plan. (d) All of the Officer's outstanding TECO Energy, Inc. stock options shall remain exercisable by the Officer for the term of each applicable stock option grant in accordance with the provisions of such grant. (e) All benefits granted or amounts paid by the Company as provided in Sections 2(a), (b), and (c) above shall be reduced by the amount of applicable FICA and federal withholding taxes. 18 Exhibit 10.2 (f) For a period of six (6) months from the Resignation Date, the Company agrees to purchase from the Officer his primary residence located at 15103 Contoy Place in Tampa, Florida for an amount equal to fair market value based on an appraisal by a qualified appraiser agreed to by the Officer and the Company. During the twelve (12) months following the date of this Agreement, the Company will reimburse the Officer for moving and storage expenses related to his relocation from Tampa, Florida to another domicile and temporary living expenses in such domicile, if necessary, for up to six (6) months during such period which combined expenses for moving, storage and temporary living, in the aggregate, do not exceed $17,500.00 and are supported by proper documentation. (g) For a period of two (2) years from the Resignation Date, the Company will reimburse the Officer for the amount of the premium for the Officer's medical insurance which he obtains pursuant to COBRA upon receipt by the Company of the invoice to be submitted by the Officer within thirty (30) days of his having paid it. (h) For a period of two (2) years from the Resignation Date, the Company shall pay the Officer an amount equal to the premium payable by the Officer upon exercising his conversion rights under the Company's life insurance plan to purchase life insurance with coverage in the current amount benefitting the Officer. Such amount payable by the Company shall be grossed up to reflect the same tax-favored treatment to the Officer as if the Company had continued to provide the coverage under its life insurance plan. 3. CONFIDENTIALITY AND OTHER CONDUCT (a) The Officer recognizes and acknowledges that during the course of his employment with the Company, he has developed, participated in the development of, been exposed to, has had access to, and has had disclosed to him information and material developed specifically by and for the benefit of the Company (including its parent company and other subsidiaries), sensitive and/or proprietary information, strategic planning and financial information, business planning, operations and marketing information, and personnel and plant security information, and, in each case, specific Company policies, practices and procedures related thereto and other matters, including without limitation trade secrets, trademarks, service marks, trademarked and copyrighted material, patents, patents pending, financial and data processing information, data bases, interfaces, and/or source codes, Company procedures, specifications, commercial information or other Company or Customer records as described in Administrative Policies I.8.7. and I.1.28, including any information or material, belonging to others which has been provided to the Company on a confidential basis, all of which are hereinafter referred to as "Confidential Information." 19 Exhibit 10.2 (b) The Officer agrees to maintain, in strict confidence, the Confidential Information and agrees not to disclose the Confidential Information or the fact of, the terms of or the amount of the consideration paid as part of this Agreement to any third party or to use the Confidential Information to benefit himself or any third party. The Officer shall be prohibited from using, duplicating, reproducing, copying, distributing or disclosing the Confidential I n f ormation regardless of form or purpose, including without limitation verbal disclosure, data, documents, electronic media or any other media form. The Officer also agrees to continue to abide by the non-disclosure and non-use obligations relating to Company records, information, and property contained in the Company's Standards of Integrity. (c) The restrictions on the Officer's disclosure of Confidential Information set out herein do not apply to such information which (i) is now, or which hereafter, through no act or failure to act on the part of the Officer becomes, generally known or available to the public; or (ii) is required to be disclosed by a court of competent jurisdiction or by an administrative or quasi-judicial body having jurisdiction over the subject matter after the Officer has given the Company reasonable prior notice of such disclosure requirement. (d) The Officer agrees to conduct himself in all actions or conduct relating to the Company in a manner consistent with existing Company policy and to refrain from engaging in any conduct or activity that in any manner harasses or interferes with the Company, its employees, officers and/or directors or holds the Company up to ridicule in the community or which jeopardizes or adversely affects the business or reputation of the Company. (e) The Officer hereby waives all rights to employment with the Company and agrees not to seek employment with the Company at any time in the future. 4. COMPETITION (a) C o venant Not to Compete. The Officer, directly or indirectly, in any capacity, either for himself, or on behalf of any corporation, partnership, joint venture, business trust, or other person or entity, shall not: For a period of two (2) years commencing on the date of this Agreement ("Prohibited Period"), (i) engage in any business, or acquire an interest in any business (except as the beneficial owner of publicly-traded stock), or become affiliated as an agent, consultant, employee, partner, director, officer, stockholder, or proprietor of or provide any consulting services to any business that is an electric or gas utility, a power marketer, a gas marketer, an energy services company, an independent power producer, cogenerator, electric 20 Exhibit 10.2 wholesale generator, municipal electric or gas utility or electric cooperative having its principal place of business within the State of Florida or engage in, or provide services with respect to, strategic planning, marketing and sales in the State of Florida for any of the foregoing businesses regardless of its principal place of business ("Competitor"); (ii) solicit, divert, do business with, or accept business from any person who is or has been a customer of the Company if such solicitation, diversion or business has the effect of or results in the Company's loss of all or a portion of such customer's business or potential business; (iii) represent any person in its dealings with the Company; (iv) influence or attempt to influence any employee of the Company to terminate his/her employment with the Company for the purpose of working for a Competitor; or (v) influence or attempt to influence any agent, customer, supplier, or distributor who has a business relationship with the Company to cease or adversely alter its business relations with the Company. (b) Consideration. In consideration for Officer's agreement to the preceding covenant not to compete set forth in Section 4(a) above, the Company agrees to pay the Officer TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) payable quarterly in the amount of TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00). Such payments shall be due throughout the Prohibited Period so long as the Officer adheres to the covenant not to compete set forth in Section 4(a) hereof, breach of which shall entitle the Company to cease making such payments during the period of such breach in addition to the other remedies set forth in Section 6 hereof. Such payments shall be made on the first day of the month immediately following the last day of each calendar quarter. The first payment hereunder shall be due on July 1, 1998. The Officer's covenant not to compete pursuant to Section 4(a) is independent of any obligation of the Company to the Officer, including any obligation of the Company to the Officer under this Agreement, and is not subject to any setoff, defense, deduction, or counterclaim based on any claim that the Officer might have against the Company. The Officer stipulates that the geographic scope, duration, and the related restrictions are reasonable limitations necessary to protect the Company's business interests, and such restrictions do not unreasonably prevent the Officer from obtaining acceptable professional or occupational employment opportunities. The Officer acknowledges that his position with the Company has given him access to the Confidential Information defined herein, certain specialized knowledge and training not readily available to him otherwise, and that he has been directly and indirectly responsible for, participated in and contributed to the development of and managed certain of the C o mpany's marketing and competitive business strategies. The Prohibited Period covering the obligations set forth in Section 4(a) above shall be extended by any period of time during which the Officer is in breach of such obligation. 21 Exhibit 10.2 (c) Reformation. Each provision of the covenant set forth in Section 4(a) shall be construed and interpreted so that it is valid and enforceable under applicable law. However, if a court of competent jurisdiction determines that the duration, geographical area, or proscribed activities contained in the restrictions under this Agreement would cause strict application of those restrictions to be invalid or unenforceable in a particular jurisdiction, the restrictions automatically will be reformed to shorten their duration, d i minish their geographical area, or confine their proscribed activities to the extent necessary (but only to such extent) to make the restrictions valid and enforceable. 5. RELEASE OF CLAIMS AND INDEMNIFICATION (a) For and in consideration of the payments and increased benefits made to the Officer pursuant to Section 2 hereof, the Officer, for himself, his heirs, executors, administrators, successors and assigns, hereby releases and agrees to hold harmless the Company (which, for purposes of this section includes the Company and any agent, officer, director or employee thereof) from all claims, rights, causes of action or liabilities of whatever nature, whether at law or in equity, against the Company that the Officer, his heirs, executors, administrators, successors, and assigns, may now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing, whatsoever, which has happened, developed or occurred on or before the date of this Agreement, arising out of Officer's employment with or termination of employment from the Company or resignation hereunder, including, but not limited to, claims for wrongful termination, discrimination, retaliation, invasion of privacy, defamation, slander, and/or intentional infliction of emotional distress and those claims arising under any federal, state, or local discrimination or civil rights or labor laws and/or rules or regulations, and/or common law, whether in contract or in tort, as they relate to the employment relationship of the Employee/Employer ( i n c l uding without limitation claims arising under the Age D i s crimination in Employment Act, the Older Workers' Benefit Protection Act (29 USC 626), Title VII of the Civil Rights Act of 1964, or the Employee Retirement Income Security Act, as such laws have been or may be amended from time to time). (b) The Officer acknowledges and agrees that this Agreement shall not be construed as an admission by Company of any improper or unlawful actions or of any wrongdoing whatsoever against Officer or any other persons, and Company expressly denies any wrongdoing whatsoever against Officer or any other employee. (c) The Officer covenants with and represents to the Company that he is the sole owner of any and all claims being waived and from which the Company is being released by the Officer in Section 5(a) above and hereby covenants with and agrees to indemnify and save and 22 Exhibit 10.2 hold harmless the Company against any and all liability, claims, suits, damages, costs, losses and expenses whatsoever, in any manner resulting from or arising out of the matters released above. The Company agrees to indemnify and save and hold harmless the Officer in accordance with the provisions of the Company's Bylaws, to the extent permitted by law, against all expenses and liabilities incurred in connection with any threatened, pending or completed proceeding to which the Officer is or becomes a party by reason of the fact that he was an officer or employee of the Company. The Company's obligation to indemnify the Officer hereunder is subject to the Officer providing the Company with prompt written notice of any threatened or existing suit, proceeding or claim. 6. REMEDIES (a) Remedy at Law Insufficient. The parties acknowledge that damages at law will be an insufficient remedy if: Officer violates the terms of Sections 3, 4 and 5 hereof or if the Company or Officer breach the covenants contained in Section 1(c) hereof, or if the Company inappropriately fails to make the payments pursuant to Section 2 hereof, and that each would suffer irreparable damage as a result of such violation. Accordingly, upon a violation of any of the covenants set out in such Sections applicable to the parties, the affected party, either Officer or the Company without excluding or limiting any other available remedy, shall be entitled to the following remedies: (1) Upon posting bond of $1,000.00 and filing with a court of competent jurisdiction an appropriate pleading and affidavit specifying each obligation breached by Officer or the Company, automatic entry by a court having jurisdiction of an order granting an injunction or specific performance compelling the defaulting party or parties to comply with that obligation, without proof of monetary damage or an inadequate remedy at law; and (2) Reimbursement of all costs and expenses reasonably incurred by the non-defaulting party in enforcing those obligations or otherwise defending or prosecuting any litigation arising out of the defaulting party's obligations, including premiums for bonds, fees for experts and investigators, and legal fees, costs, and expenses incurred before a lawsuit is filed and in trial, appellate, bankruptcy and judgment execution proceedings. (b) Cumulative Remedies. The foregoing remedies are cumulative and in addition to all other remedies afforded or available to the parties by law or in equity, and the parties may exercise any such remedy concurrently, independently or successively. (c) Attorneys' Fees. In the event that either party is required to institute litigation or some other alternative dispute resolution process (other than the proceedings contemplated in Section 6(a) 23 Exhibit 10.2 above) in order to enforce the terms of this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees and costs from the other party. 7. SURVIVAL Neither completion of payments hereunder nor termination of this Agreement shall be deemed to relieve Officer or Company of any rights or obligations hereunder which by their very nature survive the completion of payments by the Company, including without limitation, paragraphs 1(c), 3, 4, 5 and 6 hereof. For the purpose of Sections 3, 4, 5 and 6 the term "Company" shall mean Tampa Electric Company, TECO Energy, Inc., and all of its subsidiaries and affiliates. 8. ENTIRE AGREEMENT The Officer acknowledges and agrees that this Agreement contains the entire agreement between himself and Company and that no statements or promises have been made by either party concerning the subjects of this Agreement other than as expressly contained in this document. 9. EFFECTIVE DATE This Agreement shall be governed by the Laws of the State of Florida and shall become effective at the close of business on the seventh (7th) day following the date that this Agreement is executed by the Officer. 24 Exhibit 10.2 11. STATEMENT OF UNDERSTANDING THE OFFICER ACKNOWLEDGES THAT (A) HE HAS CAREFULLY READ THIS AGREEMENT AND RELEASE, KNOWS AND UNDERSTANDS THE CONTENTS CONTAINED IN IT AND HAS BEEN GIVEN THE OPPORTUNITY TO CONSIDER THIS AGREEMENT FOR TWENTY-ONE (21) DAYS AND (B) THE COMPANY HAS ADVISED HIM TO CONSULT AN ATTORNEY AND HE HAS BEEN GIVEN THE OPPORTUNITY TO DO SO. THE OFFICER DOES FREELY AND VOLUNTARILY ASSENT TO ALL OF ITS TERMS AND CONDITIONS AND SIGNS THIS AGREEMENT AS HIS OWN FREE ACT. If the Officer chooses to waive the 21 day requirement, please indicate by initialing and dating the following paragraph in the space provided in the left margin. THE OFFICER DOES HEREBY WAIVE THE TWENTY-ONE (21) DAY PERIOD TO CONSIDER THIS AGREEMENT AS REQUIRED UNDER THE OLDER WORKERS' BENEFIT PROTECTION ACT Initial (29 USC 626), BUT ACKNOWLEDGES THAT HE HAS ____ REVIEWED AND CONSIDERED THIS AGREEMENT, HAD CONSULTED WITH HIS ATTORNEY AND FREELY AND VOLUNTARILY Date ASSENTS TO ALL OF ITS TERMS AND CONDITIONS AND SIGNS THIS AGREEMENT AS HIS OWN FREE ACT. IN WITNESS WHEREOF, TAMPA ELECTRIC COMPANY and KEITH S. SURGENOR, have caused this instrument to be executed in Tampa, Florida as of the date first written above. WITNESSES: TAMPA ELECTRIC COMPANY, A FLORIDA CORPORATION BY: Name Title CAUTION! READ BEFORE SIGNING BY: Name Keith S. Surgenor DATE SIGNED: 25 EX-12 4 Exhibit 12 TAMPA ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the company's ratio of earnings to fixed charges for the periods indicated. Three Months Twelve Months Ended Ended Year Ended December 31, March 31, 1998 March 31, 1998 1997 1996(2) 1995(2) 1994(2) 1993(2) 3.44x (1) 4.20x (1) 4.38x 4.40x 4.28x 3.88x(3) 3.81x(4) For the purposes of calculating this ratio, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest on indebtedness, amortization of debt premium, the interest component of rentals and preferred stock dividend requirements. (1) Includes the effect of a $9.6-million pretax charge associated with Tampa Electric's ongoing efforts to mitigate the effects of a 1997 FPSC ruling on certain wholesale power supply contracts. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 3.99x and 4.34x for the three- and 12-month periods ended March 31, 1998, respectively. (2) Amounts have been restated to reflect the merger of Peoples Gas System, Inc., with and into Tampa Electric Company. (3) Includes the effect of a $21.3-million pretax restructuring charge. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this non-recurring charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 4.23x for the year ended Dec. 31, 1994. (4) Includes the effect of the non-recurring $10-million pretax charge associated with a coal pricing settlement. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this non- recurring charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 3.97x for the year ended Dec. 31, 1993. 26 EX-27.1 5
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TAMPA ELECTIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000096271 Tampa Electric Company 1000000 DEC-31-1998 JAN-01-1998 Mar-31-1998 3-mos PER-BOOK 2,546 7 265 252 0 3,070 119 893 283 1,295 0 0 727 0 0 141 4 0 0 0 903 3,070 354 16 292 308 46 (2) 44 17 27 0 27 34 11 110 .00 .00 Includes a $9.6-million pretax non-recurring charge. /FN
EX-27.2 6 3/31/97 RESTATED
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TAMPA ELECTRIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS 1997 FINANCIAL DATA SCHEDULE HAS BEEN RESTATED TO REFLECT THE MERGER OF PEOPLES GAS SYSTEM, INC. (PGS) INTO THE REGISTRANT CONCURRENT WITH THE MERGER OF LYKES ENERGY, INC. (PGS PARENT) INTO TECO ENERGY, INC. THESE MERGERS WERE ACCOUNTED FOR AS POOLINGS OF INTEREST. 0000096271 Tampa Electric Company 1000000 DEC-31-1997 JAN-01-1997 Mar-31-1997 3-mos PER-BOOK 2,547 6 254 158 0 2,965 119 849 284 1,252 0 20 757 0 0 82 5 0 0 0 849 2,965 350 21 277 298 52 0 52 17 35 0 35 37 11 92 .00 .00
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