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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report: May 9, 2005
(Date of earliest event reported: May 8, 2005)
DUKE ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
North Carolina 1-4928 56-0205520
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
526 South Church Street, Charlotte, North Carolina 28202-1904
(Address of Principal Executive Offices, including Zip code)
(704) 594-6200
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240. 13e-4(c))
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Item 1.01. Entry into a Material Definitive Agreement.
MERGER AGREEMENT
On May 8, 2005, Duke Energy Corporation, a North Carolina corporation
("Duke"), Cinergy Corp., a Delaware corporation ("Cinergy"), Deer Holding
Corp., a Delaware corporation ("Holdco"), Deer Acquisition Corp., a North
Carolina corporation ("Merger Sub A"), and Cougar Acquisition Corp., a
Delaware corporation ("Merger Sub B"), entered into an Agreement and Plan of
Merger (together with the exhibits thereto, the "Merger Agreement"). Each of
Holdco, Merger Sub A and Merger Sub B are newly-formed, wholly-owned direct or
indirect subsidiaries of Duke, and Merger Sub A and Merger Sub B are direct
wholly-owned subsidiaries of Holdco.
On May 9, 2005, Duke and Cinergy issued a joint press release
announcing the execution of the Merger Agreement. A copy of such press release
is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The Merger Agreement provides that Merger Sub A will merge with and
into Duke (the "Duke Merger") and each share of Duke common stock will be
cancelled and converted into the right to receive one share of Holdco common
stock. In the Duke Merger, Duke will be the surviving corporation and continue
as a wholly-owned subsidiary of Holdco and the former shareholders of Duke
will be shareholders of Holdco. As a result of the Duke Merger, Duke will
shift into a holding company structure wherein Duke will become a wholly-owned
direct subsidiary Holdco.
Following the Duke Merger, Duke (as a subsidiary of Holdco) may
convert to a limited liability company (the "Duke Conversion") and be renamed
"Deer Power LLC." If the Duke Conversion occurs, Duke Power LLC will be a
limited liability company whose membership or other equity interests will be
held by Holdco. Following the Duke Conversion, Duke Power LLC will initiate
one or more restructuring transactions as described in the Merger Agreement,
including the distribution of certain subsidiaries of Duke Power LLC to
Holdco.
Following the latest of the consummation of the Duke Merger and any
of the restructuring transactions, Merger Sub B will merge with and into
Cinergy (the "Cinergy Merger" and, together with the Duke Merger, the
"Mergers") and each share of Cinergy common stock will be cancelled and
converted into the right to receive 1.56 shares of Holdco common stock. In the
Cinergy Merger, Cinergy will be the surviving corporation and will continue as
a wholly-owned subsidiary of Holdco and the former shareholders of Cinergy
will be shareholders of Holdco.
All outstanding options at the effective time of the Mergers, whether
vested or unvested, will be converted into options to acquire shares of
Holdco common stock. Each outstanding option to acquire one share of Duke
common stock will be converted into an option to acquire one share of Holdco
common stock at the same exercise price. Each outstanding option to acquire
one share of Cinergy common stock will be converted into an option to acquire
1.56 shares of Holdco common stock at an equitably adjusted exercise price.
The options to acquire Holdco common stock will be issued subject to the same
terms and conditions as were applicable under the Duke or Cinergy option plan
pursuant to which each option was initially issued.
In connection with the signing of the Merger Agreement, Duke
announced that it would suspend the voluntary portion of its share repurchase
program pending further assessment.
The Merger Agreement provides that following the effective time of
the Mergers, Holdco will have a fifteen member board of directors, which will
include ten directors named by Duke and five directors named by Cinergy. Paul
M. Anderson, Chairman and Chief Executive Officer of Duke, will be the
Chairman of the Board of Directors of Holdco, with certain additional
responsibilities for analyzing potential strategic alternatives regarding the
separation of the gas and electric businesses. James E. Rogers, Chairman,
President and Chief Executive Officer of Cinergy, will be the President and
Chief Executive Officer of Holdco.
Duke and Cinergy have each made customary representations, warranties
and covenants in the Merger Agreement, including, among others, covenants to
conduct their businesses in the ordinary course between the execution of the
Merger Agreement and the consummation of the Mergers and covenants not to
engage in certain kinds of transactions during that period. During such
period, Cinergy will not increase its regular quarterly cash dividend without
the prior written consent of Duke and Duke may increase its regularly
quarterly cash dividend up to $0.31 per share without the prior written consent
of Cinergy. In addition, Duke and Cinergy have made certain additional
customary covenants, including, among others, covenants, subject to certain
exceptions, (A) to cause a stockholder meeting to be held to consider approval
of the Mergers and the other transactions contemplated by the Mergers
Agreement, (B) not to solicit proposals relating to alternative business
combination transactions, and (C) not to enter into discussions concerning, or
provide confidential information in connection with, alternative business
combination transactions.
Consummation of the Mergers is subject to customary conditions,
including, among others, (i) approval of the stockholders of each of Duke and
Cinergy, (ii) absence of any material adverse effect, (iii) expiration or
termination of the applicable Hart-Scott-Rodino Act waiting period, (iv)
absence of any order or injunction prohibiting the consummation of the
Mergers, (v) the registration statement of Holdco filed on Form S-4 shall have
become effective, (vi) shares of Holdco common stock shall have been approved
for listing on the New York Stock Exchange, (vii) subject to certain
exceptions, the accuracy of representations and warranties with respect to
Duke's and Cinergy's business, as applicable, (viii) receipt of customary tax
opinions, and (ix) receipt of all required statutory approvals from, among
others, the Federal Energy Regulatory Commission, the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, the Nuclear
Regulatory Commission, the Federal Communications Commission, and state public
service and utility commissions.
The Merger Agreement contains certain termination rights for both
Duke and Cinergy, and further provides that, upon termination of the Merger
Agreement under specified circumstances, a party would be required to pay the
other party's fees and expenses in an amount not to exceed $35 million or a
termination fee of $300 million in the case of a fee payable by Cinergy to
Duke or a termination fee of $500 million in the case of a fee payable by Duke
to Cinergy. The termination fee is payable by Cinergy under specified
circumstances, including (i) if Cinergy enters into a definitive agreement
with respect to certain business combinations (other than the Merger
Agreement), or (ii) if Duke terminates the Merger Agreement following a
withdrawal by Cinergy's Board of Directors of its recommendation of the Merger
Agreement and the Mergers under certain circumstances. The termination fee is
payable by Duke under specified circumstances, including (i) if Duke enters
into a definitive agreement with respect to certain business combinations
(other than the Merger Agreement), or (ii) if Cinergy terminates the Merger
Agreement following a withdrawal by Duke's Board of Directors of its
recommendation of the Merger Agreement and the Mergers under certain
circumstances.
The foregoing description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, which is filed as Exhibit 2.1 hereto, and is incorporated into this
report by reference.
EMPLOYMENT ARRANGEMENTS AND AGREEMENT
At the effective time of the Mergers, Paul M. Anderson shall be
Chairman of the Board of Directors of Holdco. In addition to the duties of the
Chairman of the Board of Directors of Holdco set forth in the Holdco By-laws,
Mr. Anderson shall have management responsibilities for analyzing potential
strategic alternatives regarding the separation of Duke's gas and electric
businesses.
At the effective time of the Mergers, James E. Rogers shall become
President and Chief Executive Officer of Holdco. Duke, Cinergy, Holdco and Mr.
Rogers have executed a term sheet (the "Rogers Employment Agreement Term
Sheet") pursuant to which the parties agree to amend the existing employment
agreement for Mr. Rogers in certain respects to reflect the Merger Agreement
and the transactions contemplated thereby (as so amended, the "Rogers
Employment Agreement"). The Rogers Employment Agreement will be assumed by
Holdco effective upon the completion of the Mergers. The Rogers Employment
Agreement provides for a three-year term of employment commencing upon
completion of the Mergers, which shall renew automatically for subsequent
one-year periods thereafter if neither Mr. Rogers nor Holdco gives notice
prior to or as of a specified date.
The Rogers Employment Agreement provides that the parties will
negotiate in good faith to restructure the current compensation arrangements
for Mr. Rogers to provide that he shall be paid substantially in the form of
equity compensation by which the current Duke Chief Executive Officer is
presently compensated, in any event on terms no less favorable than Mr.
Rogers' existing compensation arrangements.
If Mr. Rogers' employment is involuntarily terminated without cause,
or Mr. Rogers terminates with "good reason" on or prior to the second
anniversary of the completion of the Mergers, or within two years following a
change in control of Holdco, then he will receive an amount no less than the
economic value to which he would otherwise be entitled under his existing
employment agreement had he terminated employment under such circumstances
immediately following the completion of the Mergers. If such termination of
employment occurs at any time following the second anniversary of the
completion of the Mergers (other than within two years following a change in
control of Holdco), then he will receive an amount no less than the economic
value to which he would otherwise be entitled under his existing employment
agreement had he terminated employment immediately prior to the occurrence of
a change in control of Cinergy (and, in either case, such economic value shall
be determined without regard to the form of his then-restructured compensation
arrangements). The required relocation of Mr. Rogers to Charlotte, North
Carolina will not constitute a "good reason" trigger under the Rogers
Employment Agreement.
Effective upon the completion of the Merger, Cinergy will waive the
limitation on Mr. Rogers' ability to sell, while still employed, certain
shares of stock of Cinergy acquired upon the exercise of Cinergy stock
options, provided that Mr. Rogers will be subject to any future Duke/Holdco
stock ownership guidelines.
A copy of the Rogers Employment Agreement Term Sheet is included
herein as Exhibit D to the Merger Agreement and is incorporated herein by
reference.
* * *
Forward-Looking Statements
This document includes statements that do not directly or exclusively
relate to historical facts. Such statements are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward-looking statements
include statements regarding benefits of the proposed mergers and
Restructuring Transactions, integration plans and expected synergies,
anticipated future financial operating performance and results, including
estimates of growth. These statements are based on the current expectations of
management of Duke and Cinergy. There are a number of risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements included in this document. For example, (1) the companies may be
unable to obtain shareholder approvals required for the transaction; (2) the
companies may be unable to obtain regulatory approvals required for the
transaction, or required regulatory approvals may delay the transaction or
result in the imposition of conditions that could have a material adverse
effect on the combined company or cause the companies to abandon the
transaction; (3) conditions to the closing of the transaction may not be
satisfied; (4) problems may arise in successfully integrating the businesses
of the companies, which may result in the combined company not operating as
effectively and efficiently as expected; (5) the combined company may be
unable to achieve cost-cutting synergies or it may take longer than expected
to achieve those synergies; (6) the transaction may involve unexpected costs
or unexpected liabilities, or the effects of purchase accounting may be
different from the companies' expectations; (7) the credit ratings of the
combined company or its subsidiaries may be different from what the companies
expect; (8) the businesses of the companies may suffer as a result of
uncertainty surrounding the transaction; (9) the industry may be subject to
future regulatory or legislative actions that could adversely affect the
companies; and (10) the companies may be adversely affected by other economic,
business, and/or competitive factors. Additional factors that may affect the
future results of Duke and Cinergy are set forth in their respective Form 10-K
reports for the year ended December 31, 2004 and other filings with the
Securities and Exchange Commission ("SEC"), which are available at
www.duke-energy.com/investors and www.cinergy.com/investors, respectively.
Duke and Cinergy undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, a registration statement
of Deer Holding Corp., which will include a joint proxy statement of Duke and
Cinergy, and other materials will be filed with the SEC. WE URGE INVESTORS TO
READ THE REGISTRATION STATEMENT AND PROXY STATEMENT AND THESE OTHER MATERIALS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT DUKE, CINERGY, DEER HOLDING CORP., AND THE PROPOSED
TRANSACTION. Investors will be able to obtain free copies of the registration
statement and proxy statement (when available) as well as other filed
documents containing information about Duke and Cinergy at http://www.sec.gov,
the SEC's website. Free copies of Duke's SEC filings are also available on
Duke's website at www.duke-energy.com/investors, and free copies of Cinergy's
SEC filings are also available on Cinergy's website at
www.cinergy.com/investors.
Participants in the Solicitation
Duke, Cinergy and their respective executive officers and directors
may be deemed, under SEC rules, to be participants in the solicitation of
proxies from Duke's or Cinergy's stockholders with respect to the proposed
transaction. Information regarding the officers and directors of Duke is
included in its definitive proxy statement for its 2005 Annual Meeting filed
with the SEC on March 31, 2005. Information regarding the officers and
directors of Cinergy is included in its definitive proxy statement for its
2005 Annual Meeting filed with the SEC on March 28, 2005. More detailed
information regarding the identity of potential participants, and their direct
or indirect interests, by securities, holdings or otherwise, will be set forth
in the registration statement and proxy statement and other materials to be
filed with the SEC in connection with the proposed transaction.
Item 8.01. Other Events
On May 9, 2005, Duke issued a press release announcing its merger with
Cinergy. A copy of the press release is attached as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated May 8, 2005, by and
among Duke Energy Corporation, Cinergy Corp., Deer Holding
Corp., Deer Acquisition Corp., and Cougar Acquisition Corp.
99.1 Joint Press Release, dated May 9, 2005, issued by Duke
Energy Corporation and Cinergy Corp.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Duke Energy Corporation
Date: May 9, 2005 By: /s/ Keith G. Butler
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Name: Keith G. Butler
Title: Vice President and
Controller
EXHIBIT INDEX
Exhibit Description
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2.1 Agreement and Plan of Merger, dated May 8, 2005, by and
among Duke Energy Corporation, Cinergy Corp., Deer Holding
Corporation, Deer Acquisition Corp., and Cougar Acquisition
Corp.
99.1 Joint Press Release, dated May 9, 2005, issued by Duke
Energy Corporation and Cinergy Corp.