SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DUKE ENERGY CORPORATION
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
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<S> <C>
(Duke Energy Duke Energy Corporation
logo) 422 South Church Street
P.O. Box 1244
Charlotte, NC 28201-1244
</TABLE>
R.B. PRIORY
Chairman of the Board
March 16, 1998
Dear Shareholder:
You are cordially invited to attend the annual shareholders meeting, which
will be held on Thursday, April 16, 1998, at 10 a.m. in the O. J. Miller
Auditorium in the Energy Center, 526 South Church Street, Charlotte, North
Carolina. This will be our first annual meeting as Duke Energy Corporation. It
will provide a good opportunity for us to report to you our progress following
the successful completion of the merger of Duke Power Company and PanEnergy
Corp, as well as to outline for you our goals for 1998.
During the meeting, we will elect five Class I directors to three-year
terms expiring in 2001, two Class II directors to one-year terms expiring in
1999 and one Class III director to a two-year term expiring in 2000. Also, we
will act upon the ratification of the appointment of auditors, act upon a
proposal to approve the 1998 Long-Term Incentive Plan of the Corporation, act
upon a proposal to approve the Short-Term Incentive Plan for members of the
Corporation's Policy Committee and transact any other business that may come
before the meeting. The accompanying proxy statement contains further
information about all of these matters.
On behalf of the entire Board of Directors, I would like to express our
sincere appreciation to Buck Mickel, who will conclude twenty-two years of
valued service to the Corporation with his retirement from the Board of
Directors at the meeting.
The Board of Directors and I hope you can attend the meeting, and look
forward to seeing you. Whether or not you expect to attend, please sign and date
the enclosed form of proxy and return it promptly in the accompanying envelope
to ensure that your shares will be represented. If you attend the meeting, you
may withdraw any proxy previously given and vote your shares in person.
Sincerely,
/s/ R. B. Priory
<PAGE>
DUKE ENERGY CORPORATION
422 SOUTH CHURCH STREET
P.O. BOX 1244
CHARLOTTE, NORTH CAROLINA 28201-1244
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
March 16, 1998
To the Holders of Common Stock of
DUKE ENERGY CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Duke
Energy Corporation (the "Corporation") will be held in O. J. Miller Auditorium
in the Energy Center, 526 South Church Street, Charlotte, North Carolina, on
Thursday, April 16, 1998, at 10 a.m., for the following purposes:
(1) to elect five directors to Class I, two directors to Class II and
one director to Class III of the Board of Directors;
(2) to ratify the appointment of auditors;
(3) to act upon a proposal to approve the Duke Energy Corporation 1998
Long-Term Incentive Plan;
(4) to act upon a proposal to approve the Duke Energy Corporation
Policy Committee Short-Term Incentive Plan; and
(5) to transact such other business as may come before the meeting.
The Board of Directors has fixed the close of business on February 27, 1998
as the record date for the meeting.
It is important that your shares be represented at the meeting regardless
of the number of shares you may hold. Please complete, sign and date the
enclosed form of proxy and return it promptly in the enclosed envelope which
requires no postage if mailed within the United States.
By Order of the Board of Directors
W. EDWARD POE, JR.
SECRETARY
<PAGE>
DUKE ENERGY CORPORATION
PROXY STATEMENT
This proxy statement, with the accompanying proxy card, is first being
mailed to holders of Common Stock on or about March 16, 1998 and is furnished in
connection with the solicitation of proxies by the Board of Directors of the
Corporation to be used at the annual meeting of shareholders to be held on April
16, 1998.
PROXIES; REVOCATION OF PROXIES
The accompanying form of proxy may be used by a holder of Common Stock
whether or not such holder attends the meeting in person. The proxy may be
revoked by such holder at any time prior to its use at the meeting. There is no
specific procedure or requirement under the Corporation's Restated Articles of
Incorporation, By-Laws or North Carolina law with respect to how proxies may be
revoked. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before such proxies are exercised, will be voted
in the manner specified therein. If no directions are given, the proxies will be
voted FOR the proposed slate of directors (Proposal 1); FOR the ratification of
the appointment of auditors (Proposal 2); FOR the proposal to approve the Duke
Energy Corporation 1998 Long-Term Incentive Plan (Proposal 3); FOR the proposal
to approve the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan (Proposal 4); and AT THE DISCRETION OF THE PERSONS NAMED IN SUCH PROXIES ON
ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING.
COST OF PROXY SOLICITATION
The entire cost of soliciting the proxies from holders of Common Stock will
be borne by the Corporation. In addition to the solicitation of the proxies by
mail, the Corporation will request banks, brokers and other record holders to
send proxies and proxy material to the beneficial owners of Common Stock and
secure their voting instructions. The Corporation will reimburse such record
holders for their reasonable expenses in so doing. The Corporation has also made
arrangements with Georgeson & Company, Inc. to assist it in soliciting proxies
and has agreed to pay $17,500 plus expenses for such services. If necessary, the
Corporation may also use several of its officers and regular employees, who will
not be specially compensated, to solicit proxies from holders of Common Stock,
either personally or by telephone, telegram, facsimile, special delivery letter
or by other means.
RECORD DATE; QUORUM; VOTING RIGHTS
The Board of Directors has fixed February 27, 1998, as the record date (the
"Record Date") for determination of holders of Common Stock entitled to notice
of and to vote at the meeting. Accordingly, only holders of record of Common
Stock at the close of business on the Record Date will be entitled to notice of
and to vote at the meeting. The number of outstanding shares of Common Stock
entitled to vote at the meeting is 360,149,391. In order to establish a quorum
for the meeting, a majority of the votes entitled to be cast must be either
present in person or represented by valid proxy. Abstentions and broker
non-votes will be counted for purposes of determining whether a quorum exists at
the meeting.
Each share of Common Stock entitled to vote at the meeting entitles its
holder to one vote. Directors will be elected by a plurality of the votes cast
by the holders of Common Stock entitled to vote at the meeting. "Plurality"
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Approval by a majority of the votes cast by holders of Common Stock is
required to approve Proposals 2, 3 and 4. Any shares not voted, whether by
abstention or broker non-vote, will not be counted as votes cast for purposes of
determining whether Proposals 2, 3 and 4 have received sufficient votes for
approval, nor will any abstentions or broker non-votes be counted in the
election of directors.
MULTIPLE COPIES OF ANNUAL REPORT TO SHAREHOLDERS
The Corporation's Annual Report to Shareholders has been mailed to all
shareholders. The Annual Report is not to be regarded as proxy soliciting
material. If more than one copy of the Annual Report is sent to your address and
you wish to reduce the number of Annual Reports you receive and save the
Corporation the cost of producing and mailing these reports, the Corporation
will discontinue the mailing of reports if you mark the appropriate box on each
proxy card for which you do not wish to receive an Annual Report. Mailing of
dividends, dividend reinvestment and stock purchase statements, proxy materials
and special notices will not be affected by your election to discontinue
duplicate mailings of the Annual Report.
<PAGE>
At least one account must continue to receive an Annual Report. To
discontinue or resume the mailing of an Annual Report to an account,
shareholders of record may also call the Investor Relations Department at (800)
488-3853.
If you own Common Stock through a bank, broker or other nominee and receive
more than one Annual Report of the Corporation, contact the holder of record to
eliminate duplicate mailings.
ADVANCE NOTICE PROCEDURES
Under the Corporation's By-Laws, nominations for director may be made only
by the Board of Directors or by a shareholder entitled to vote who has delivered
notice to the Corporation not less than 90 nor more than 120 days prior to the
first anniversary of the preceding year's annual meeting.
The Corporation's By-Laws also provide that no business may be brought
before an annual meeting except as specified in the notice of the meeting or as
otherwise brought before the meeting by or at the direction of the Board of
Directors or by a shareholder entitled to vote who has delivered notice to the
Corporation (containing certain information specified in the By-Laws) within the
time limits described above for delivering notice of a nomination for the
election of a director. These requirements apply to any matter that a
shareholder wishes to raise at an annual meeting other than pursuant to the
procedures under Rule 14a-8 of the Securities and Exchange Commission ("SEC").
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Secretary of the Corporation, Post Office Box 1244,
Charlotte, North Carolina 28201-1244.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Corporation's Restated Articles of Incorporation provide that the Board
of Directors is to be divided into three classes, as nearly equal in size as
possible. Each year the directors of one class are elected to serve terms of
three years.
Five persons have been nominated by the Board of Directors for election as
directors to Class I at the meeting, to serve three-year terms and until their
successors are duly elected and qualified. The Class I nominees are Ann Maynard
Gray, Dennis R. Hendrix, Harold S. Hook, W. W. Johnson and Russell M. Robinson,
II. All of the Class I nominees are currently Class I directors with the
exception of Ms. Gray, who is currently a Class III director. In addition, the
Board of Directors has nominated for election by the shareholders to their
current classes each other director appointed as a director at the effective
time of the merger of the Corporation and PanEnergy Corp ("PanEnergy").
Accordingly, Paul M. Anderson and Leo E. Linbeck, Jr. have been nominated for
election as directors to Class II, with terms expiring in 1999, and William T.
Esrey has been nominated as a director to Class III, with a term expiring in
2000.
Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed unless, by reason of death or
other unexpected occurrence, one or more of such nominees shall not be available
for election. In that event, it is intended that such votes will be cast for
such substitute nominee or nominees as may be determined by the persons named in
such proxy. The Board of Directors has no reason to believe that any of the
nominees listed will not be available for election as a director.
2
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NOMINEES FOR ELECTION AS DIRECTORS
CLASS I NOMINEES
(TERM EXPIRING IN 2001)
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- --------------------------- ANN MAYNARD GRAY, VICE PRESIDENT, ABC, INC. AND FORMER PRESIDENT, DIVERSIFIED PUBLISHING
(Photo) GROUP OF ABC, INC., TELEVISION, RADIO AND PUBLISHING
Ms. Gray, 53, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. She had been a director of PanEnergy since 1994. She serves on the Audit and
Corporate Performance Review Committees. She was President, Diversified Publishing Group of
ABC, Inc. from 1991 until 1997, and has been a Corporate Vice President of ABC, Inc. and its
predecessors since 1979. She is a director of Cyprus Amax Minerals Company.
- --------------------------- DENNIS R. HENDRIX, RETIRED CHAIRMAN OF THE BOARD, PANENERGY CORP
(Photo) Mr. Hendrix, 58, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1990. He serves on the Corporate
Performance Review and Nominating Committees. He was Chairman of the Board of PanEnergy from
1990 to 1997; Chief Executive Officer of PanEnergy from 1990 to 1995; and President of
PanEnergy from 1990 to 1993. He served as a director of Panhandle Eastern Pipe Line Company
("PEPL") and Texas Eastern Transmission Corporation ("TETCO") from 1990 to 1997; Chairman of
the Board of PEPL and TETCO from 1990 to 1994; and President of TETCO from 1990 to 1994. He
is a director of Allied Waste Industries, Inc., National Power, PLC and Newfield Exploration
Company.
- --------------------------- HAROLD S. HOOK, CONSULTANT, RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF AMERICAN GENERAL
(Photo) CORPORATION, DIVERSIFIED FINANCIAL SERVICES
Mr. Hook, 67, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1978. He serves on the Corporate
Performance Review and Finance Committees. Mr. Hook retired from American General Corporation
in 1997 after more than 18 years as Chairman and Chief Executive Officer. He serves as a
director of Chase Manhattan Corporation, The Chase Manhattan Bank, Cooper Industries, Inc.
and Sprint Corporation.
- --------------------------- W. W. JOHNSON, CHAIRMAN OF THE EXECUTIVE COMMITTEE, NATIONSBANK CORPORATION
(Photo) Mr. Johnson, 67, was elected a director in 1984. He is Chairman of the Compensation Committee
and also serves on the Finance Committee. He is Chairman of the Executive Committee of
NationsBank Corporation. Mr. Johnson was Chairman of the Board and Chief Executive Officer of
Bankers Trust of South Carolina from 1980 until its merger in January 1986 with NationsBank
Corporation. He is a director of NationsBank Corporation, ALLTEL Corporation and The Liberty
Corporation.
</TABLE>
3
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- --------------------------- RUSSELL M. ROBINSON, II, ATTORNEY, ROBINSON BRADSHAW & HINSON, P.A.
(Photo) Mr. Robinson, 66, was elected a director in 1995 and serves on the Audit and Corporate
Performance Review Committees. He has been engaged in the practice of law since 1956, and is
the author of ROBINSON ON NORTH CAROLINA CORPORATION LAW. He is a director of Cadmus
Communications Corporation and Caraustar Industries, Inc. and also serves as a member of the
American Law Institute and a Fellow of the American Bar Foundation. He is a member of the
Board of Visitors of Duke University Law School, a trustee of The Duke Endowment and a
director of the Presbyterian Hospital Foundation.
<CAPTION>
CLASS II NOMINEES
(TERM EXPIRING IN 1999)
<S> <C>
- --------------------------- PAUL M. ANDERSON, PRESIDENT AND CHIEF OPERATING OFFICER, DUKE ENERGY CORPORATION
(Photo) Mr. Anderson, 52, became President and Chief Operating Officer and a director in June 1997
upon the merger of the Corporation and PanEnergy. He had been a director of PanEnergy since
1992. He serves on the Management and Finance Committees. He was named Executive Vice
President of PanEnergy in 1991, President in 1993 and Chief Executive Officer in 1995. He
also served as President and Chief Executive Officer of PEPL from 1991 to 1994, became a
director in 1991 and was named Chairman of the Board in 1994. Mr. Anderson became a director
of TETCO in 1991 and Chairman of the Board in 1994. Previously, he was Vice President,
Finance and Chief Financial Officer of Inland Steel Industries, Inc. from 1990 to 1991. Mr.
Anderson is a director of Temple-Inland, Inc., Kerr-McGee Corporation and Texas Eastern
Products Pipeline Company ("TEPPCO"), a wholly owned indirect subsidiary of the Corporation
and the general partner of TEPPCO Partners, L.P., a publicly traded master limited
partnership.
- --------------------------- LEO E. LINBECK, JR., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, LINBECK CORPORATION,
(Photo) HOLDING COMPANY OF FIVE CONSTRUCTION-RELATED FIRMS
Mr. Linbeck, 64, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1986. He serves on the Audit and
Compensation Committees. He assumed his present position with Linbeck Corporation in 1990
after serving as Chairman, President and Chief Executive Officer of Linbeck Construction
Corporation from 1975 to 1990. He serves as a director of Daniel Industries, Inc. and as a
director and trustee of 33 investment companies managed by John Hancock Advisers, Inc.
</TABLE>
4
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<TABLE>
<CAPTION>
CLASS III NOMINEE
(TERM EXPIRING IN 2000)
- --------------------------- WILLIAM T. ESREY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, SPRINT CORPORATION, A DIVERSIFIED
(Photo) TELECOMMUNICATIONS HOLDING COMPANY
Mr. Esrey, 58, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1985. He serves on the Compensation and
Nominating Committees. He has served as Chairman of Sprint Corporation since 1990 and as its
Chief Executive Officer since 1985. He was President of Sprint Corporation from 1985 to 1996.
He is a director of Sprint Corporation, Equitable Life Assurance Society of the United
States, General Mills, Inc. and Everen Capital Corporation.
DIRECTORS CONTINUING IN OFFICE
<S> <C>
- --------------------------- G. ALEX BERNHARDT, SR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER, BERNHARDT FURNITURE COMPANY,
(Photo) FURNITURE MANUFACTURER
Mr. Bernhardt, 54, was elected a director in 1991. He is Chairman of the Corporate
Performance Review Committee and serves on the Finance Committee. He has been associated with
Bernhardt Furniture Company of Lenoir, North Carolina, since 1965. He was named President and
a director in 1976 and became Chairman and Chief Executive Officer in 1996. He is a director
of Robert Talbott, Inc. and First Union Corporation. He serves as a trustee of Davidson
College and a member of the North Carolina Governor's Business Council. He is a director
emeritus and past President of the American Furniture Manufacturers Association. He is a
Class II director with a term expiring in 1999.
- --------------------------- ROBERT J. BROWN, CHAIRMAN AND PRESIDENT, B&C ASSOCIATES, INC., MARKETING RESEARCH AND PUBLIC
(Photo) RELATIONS FIRM
Mr. Brown, 63, was elected a director in 1994 and serves on the Audit and Corporate
Performance Review Committees. He founded B&C Associates, Inc., High Point, North Carolina,
in 1960, served as its President from 1960 until 1968 and has been its Chairman and President
since 1973. From 1968 until 1973, Mr. Brown was a Special Assistant to the President of the
United States, with oversight responsibility for community relations, civil rights, emergency
preparedness and day care. He is a director of First Union Corporation, Sonoco Products
Company, Republic Industries, Inc. and North Carolina Citizens for Business and Industry. He
is a Class III director with a term expiring in 2000.
</TABLE>
5
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<TABLE>
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- --------------------------- WILLIAM A. COLEY, GROUP PRESIDENT, DUKE POWER, ELECTRIC OPERATIONS OF DUKE ENERGY CORPORATION
(Photo) Mr. Coley, 54, joined the Corporation in 1966 and was elected a director in 1990. He was
named Vice President, Operation, in 1984; Vice President, Central Division, in 1986; Senior
Vice President, Power Delivery, in 1988; Senior Vice President, Customer Group, in 1990;
Executive Vice President, Customer Group, in 1991; President, Associated Enterprises Group,
in 1994 and was appointed to his present position in June 1997. He serves on the Management
Committee. He is a director of Carolina Pad and Paper Company and the North Carolina Board of
SouthTrust Bank. He also serves on the Boards of Trustees of the Lynnwood Foundation, Queens
College, Union Theological Seminary, Presbyterian Healthcare Systems, United Way of the
Central Carolinas and the Charlotte Chamber of Commerce and is on the Institutional Advisory
Board and the Engineering Advisory Board of the Georgia Institute of Technology. He is a
Class II director with a term expiring in 1999.
- --------------------------- GEORGE DEAN JOHNSON, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER, EXTENDED STAY AMERICA,
(Photo) DEVELOPMENT, OWNERSHIP AND MANAGEMENT OF EXTENDED-STAY LODGING FACILITIES
Mr. Johnson, 55, was elected a director in 1986. He is Chairman of the Finance Committee and
also serves on the Compensation Committee. Mr. Johnson began his legal career in 1967 when he
joined Johnson, Smith, Hibbard and Wildman as an attorney. He was General Partner of WJB
Video, a Blockbuster Video franchisee, from 1987 to 1993, and served as President of the
Domestic Consumer Division of Blockbuster Entertainment Corporation from 1993 until 1995. He
was a co-founder of Extended Stay America and has served as its President and Chief Executive
Officer since 1995. He is Chairman of Johnson Development Associates, Inc. Mr. Johnson is
also Chairman of the Board of Allrenco, Inc. and a director of Florida Panthers Holdings,
Inc., Extended Stay America and Republic Industries, Inc. He also serves on the Board of
Trustees of Converse College. He is a Class III director with a term expiring in 2000.
- --------------------------- MAX LENNON, PRESIDENT, MARS HILL COLLEGE, MARS HILL, NORTH CAROLINA
(Photo) Dr. Lennon, 57, was elected a director in 1988. He is Chairman of the Audit Committee and
also serves on the Nominating Committee. He assumed his present position as President of Mars
Hill College in 1996, after serving as President of Eastern Foods, Inc. from 1994 through
1995. He was previously involved in higher education from 1966 to 1994, his last tenure being
at Clemson University where he served as President for eight years. He is a director of Delta
Woodside Industries, Inc. He is a Class II director with a term expiring in 1999.
</TABLE>
6
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- --------------------------- JAMES G. MARTIN, PH.D., VICE PRESIDENT, RESEARCH, CAROLINAS HEALTHCARE SYSTEM
(Photo) Mr. Martin, 62, was elected a director in 1994. He is Chairman of the Nominating Committee
and also serves on the Compensation Committee. Since January 1993, he has been Chairman of
the Research Development Board of the Carolinas HealthCare System located at Carolinas
Medical Center, Charlotte, North Carolina. He was named to his present position in 1995. He
served as Governor of the State of North Carolina from 1985 to 1993 and was a member of the
United States House of Representatives, representing the Ninth District of North Carolina,
from 1972 to 1984. Mr. Martin is currently a director of J. A. Jones, Inc., Palomar Medical
Technologies, Inc., Entropy, Inc., Reprogenesis, Inc. and Family Dollar Stores, Inc. He is
Chairman of the Global TransPark Foundation, Inc. and a Trustee of Davidson College and Wake
Forest University. He is a Class III director with a term expiring in 2000.
- --------------------------- RICHARD B. PRIORY, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, DUKE ENERGY CORPORATION
(Photo) Mr. Priory, 51, became Chairman of the Board and Chief Executive Officer in June 1997 upon
the merger of the Corporation and PanEnergy. He was elected a director in 1990. He joined the
Corporation in 1976 as a Design Engineer; was named Vice President, Design Engineering, in
1984; Senior Vice President, Generation and Information Services, in 1988; Executive Vice
President, Power Generation Group, in 1991 and President and Chief Operating Officer in 1994.
He is Chairman of the Management Committee and serves on the Finance and Nominating
Committees. He is a director of Dana Corporation, J. A. Jones Applied Research Corp. and
NationsBank Corporation. He serves on the boards of the Edison Electric Institute, the
Association of Edison Illuminating Companies and the Institute of Nuclear Power Operations.
He is a member of The National Petroleum Council and The Business Roundtable. Mr. Priory is
also a member of the National Academy of Engineering. He is a Class III director with a term
expiring in 2000.
</TABLE>
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SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the beneficial ownership of Common Stock by each
director, each nominee for director, each executive officer whose name appears
in the "Summary Compensation" table below ("Named Executive Officer") and by
directors and executive officers of the Corporation as a group, as of December
31, 1997. In addition to the Common Stock, the Corporation also has outstanding
nine series of Preferred Stock and four series of Preferred Stock A. As of
December 31, 1997, no director, nominee for director or executive officer of the
Corporation was the beneficial owner of any shares of the Corporation's
Preferred Stock or Preferred Stock A.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY RIGHT TO TOTAL SHARES
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) ACQUIRE (2) BENEFICIALLY OWNED
- --------------------------------------- ------------------- ----------- ------------------
<S> <C> <C> <C>
Paul M. Anderson3 76,011 360,194 436,205
G. Alex Bernhardt, Sr.4 4,640 4,640
Robert J. Brown4 2,005 2,005
William A. Coley3,5 19,093 19,093
William T. Esrey4 2,762 13,574 16,336
Ann Maynard Gray4 2,881 8,354 11,235
W. H. Grigg7 1,565 1,565
James T. Hackett3 68,126 57,442 125,568
Dennis R. Hendrix4 257,431 257,431
Harold S. Hook4 10,418 13,574 23,992
George Dean Johnson, Jr.4,6 27,464 27,464
W. W. Johnson4 16,076 16,076
Max Lennon4 4,729 4,729
Leo E. Linbeck, Jr.4 4,830 13,574 18,404
James G. Martin4 2,130 2,130
Buck Mickel4,8 72,572 72,572
Richard J. Osborne3 7,348 7,348
Richard B. Priory3 11,761 11,761
Russell M. Robinson, II4,9 10,708,969 10,708,969
Directors and executive officers as a
group (23 persons)3,4,5,6,8,9 11,334,474 525,526 11,860,000
</TABLE>
- ---------------
(1) Determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934. Individuals may disclaim beneficial ownership for other purposes.
Unless otherwise indicated in a footnote, the named individual or family
member possesses sole voting power and sole investment power with respect to
shares of Common Stock shown as owned by such person.
(2) Represents shares which the individual has a right to acquire within 60 days
after December 31, 1997 through exercise of stock options assumed by the
Corporation.
(3) Includes full shares credited to the participant's account under employee
benefit plans as of December 31, 1997.
(4) Includes full shares held in trust under the arrangement for directors
described under the caption "Compensation of Directors."
(5) Includes 1,411 shares owned by Mr. Coley's wife. Beneficial ownership of
such shares is disclaimed.
(6) Includes 22,609 shares held in a limited partnership controlled by Mr.
Johnson.
(7) Mr. Grigg also owns 13,900 shares of Common Stock units under the
Corporation's Executive Savings Plan.
(8) Includes 60,000 shares owned by The Daniel Foundation of South Carolina, a
charitable foundation in Greenville, South Carolina. Mr. Mickel, who is a
trustee of the Foundation, with shared voting and investment power,
expressly disclaims beneficial ownership of such shares.
(9) Includes 9,404,721 shares owned by The Duke Endowment and 1,302,132 shares
owned by the Doris Duke Trust. Mr. Robinson, who is a trustee of each of
such entities, with shared voting and investment power, expressly disclaims
beneficial ownership of the shares owned by such trusts.
No person listed in the table beneficially owned more than 1% of the Common
Stock outstanding on December 31, 1997, with the exception of Russell M.
Robinson, II, who beneficially owned 10,708,969 shares of such stock on that
date
8
<PAGE>
largely because of the attribution to him of 9,404,721 shares owned by The Duke
Endowment and 1,302,132 shares owned by the Doris Duke Trust, shares he is
deemed to beneficially own in his capacities as a trustee of The Duke Endowment
and a trustee of the Doris Duke Trust, respectively. The directors and executive
officers as a group beneficially owned less than 1% of such stock (not including
the shares owned by such trusts) on that date.
The following table shows the number of units of limited partnership
interests in TEPPCO Partners, L.P., a publicly traded master limited partnership
of which Texas Eastern Products Pipeline Company, an indirect wholly owned
subsidiary of the Corporation, is the general partner, which were beneficially
owned on December 31, 1997 by a director, nominee for director, Named Executive
Officer, or executive officer of the Corporation. None of such persons had the
right to acquire units within 60 days after December 31, 1997. As of December
31, 1997, the number of units beneficially owned by directors and executive
officers of the Corporation as a group (18,500 units) did not exceed 1% of the
then outstanding units.
<TABLE>
<CAPTION>
UNITS BENEFICIALLY
NAME OWNED
- ------------------- ------------------
<S> <C>
Paul M. Anderson 2,000
Dennis R. Hendrix 14,500
Harold S. Hook 2,000
</TABLE>
EXECUTIVE COMPENSATION
Set forth below is information regarding compensation to the current Chief
Executive Officer, the prior Chief Executive Officer and the other four most
highly compensated executive officers of the Corporation for services to the
Corporation for the years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ ------------
OTHER ANNUAL LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) PAYOUTS($)
- --------------------------------------------- ---- --------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Richard B. Priory 1997 671,933 297,339 59,652 397,013
Chairman of the Board and 1996 476,509 107,215 14,144 124,362
Chief Executive Officer 1995 423,445 149,407 9,716 130,275
William H. Grigg 1997 825,900 259,000 43,016 705,408
Chairman of the Board and 1996 695,000 218,925 56,760 188,123
Chief Executive Officer(1) 1995 636,667 312,704 48,098 204,392
Paul M. Anderson 1997 373,864 225,000 5,257 0
President and
Chief Operating Officer(2)
William A. Coley 1997 387,392 190,407 14,302 281,959
Group President, 1996 378,947 300,723 43,734 124,362
Duke Power 1995 380,110 208,360 9,997 130,275
James T. Hackett 1997 211,364 207,000 2,960 0
Group President,
Energy Services(2)
Richard J. Osborne 1997 299,322 72,085 36,284 171,774
Executive Vice President 1996 253,200 47,931 3,448 61,272
and Chief Financial Officer 1995 250,800 57,504 1,873 70,763
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION($)(3)
- --------------------------------------------- ------------------
<S> <C>
Richard B. Priory 99,165
Chairman of the Board and 31,254
Chief Executive Officer 20,945
William H. Grigg 292,036
Chairman of the Board and 182,606
Chief Executive Officer(1) 163,720
Paul M. Anderson 698,475
President and
Chief Operating Officer(2)
William A. Coley 95,180
Group President, 53,594
Duke Power 44,809
James T. Hackett 59,607
Group President,
Energy Services(2)
Richard J. Osborne 32,516
Executive Vice President 15,932
and Chief Financial Officer 13,591
</TABLE>
- ---------------
(1) W. H. Grigg resigned as Chairman of the Board and Chief Executive Officer in
June 1997 immediately prior to the merger of the Corporation and PanEnergy.
(2) Amounts shown for P. M. Anderson and J. T. Hackett relate to the period from
June 18, 1997 to December 31, 1997.
(3) All Other Compensation Column includes the following for 1997:
(i) Amounts contributed to the Retirement Savings Plan for Employees as
follows: R. B. Priory, $7,150; W. H. Grigg, $7,150; W. A. Coley,
$7,150; R. J. Osborne, $7,150.
9
<PAGE>
(ii) Amounts accrued under a make-whole arrangement under the Executive
Savings Plan designed to maintain the overall integrity of the
employee benefit plans as follows: R. B. Priory, $45,413; W. H.
Grigg, $50,135; W. A. Coley, $31,787; R. J. Osborne, $12,607.
(iii) Amounts contributed to the Employees' Savings Plan of PanEnergy as
follows: P. M. Anderson, $5,225; J. T. Hackett, $3,520.
(iv) Amounts accrued under a make-whole arrangement under the Key
Employees' Deferred Compensation Plan of PanEnergy designed to
maintain the overall integrity of the employee benefit plans as
follows: P. M. Anderson, $93,303; J. T. Hackett, $50,699.
(v) Above-market interest earned on account balances in the Executive
Savings Plan, Supplemental Account as follows: R. B. Priory, $7,080;
W. H. Grigg, $114,457; W. A. Coley, $9,408; R. J. Osborne, $3,661.
(vi) Above-market interest earned on account balances in the Key
Employees' Deferred Compensation Plan of PanEnergy as follows: P. M.
Anderson, $4,285; J. T. Hackett, $18.
(vii) Economic value of life insurance coverage provided under life
insurance plans as follows: R. B. Priory, $15,967; W. H. Grigg,
$40,146; P. M. Anderson, $2,000; W. A. Coley, $4,073; J. T. Hackett,
$358; R. J. Osborne, $1,898.
(viii) The cost to the Corporation of supplemental life insurance coverage
under the Supplemental Insurance Plan as follows: R. B. Priory,
$10,531, W. H. Grigg, $18,201; W. A. Coley, $3,859.
(ix) The economic benefit of split-dollar life insurance coverage pursuant
to the Estate Conservation Plan as follows: R. B. Priory, $224; W. H.
Grigg, $3,101; W. A. Coley, $282.
(x) Pursuant to the employment agreement described in "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements" below, $83,334 is deferred monthly for P. M. Anderson
for a period of two years beginning in June 1997. For the period June
through December 1997, $583,338 was deferred under such agreement.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The following table sets forth estimated payments to the Named Executive
Officers under the Duke Power Executive Long-Term Incentive Plan for the periods
beginning in 1997. Awards are based upon the Corporation's total shareholder
return during the performance period as compared with that of the companies
listed in the S&P Electric Utility Index. The table assumes that total
shareholder return is attained at the threshold (or minimum) performance level.
There is no award, however, if total shareholder return is less than the 33rd
percentile of the companies listed in the S&P Electric Utility Index. Payment of
the threshold, target and maximum is estimated for performance at or above the
33rd, 55th and 75th percentiles, respectively.
The Compensation Committee of the Board of Directors terminated the Duke
Power Executive Long-Term Incentive Plan as of December 31, 1997 and elected to
pay prorated awards to reflect the period of time between the beginning of the
performance period and such date. The awards were originally granted based on a
three-year performance period. Estimated payments in the table below are
prorated to reflect such termination. (See "Compensation Committee Report on
Executive Compensation -- LONG-TERM INCENTIVE COMPENSATION").
<TABLE>
<CAPTION>
ESTIMATED PAYMENTS
-------------------------------------
NAME PERFORMANCE PERIOD THRESHOLD($) TARGET($) MAXIMUM($)
- ------------------------------------- ------------------ ------------ ------- ----------
<S> <C> <C> <C> <C>
W. H. Grigg (1) 1/1/97-12/31/97 67,222 134,444 201,667
Richard B. Priory (2) 1/1/97-12/31/97 41,875 83,750 125,625
William A. Coley 1/1/97-12/31/97 25,376 50,753 76,129
Richard J. Osborne 1/1/97-12/31/97 16,324 32,648 48,972
</TABLE>
- ---------------
(1) Award projection is prorated to reflect Mr. Grigg's retirement.
(2) Award projection is adjusted to reflect Mr. Priory's promotion to Chairman
of the Board and Chief Executive Officer.
EXERCISES OF STOCK OPTIONS IN 1997 AND YEAR-END OPTION VALUES
The following table shows aggregate exercises of options during the fiscal
year ended December 31, 1997, by the Named Executive Officers, and the aggregate
fiscal year-end value of the unexercised options held by them. The value
assigned to each unexercised, "in-the-money" stock option is based on the
positive spread between the exercise price of such
10
<PAGE>
stock option and the fair market value ("FMV") of the Corporation's Common Stock
on December 31, 1997, which was $55.4375. The FMV is the average of the high and
low prices of a share of the Corporation's Common Stock on that date as reported
on the New York Stock Exchange Composite Transactions Tape. The ultimate value
of a stock option will be dependent on the market value of the underlying shares
on a future date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY
SHARES YEAR-END OPTIONS AT FISCAL YEAR-
ACQUIRED ON VALUE EXERCISABLE/ END EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE($)
- -------------------------- ----------- -------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Paul M. Anderson -- -- 334,084/78,330 10,940,662/883,045
James T. Hackett -- -- 52,220/15,666 1,501,195/176,609
</TABLE>
-----------------------------------
Note: Future exercisability of currently unexercisable stock
options depends on the grantee remaining employed by the
Corporation throughout the vesting period of the options,
subject to provisions applicable at retirement, death or
total disability. The unexercisable options vest and become
exercisable on the following schedule, although all unvested
options will fully vest and become exercisable upon a change
in control (as defined in the applicable option agreement)
of the Corporation.
<TABLE>
<CAPTION>
UNEXERCISABLE OPTIONS HELD UNEXERCISABLE OPTIONS HELD
VESTING DATE BY PAUL M. ANDERSON BY JAMES T. HACKETT
- ----------------- -------------------------- --------------------------
<S> <C> <C>
January 22, 1998 26,110 5,222
January 22, 1999 26,110 5,222
January 22, 2000 26,110 5,222
</TABLE>
RETIREMENT PLAN INFORMATION
Executive officers and other employees of the Corporation who were
employees of the Corporation prior to the merger of the Corporation and
PanEnergy participate in a noncontributory, qualified pension plan known as the
Retirement Cash Balance Plan. In addition, selected managers who were employees
of the Corporation prior to the merger are eligible to participate in a
noncontributory, nonqualified pension plan known as the Executive Cash Balance
Plan. A portion of the benefits earned in the Executive Cash Balance Plan is
attributable to compensation in excess of the Internal Revenue Service
compensation limit ($160,000 for 1997) or deferred compensation. Benefits under
the Retirement Cash Balance Plan and the Executive Cash Balance Plan are based
on base pay, short-term incentives and lump-sum merit increases. The Retirement
Cash Balance Plan excludes deferred compensation.
For eligible employees, the Corporation makes an allocation to employees'
accounts at the end of each month in which an employee is actively employed and
receives pay for services. The Corporation's monthly allocations are equal to a
percentage of an eligible employee's monthly base salary. The percentage
received depends on age and completed years of service at the beginning of the
year, as shown below:
<TABLE>
<CAPTION>
MONTHLY ALLOCATION
AGE AND SERVICE PERCENTAGE
- ----------------------------------------------------------------------------- ------------------
<S> <C>
34 or less................................................................... 4%
35 to 49..................................................................... 5%
50 to 64..................................................................... 6%
65 or more................................................................... 7%
</TABLE>
In addition to the basic monthly allocation percentage, an employee will
receive a monthly allocation of 4% for any portion of eligible compensation
above the Social Security taxable wage base ($68,400 as of 1998).
Employee accounts also earn monthly interest credits. The amount of the
interest credit is adjusted quarterly and equals the yield on 30-year U.S.
Treasury Bonds during the third week of the last month of the previous quarter,
subject to a minimum rate of 4% per year and a maximum rate of 9% per year.
11
<PAGE>
The Retirement Cash Balance Plan and the Executive Cash Balance Plan became
effective on January 1, 1997. Prior to such date, eligible employees were
covered under the Corporation's Employees' Retirement Plan, Supplemental
Retirement Plan and Supplemental Security Plan. To account for the transition in
pension plans, each employee account was given an initial opening balance
determined under the predecessor plan on the basis of age and credited service.
In addition, during 1997 W. H. Grigg and Richard B. Priory received as one-time
supplementary contributions to their Supplemental Accounts in the Executive Cash
Balance Plan allocations of $100,000 and $400,000, respectively.
The years of credited service under the Retirement Cash Balance Plan as of
December 31, 1997 for the Named Executive Officers were: William A. Coley, 31;
Richard B. Priory, 21; and Richard J. Osborne, 22. Assuming that such officers
continue in their present positions at their present salaries until retirement
at age 65, their estimated annual pensions in a single life annuity form under
the Retirement Cash Balance Plan and the Executive Cash Balance Plan
attributable to such salaries would be: William A. Coley, $373,738; Richard B.
Priory, $520,606; and Richard J. Osborne, $227,655. Such estimates are
calculated assuming that cash balances are credited with interest at 7% per
annum and using a future Social Security taxable wage base equal to $68,400. In
connection with his retirement in 1997, W. H. Grigg took a lump sum distribution
consisting of the entire balance in his Retirement Cash Balance Plan account.
His estimated annual pension under the Executive Cash Balance Plan, using the
foregoing calculation, would be $284,318.
Certain of the executive officers and other employees of the Corporation
who were employees of PanEnergy prior to the merger of the Corporation and
PanEnergy participate in the PanEnergy qualified retirement plan. PanEnergy's
qualified retirement plan provides, with respect to participants employed by
certain participating subsidiary companies, benefits, expressed in the form of a
single life annuity commencing at normal retirement date of age 65, or, if
later, the fifth anniversary of participation in the retirement plan, based on a
final average pay benefit formula that, in part, uses average pay for the
highest 60 months out of the last 120 months of employment, which considers the
regular compensation of the participant, including overtime payments, bonus
payments, and some forms of deferred compensation. The PanEnergy qualified
retirement plan also provides, with respect to participants employed by certain
other participating subsidiary companies of PanEnergy, benefits, expressed in
the form of a cash balance, based on a benefit formula that uses annual regular
compensation accruals and interest accruals. In addition to providing certain
death benefits, the PanEnergy qualified retirement plan permits participants who
meet certain eligibility requirements to commence final average pay benefit
formula benefit payments as early as age 55 and with less than full actuarial
reductions for early commencement.
Qualified retirement plan benefits under the PanEnergy qualified retirement
plan may be subject to statutory limitations if the participant receives
compensation in excess of a maximum, is covered by other qualified plans, if
benefits are paid before Social Security retirement age, if the participant has
less than ten years of plan participation, or if benefits are paid in a more
valuable form than a single life annuity. When qualified plan benefits are
limited by statute, nonqualified plans restore certain benefits for participants
covered by the nonqualified plans to a level which would have been available if
such statutory limits did not exist.
The table below shows the estimated annual benefits payable at age 65 under
the PanEnergy qualified and nonqualified retirement plans at various levels of
final average compensation and assuming various years of benefit accrual
service:
PANENERGY PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
- ----------------------------------------- ---- ---- ---- ---- ----
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 600,000................................ $142 $189 $237 $284 $331
800,000............................... 190 253 317 380 443
1,000,000............................... 238 317 397 476 555
1,200,000............................... 286 381 477 572 667
1,400,000............................... 334 445 557 668 779
</TABLE>
The years of benefit accrual service for each Named Executive Officer who
is eligible to receive benefits under the PanEnergy plans described above are as
follows: Paul M. Anderson, 19, and James T. Hackett, 2. Covered compensation,
which consists of salary and bonus for the full 1997 fiscal year, is
approximately $1,141,500 for Mr. Anderson and approximately $810,950 for Mr.
Hackett.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently comprised
of W.W. Johnson, William T. Esrey, George Dean Johnson, Jr., Leo E. Linbeck, Jr.
and James G. Martin. None of the present or former members of the Compensation
Committee was at any time during 1997 or at any other time an officer or
employee of the Corporation.
No executive officer of the Corporation serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Corporation's Board of Directors
or the Compensation Committee.
------------------------
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that might
incorporate future filings, including this proxy statement in whole or in part,
the following Compensation Committee Report on Executive Compensation and the
Performance Graph immediately following such Report shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, which is composed
exclusively of nonemployee directors, is responsible for the Corporation's
executive compensation programs. The following is the report of the Compensation
Committee on compensation policies regarding executive officers and the basis of
compensation actions it has taken.
The objective of the Corporation's executive compensation programs is to
offer compensation opportunities that attract and retain talented executive
officers and key employees and that motivate such employees to enhance
shareholder value. Base pay, annual incentives and long-term incentives are
structured to deliver competitive pay opportunities, reward individual
performance and encourage executives to manage from the perspective of owners
with an equity stake in the Corporation. The executive compensation programs are
intended to provide total compensation (consisting of base salaries, annual cash
incentive opportunities and long-term incentive opportunities) that is
competitive with the median total compensation offered other executives employed
by companies of similar size, complexity and lines of business. To determine
competitive compensation levels, the Compensation Committee considers data from
surveys, proxy statements and independent compensation consultants. The
attainment of corporate, business group and, in some instances, individual
performance goals determines the payouts from the annual incentive compensation
plans. Long-term incentive compensation awards are designed to link a
significant portion of total pay directly to long-term financial performance and
creation of shareholder value.
To underscore the importance of linking executive and shareholder
interests, the Board of Directors has adopted stock ownership guidelines for
executive officers and other members of senior management. The target level of
ownership of Common Stock (or Common Stock equivalents) for the Chairman of the
Board and Chief Executive Officer and the President and Chief Operating Officer
under such guidelines is three times annual salary. The target level for other
officers who are members of the Corporation's Policy Committee, including
Messrs. Hackett, Coley and Osborne, is two times annual salary. Each employee
subject to the guidelines is expected to achieve the ownership target within a
period of five years, commencing on the later of January 1, 1997, or the date
upon which the employee became subject to the guidelines. Common Stock held in
an executive's 401(k) plan account, Common Stock equivalents earned through
non-qualified deferred compensation programs and any Common Stock beneficially
owned outside such programs are included in determining compliance with the
guidelines.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code imposes a limitation on the
Corporation's ability to deduct from income tax annual compensation in excess of
$1 million paid to certain employees, generally the chief executive officer and
the four other most highly compensated executive officers. The Compensation
Committee intends to structure compensation that rewards performance while
preserving maximum deductibility of all compensation awards. Towards this end,
the Board of Directors has recommended that the shareholders approve the
Corporation's 1998 Long-Term Incentive Plan and Policy Committee Short-Term
Incentive Plan to allow future grants of stock options and other performance
awards to satisfy the requirements for exemption from Section 162(m). It is not
anticipated that compensation realized by any executive officer under programs
now in effect will result in a material loss of tax deductions.
13
<PAGE>
BASE SALARIES
Salaries for executive officers are reviewed annually and established by
the Compensation Committee based upon job responsibilities, level of experience,
individual performance and competitive data obtained from surveys, consultants
and staff research. Base pay increases were approved effective March 1, 1997 for
certain executive officers, including Messrs. Grigg, Priory, Coley and Osborne,
in accordance with these criteria. Increases were also approved for Mr. Priory
and Mr. Osborne when they assumed additional responsibilities effective with the
merger of the Corporation and PanEnergy.
SHORT-TERM INCENTIVE COMPENSATION
In 1997, the Compensation Committee administered two annual incentive plans
that permitted the granting of cash awards. Executive officers who were
participants in the Duke Power Executive Short-Term Incentive Plan continued to
earn incentive pay under that plan for the entire year; executive officers who
were participants in the PanEnergy Annual Cash Bonus Plan at the beginning of
the year continued to earn incentive pay under that plan through year end.
Awards under the Duke Power Executive Short-Term Incentive Plan were
calculated pursuant to a formula that rewarded attainment of certain corporate
and business unit goals finalized in early 1997. Those goals varied according to
the position held by the executive officer. Minimum, target and maximum
performance levels were established, and participants could receive up to 150%
of their short-term incentive targets. Key measures under the plan for named
executives included return on equity, total cost per kilowatt hour delivered,
corporate safety and after-tax net profit of the former Associated Enterprise
Group which held all of the non-regulated businesses of the Corporation prior to
the merger of the Corporation and PanEnergy. In addition to these measures, Mr.
Osborne's award calculation included consideration of certain business unit
measures. A portion of Mr. Coley's award was based on achievement of certain
after-tax net profit measures for the Associated Enterprise Group. Mr. Coley was
also eligible for an additional award based on total net profits of the
Associated Enterprise Group as a whole.
Awards under the PanEnergy Annual Cash Bonus Plan were determined on the
basis of a combination of business unit and corporate earnings before interest
and income taxes ("EBIT") and individual objectives. Each of these components
determined one half of the executives' bonus. Messrs. Anderson and Hackett
received incentive pay under the plan of 91.6% and 97.78% of target,
respectively, based upon corporate performance and the executives' individual
achievements.
Effective January 1, 1998, all key employees will participate in
consolidated incentive plans with awards based on increases in earnings per
share, on EBIT and on the individual accountabilities of such executives for
achieving growth objectives. The annual cash incentive compensation opportunity
for members of the Policy Committee, including Messrs. Priory, Anderson,
Hackett, Coley and Osborne, will be determined solely by the Corporation's
success in achieving earnings per share growth as set forth in the Policy
Committee Short-Term Incentive Plan being submitted for shareholder approval at
the annual meeting.
LONG-TERM INCENTIVE COMPENSATION
In 1997, executive officers who participated in the Duke Power Executive
Long-Term Incentive Plan continued to earn incentive compensation under that
plan for the entire year. The plan included a pre-established awards formula
based on total shareholder return over a three-year period compared to the
performance of a peer group consisting of companies in the S&P Electric Utility
Index. "Total shareholder return" was calculated as the sum of the change in the
market price of the Common Stock over the three-year performance period plus
dividends paid over that period divided by the price of the Common Stock at the
beginning of the performance period. The minimum performance level for awards
was the 33rd percentile of the peer group; the target performance level was the
55th percentile of the peer group and the maximum performance level was the 75th
percentile of the peer group. The Corporation performed slightly under the
target performance level by achieving total shareholder return at the 52nd
percentile of the peer group for the 1995 through 1997 performance period. As a
result, Messrs. Priory, Coley and Osborne received awards under the plan ranging
from 32.61% to 39.6% of their respective February 1995 base salaries.
Consistent with its decision to restructure the executive compensation
program of the Corporation and, in particular, to make long-term incentive
compensation entirely contingent upon increases in the market value of the
Common Stock, the Compensation Committee elected to terminate outstanding award
opportunities under the Duke Power Executive Long-Term Incentive Plan that had
been granted in 1996 for the three-year performance period from 1996 through
1998 and outstanding award opportunities that had been granted in 1997 for the
three-year performance period from 1997 through 1999. Awards were calculated at
the greater of the target or actual performance level, and prorated to reflect
the period of time between the date of the award and December 31, 1997.
Accordingly, Mr. Priory received 29.89% of his 1996 base salary for the
14
<PAGE>
1996-1998 period and 15.83% of his 1997 base salary for the 1997-1999 period.
Messrs. Osborne and Coley received 23.92% and 27.33%, respectively, of their
1996 base salary for the 1996-1998 period and 11.67% and 13.33%, respectively,
of their 1997 base salary for the 1997-1999 period.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
At its February 1997 meeting, the Compensation Committee reviewed an
analysis of total compensation available to chief executive officers in Duke
Power's competitive marketplace. At that meeting, the Compensation Committee
elected to make a 14.3% upward adjustment to Mr. Grigg's salary.
Prior to the merger of the Corporation and PanEnergy, the Compensation
Committee commissioned its compensation consultant to prepare an independent
report regarding the level of compensation for the Chief Executive Officer of
the Corporation, considering in particular the size of the Corporation, its
complexity and the markets in which the Corporation will compete for executive
talent. Based upon its analysis of the consultant's report, at its June 1997
meeting, the Compensation Committee adjusted Mr. Priory's annual base salary to
$810,000 and adjusted his annual short-term incentive target to 100% of base
salary beginning in 1998. Also based upon its analysis of the consultant's
report, the Compensation Committee expects that it will grant Mr. Priory an
award of nonqualified stock options to purchase 500,000 shares of Common Stock,
subject to and effective upon shareholder approval of the Duke Energy
Corporation 1998 Long-Term Incentive Plan. (See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" and "Approval of
the Duke Energy Corporation Long-Term Incentive Plan -- 1998 Plan Benefits.")
The Compensation Committee believes that such an award would put in place a
mechanism which will result in meaningful rewards for substantial improvements
in shareholder value. The Compensation Committee does not contemplate additional
awards of stock options to Mr. Priory in the foreseeable future, but will
consider such additional awards as, from time to time, it deems appropriate.
It is the Compensation Committee's intention that, taken together, the
components of Mr. Priory's pay, including salary, short-term incentive
opportunity and annualized long-term incentive award value, result in
compensation which approximates the 50th percentile of the market when incentive
plan performance expectations are met and for compensation as high as the 75th
percentile of the market when results exceed expectations.
This report has been provided by the Compensation Committee.
W. W. JOHNSON, Chairman
WILLIAM T. ESREY
GEORGE DEAN JOHNSON, JR.
LEO E. LINBECK, JR.
JAMES G. MARTIN
15
<PAGE>
PERFORMANCE GRAPH
Note: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, S&P 500 INDEX,
S&P UTILITIES INDEX AND S&P ELECTRIC UTILITY INDEX
(Performance Graph appears here. See the table below for plot points.)
Assumes $100 invested on Dec. 31, 1992
in Duke Common Stock, S&P 500 Index,
S&P Utilities Index, and S&P Electrics.
Assumes reinvestment of dividends.
1992 1993 1994 1995 1996 1997
Duke $100 $122 $116 $150 $153 $190
S&P 500 Index $100 $110 $111 $153 $187 $249
S&P Utilities $100 $114 $104 $147 $151 $187
S&P Electrics $100 $113 $ 98 $127 $127 $158
The performance graph in the Corporation's proxy statement distributed in
connection with the annual meeting of shareholders in 1997 used the S&P Electric
Utility Index as the required comparative industry index, rather than the S&P
Utilities Index used in the above performance graph. Because the merger of the
Corporation and PanEnergy created an integrated energy company with both
electric and natural gas operations, as well as energy services, the Corporation
believes that a performance comparison with a peer group of electric and gas
utilities, such as the S&P Utilities Index, which comprises 37 electric and/or
gas utility companies, provides a more appropriate comparison than an index
consisting solely of electric utilities. Total return for the S&P Electric
Utility Index is shown in the above performance graph for comparison.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Corporation entered into employment agreements dated as of November 24,
1996 with Messrs. Priory, Coley, Osborne, Anderson and Hackett, which became
effective on June 18, 1997 (the "Effective Time") and which remain in effect for
a two-year period from the Effective Time or such longer period as may be
mutually agreed upon by the parties to such agreements (the "Employment
Period"). The employment agreements were amended in October 1997 (as amended,
the "Employment Agreements"). In October 1997 the Corporation and the employees
mutually agreed to short- and long-term incentive opportunities pursuant to the
terms of the Employment Agreements. The principal terms and conditions of the
Employment Agreements are described below.
The Employment Agreements for Richard B. Priory, William A. Coley and
Richard J. Osborne provide for an annual base salary that is at least equal to
the executive's annual base salary for the twelve-month period prior to the
Effective Time (i.e., Messrs. Priory, Coley and Osborne were paid $476,509,
$378,947, $253,200, respectively, as base salary in 1996). The Employment
Agreements also provide for an annual bonus opportunity of 100% for Mr. Priory
and 60% for each of Messrs. Coley and Osborne under the terms of the Duke Energy
Corporation Policy Committee Short-Term Incentive Plan calculated as a
percentage of annual base salary. Each executive will be entitled to participate
in all long-term incentive plans, savings, retirement, welfare benefit plans on
the same basis as other peer executives of the Corporation. The Employment
Agreements
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<PAGE>
also provide that Messrs. Priory, Coley and Osborne will receive nonqualified
stock options to purchase 500,000, 200,000 and 100,000 shares of Common Stock,
respectively. Such options will be issued under the Duke Energy Corporation 1998
Long-Term Incentive Plan, which is subject to shareholder approval. In the event
the executive's employment is terminated for "Good Reason" by the executive or
without "Cause" by the Corporation (both as defined in the Employment
Agreements), the executive will be entitled to receive a lump-sum severance
payment equal to the product of three times the executive's annual base salary
and target bonus. In addition, for three years following the executive's date of
termination for "Good Reason" or without "Cause" by the Corporation, the
executive will be entitled to continued coverage under the medical, life
insurance and other welfare benefit plans of the Corporation. In the event that
any of the payments or benefits provided for in the relevant Employment
Agreement would constitute a "parachute payment" (as defined in section
280G(b)(2) of the Internal Revenue Code), the executive is entitled to elect to
reduce such payments or benefits so that the excise tax imposed by section 4999
of the Internal Revenue Code would not apply. Each of the Priory, Coley and
Osborne Employment Agreements contains a restrictive covenant that prohibits the
executive from disclosing or using certain confidential information while
employed by the Corporation and at any time thereafter.
The Employment Agreement of Paul M. Anderson provides that Mr. Anderson
will serve as Chief Operating Officer and President of the Corporation, a member
of the Office of the Chief Executive Officer and a member of the Corporation's
Policy Committee, a committee of senior executive managers designated by the
Office of the Chief Executive Officer. The Anderson Employment Agreement further
provides that during the Employment Period Mr. Anderson will receive an annual
base salary of no less than $700,000, an annual bonus opportunity set at a
target level of no less than 90% of Mr. Anderson's base salary claimed under the
terms of the Duke Energy Corporation Policy Committee Short-Term Incentive Plan,
and a supplementary salary payment in the event that Mr. Anderson becomes
subject to North Carolina taxes such that the amount of Mr. Anderson's after-tax
compensation is no less than the amount he would have received absent the
imposition of North Carolina taxes. In addition, Mr. Anderson will be entitled
to receive 400,000 nonqualified stock options. Such options will be issued under
the Duke Energy Corporation 1998 Long-Term Incentive Plan, which is subject to
shareholder approval. Pursuant to the Anderson Employment Agreement, the
Corporation will also provide Mr. Anderson with deferred compensation payable
upon the later of Mr. Anderson's termination of employment or his attainment of
the age of 55, accruing at a monthly rate of $83,334, plus interest, for each of
the twenty-four months following the Effective Time. The Anderson Employment
Agreement prohibits Mr. Anderson from disclosing or using certain confidential
information while employed by the Corporation and at any time thereafter. If Mr.
Anderson's employment terminates before the end of the Employment Period (except
in the case of termination for "Cause" or "Disability" as defined in the
Employment Agreement), Mr. Anderson will be entitled to the following: (i) a
lump-sum payment aggregating accrued obligations (such as unpaid salary and a
pro-rata portion of his target bonus opportunity) to Mr. Anderson, and (ii)
retirement benefits, including qualified defined benefit retirement benefits,
excess or supplemental retirement benefits, and welfare benefits, as if Mr.
Anderson had reached early retirement age as of the date of termination of his
employment. In the event that compensation payments to Mr. Anderson would
subject him to excise tax under section 4999 of the Internal Revenue Code, the
Corporation will reduce such payments if and to the extent it would maximize Mr.
Anderson's after-tax compensation.
The Employment Agreement of James T. Hackett provides that Mr. Hackett will
serve as Group President, Energy Services, the division that comprises all
non-regulated energy business units of the Corporation, and as a member of the
Policy Committee during the Employment Period. The Hackett Employment Agreement
further provides that during the Employment Period Mr. Hackett will receive a
base salary at least equal to the base salary he received for the twelve-month
period prior to the Effective Time (i.e., $372,916) and an annual bonus
opportunity set at a target level of no less than 70% of Mr. Hackett's base
salary and earned under the terms of the Duke Energy Corporation Policy
Committee Short-Term Incentive Plan. Mr. Hackett is also entitled to receive
250,000 stock options. Such options will be issued under the Duke Energy
Corporation 1998 Long-Term Incentive Plan, which is subject to shareholder
approval. The Hackett Employment Agreement prohibits Mr. Hackett from disclosing
or using certain confidential information while employed by the Corporation and
at any time thereafter. If, during the Employment Period, the Corporation
terminates Mr. Hackett's employment for any reason other than "Cause" or
"Disability" (as defined in the Employment Agreement), or Mr. Hackett terminates
his employment for "Good Reason" (as defined in the Employment Agreement), Mr.
Hackett will be entitled to the following: (i) a lump-sum payment aggregating
(a) accrued obligations (such as unpaid salary and a pro-rata portion of his
target bonus opportunity) to Mr. Hackett, (b) an amount equal to three times Mr.
Hackett's most recent annual compensation (including target bonus opportunity),
and (c) an amount equal to the excess of (1) the actuarial present value of the
retirement benefits that Mr. Hackett would receive assuming he continued
employment with PanEnergy for three years over (2) the actuarial present value
of Mr. Hackett's actual retirement benefits, and (ii) continued employee welfare
benefits for three years. With respect to any payments, other than the payments
related to restricted stock granted to Mr. Hackett pursuant to a 1995 agreement
(the "Restricted Stock"), that would subject Mr. Hackett to excise tax under
section 4999 of the Internal Revenue Code, the
17
<PAGE>
Corporation has agreed to (a) reduce such payments so that payments to Mr.
Hackett do not exceed the amount which would be characterized as a "parachute
payment" under section 280G of the Internal Revenue Code and (b) if, after such
reduction, payments to Mr. Hackett remain subject to the excise tax under
section 4999 of the Internal Revenue Code, make a payment to Mr. Hackett such
that after the payment of all income and excise taxes, Mr. Hackett will be in
the same after-tax position as if no excise tax under section 4999 had been
imposed. If it is determined that the Restricted Stock, without regard to any
other payments, would be subject to the excise tax under section 4999 of the
Internal Revenue Code, the Corporation will make a payment to Mr. Hackett such
that after the payment of all income and excise taxes, Mr. Hackett will be in
the same after-tax position as if no excise tax under section 4999 had been
imposed.
COMPENSATION OF DIRECTORS
Effective upon the merger of the Corporation and PanEnergy, the fixed
annual retainer for nonemployee directors was increased from $30,000 to $40,000.
At the same time, annual compensation for serving as the Chairman of the Audit,
Compensation, Nominating, Corporate Performance Review or Finance Committees was
increased from $3,500 to $4,000. In addition, nonemployee directors receive a
fee of $1,000 for attendance at each meeting of the Board of Directors, each
committee meeting and other functions of the Corporation requiring their
presence, together with expenses of attendance.
A nonemployee director may elect to receive 50% of his or her retainer and
attendance fees in the form of Common Stock or may defer such portion by having
it held in trust for the director's benefit and invested in Common Stock at
market price. The director may elect to receive the remaining 50% of such
compensation in cash or may elect to defer, until termination of service on the
Board of Directors, that portion in trust as shares of Common Stock or in an
investment account that is credited with interest based upon the interest paid
on 30-year U.S. Treasury Bonds.
Each January and July that a nonemployee director continues to serve on the
Board of Directors, such director is credited with 100 shares of Common Stock to
be held in trust. Each director who previously served as a PanEnergy director
was also credited with an amount of shares of Common Stock, to be similarly held
in trust, based upon the benefit that such director had accrued under a
PanEnergy directors' retirement plan that was terminated upon the merger of the
Corporation and PanEnergy.
In general, shares of Common Stock held in trust, and income thereon, will
not become distributable until the nonemployee director terminates service on
the Board of Directors. Dividends will be converted into additional shares held
in trust at fair market value on the dividend payment date. When a nonemployee
director terminates service on the Board of Directors, shares held in trust for
his or her account will be distributed to the director on the basis of the
distribution schedule chosen by such director.
Upon completing ten years of service on the Board of Directors, each
director becomes eligible to participate in the Directors' Charitable Giving
Program. Under this program, the Corporation will make, upon the director's
death, donations of up to $1,000,000 to charitable organizations selected by the
director. A director may request that the Corporation make donations under this
program during the director's lifetime, in which case the maximum donation will
be reduced on a net present value basis. The Corporation maintains life
insurance policies upon eligible directors to fund donations under the program.
Eligible directors include only those who were members of the Board of Directors
on February 18, 1998, and certain former directors who previously qualified for
benefits.
Nonemployee directors are subject to stock ownership guidelines that became
effective on January 1, 1997. The guidelines require nonemployee directors to
build and maintain holdings of Common Stock (or Common Stock equivalents) equal
in market value to three times the annual retainer ($120,000). Nonemployee
directors must attain this ownership level within five years from the date of
implementation of the guidelines, or from the commencement of their service on
the Board of Directors, if after the implementation date.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors had nine meetings during 1997. No director attended
fewer than 75% of the aggregate of the meetings of the Board of Directors held
during the period for which he or she was a director and the meetings of the
committees upon which he or she served during the period for which he or she was
a director.
Among its standing committees the Corporation has a Management Committee,
an Audit Committee, a Compensation Committee, a Nominating Committee, a
Corporate Performance Review Committee and a Finance Committee.
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<PAGE>
The Management Committee consists of Richard B. Priory, Paul M. Anderson
and William A. Coley. This Committee may exercise all of the authority of the
Board of Directors except with respect to certain actions specified in the
Corporation's By-Laws.
The Audit Committee consists of Robert J. Brown, Ann Maynard Gray, Max
Lennon, Leo E. Linbeck, Jr. and Russell M. Robinson, II. This Committee
recommends to the Board of Directors the engagement of the independent auditors
for the Corporation, determines the scope of the auditing of the books and
accounts of the Corporation, reviews reports submitted by the auditors, examines
procedures employed in connection with the Corporation's internal audit program
and makes recommendations to the Board of Directors as may be appropriate. The
Committee held seven meetings during 1997.
The Compensation Committee consists of William T. Esrey, George Dean
Johnson, Jr., W. W. Johnson, Leo E. Linbeck, Jr. and James G. Martin. This
Committee sets the salaries and other compensation of all employees of the
Corporation except the Chairman of the Board, President and any other officers
the Board of Directors may designate whose salaries are at a monthly rate at or
above a level determined from time to time by the Board of Directors. This
Committee makes recommendations to the Board of Directors regarding the salary
of the Chairman of the Board and any President for consideration and action by
the Board of Directors, without the presence or participation of those directors
who are also employees of the Corporation. The Committee also makes
recommendations to the Board of Directors regarding the compensation of
nonemployee directors. The Committee held eight meetings during 1997.
The Nominating Committee recommends to the Board of Directors the size and
composition of the Board of Directors within the limits set forth in the
Corporation's Restated Articles of Incorporation and By-Laws and recommends
persons to be considered as successors to the Chief Executive Officer. The
Committee will consider nominees for the Board of Directors recommended by
shareholders. The Committee, consisting of William T. Esrey, Dennis R. Hendrix,
Max Lennon, James G. Martin and Richard B. Priory, met twice in 1997.
The Corporate Performance Review Committee consists of G. Alex Bernhardt,
Sr., Robert J. Brown, Ann Maynard Gray, Dennis R. Hendrix, Harold S. Hook and
Russell M. Robinson, II. This Committee monitors and makes recommendations for
improving the overall performance of the Corporation, and, at the policy level,
determines the adequacy of and support for the Corporation's emphasis on
continuous improvement. The Committee met seven times during 1997.
The Finance Committee consists of Paul M. Anderson, G. Alex Bernhardt, Sr.,
Harold S. Hook, George Dean Johnson, Jr., W. W. Johnson and Richard B. Priory.
This Committee reviews the financial and fiscal affairs of the Corporation and
makes recommendations to the Board of Directors regarding the Corporation's
dividend, financing and fiscal policies. The Committee met seven times during
1997.
In February 1998, the Corporation adopted a policy stating that members of
the Board of Directors are to submit their resignation as a matter of course
upon a change in employment or other significant change in their professional
roles and responsibilities, with the exception of the normal retirement of those
individuals who were members of the Board of Directors on the date the policy
was adopted. The Nominating Committee will determine whether any such
resignation will be accepted. It is expected that acceptance of any such
resignation will be effective as of the end of the term of the director
tendering the resignation.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Corporation has had business relationships and engaged in certain
transactions with affiliated parties. It is the policy of the Corporation to
engage in transactions with related parties only on terms that, in the opinion
of the Corporation, are no less favorable to the Corporation than could be
obtained from unrelated parties.
During 1997, the Corporation retained the law firm of Robinson, Bradshaw &
Hinson, P.A., of which Russell M. Robinson, II, a director of the Corporation,
is a shareholder, in connection with a number of matters. Fees for legal
services paid by the Corporation to the law firm in 1997 represented less than
5% of such firm's gross revenues for the year.
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<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL 2)
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed, subject to shareholder ratification, the firm of Deloitte & Touche
LLP, certified public accountants, as independent auditors to make an
examination of the accounts of the Corporation for the year 1998. If the
shareholders do not ratify this appointment, other certified public accountants
will be considered by the Board of Directors upon recommendation of the Audit
Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
A representative of Deloitte & Touche LLP will, as in prior years, attend
the annual meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
APPROVAL OF THE DUKE ENERGY CORPORATION
1998 LONG-TERM INCENTIVE PLAN
(PROPOSAL 3)
The following is a description of the Duke Energy Corporation 1998
Long-Term Incentive Plan (the "1998 Plan"), which was adopted by the Board of
Directors on February 18, 1998. If approved by the shareholders as proposed
herein, the 1998 Plan will allow the grant of incentive awards to employees of
the Corporation and its subsidiaries and to nonemployee members of the Board of
Directors. The 1998 Plan provides for the grant of stock options, including both
incentive stock options and nonqualified stock options, as well as stock
appreciation rights, restricted stock, performance awards, phantom stock, and
dividend equivalents, as described below. The purpose of the 1998 Plan is to
promote the interests of the Corporation and its shareholders by strengthening
the Corporation's ability to attract, motivate and retain employees and
directors and to provide an additional incentive for employees and directors to
promote the financial success and growth of the Corporation. The 1998 Plan is
designed to allow for the grant of certain types of awards that conform to the
requirements for tax deductible "performance-based" compensation under section
162(m) of the Internal Revenue Code, as discussed under "Compliance with Section
162(m) of the Internal Revenue Code" in the section of this proxy statement
entitled "Compensation Committee Report on Executive Compensation."
The full text of the 1998 Plan was filed electronically with the SEC with
this proxy statement. A brief description of the material features of the 1998
Plan is set forth below, but is qualified by reference to the full text thereof.
1998 PLAN BENEFITS. As of the date of this proxy statement, no awards have
been made under the 1998 Plan. The table below sets forth all determinations
made as of the date of this proxy statement as to future award recipients and
the size or type of such awards under the 1998 Plan. It is anticipated that the
Compensation Committee will grant the awards set forth below under the 1998 Plan
on the date of the annual meeting, subject to shareholder approval of the 1998
Plan. With respect to the Named Executive Officers, the awards are to be made
pursuant to the employment agreements described in "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements." No awards to
non-executive officer employees under the 1998 Plan are anticipated during 1998.
<TABLE>
<CAPTION>
NUMBER
OF STOCK
NAME OPTIONS
- -------------------------------------- ---------
<S> <C>
Richard B. Priory 500,000
Paul M. Anderson 400,000
William A. Coley 200,000
James T. Hackett 250,000
Richard J. Osborne 100,000
All Executive Officers as a Group (9) 1,900,000
</TABLE>
Currently, approximately 1,000 persons are expected to be considered by the
Committee for participation in the 1998 Plan. The number of persons eligible to
participate in the 1998 Plan and the number of grantees may vary from year to
year.
RESERVATION OF SHARES. The Corporation has reserved, subject to shareholder
approval of the 1998 Plan, 15,000,000 shares of Common Stock for issuance under
the 1998 Plan, provided that no more than 1,500,000 shares of Common Stock may
be issued pursuant to all awards of restricted stock, performance awards or
phantom stock under the 1998 Plan. The shares of Common Stock to be issued under
the 1998 Plan shall be made available from authorized but unissued shares of
Common Stock. If any shares of Common Stock that are the subject of an award are
not issued and cease to be issuable for
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<PAGE>
any reason, such shares will no longer be charged against such maximum share
limitation and may again be made subject to awards under the 1998 Plan. In the
event of certain corporate reorganizations, recapitalizations, or other
specified corporate transactions affecting the Corporation or the Common Stock,
proportionate adjustments may be made to the number of shares available for
grant under the 1998 Plan, the applicable maximum share limitations under the
1998 Plan, and the number of shares and prices under outstanding awards at the
time of the event.
ADMINISTRATION. The 1998 Plan will be administered by the Compensation
Committee, or such other committee or subcommittee of the Board of Directors
designated for such purpose (the "Committee"). Subject to the limitations set
forth in the 1998 Plan, the Committee has the authority to determine the persons
to whom awards are granted, the types of awards to be granted, the time at which
awards will be granted, the number of shares, units or other rights subject to
each award, the exercise, base or purchase price of an award (if any), the time
or times at which the award will become vested, exercisable or payable, and the
duration of the award. The Committee may provide for the acceleration of the
vesting or exercise period of an award at any time prior to its termination or
upon the occurrence of specified events. With the consent of the affected
participant, the Committee has the authority to cancel and replace awards
previously granted with new awards for the same or a different number of shares
and for the same or different exercise or base price and may amend the terms of
any outstanding award, provided that the Committee shall not have the authority
to reduce the exercise or base price of an award by amendment or cancellation
and substitution of an existing award without approval of the Corporation's
shareholders. With respect to awards granted under the 1998 Plan to nonemployee
members of the Board of Directors, all rights, powers and authorities vested in
the Committee under the 1998 Plan shall instead be exercised by the Board of
Directors.
ELIGIBILITY. All employees of the Corporation and its subsidiaries and all
nonemployee members of the Board of Directors are eligible to be granted awards
under the 1998 Plan, as selected from time to time by the Committee in its sole
discretion.
STOCK OPTIONS. The 1998 Plan authorizes the grant of nonqualified stock
options and incentive stock options. Nonqualified stock options may be granted
to employees and nonemployee directors. Incentive stock options may only be
granted to employees. The exercise price of an option may be determined by the
Committee, provided that the exercise price per share of an option may not be
less than the fair market value of a share of Common Stock on the date of grant.
The value of Common Stock (determined at the time of grant) that may be subject
to incentive stock options that become exercisable by any one employee in any
one year is limited to $100,000. The maximum term of stock options granted under
the 1998 Plan is ten years from the date of grant. The Committee shall determine
the extent to which an option shall become and/or remain exercisable in the
event of termination of employment or service of a participant under certain
circumstances, including retirement, death or disability, subject to certain
limitations for incentive stock options. Under the 1998 Plan, the exercise price
of an option is payable by the participant in cash, or, in the discretion of the
Committee, in shares of Common Stock, or by any other method approved of by the
Committee. The maximum number of shares of Common Stock that may be granted
under stock options to any one participant during any calendar year shall be
limited to 1,000,000 shares. Nonqualified stock options granted under the 1998
Plan are intended to qualify for exemption under section 162(m) of the Internal
Revenue Code. To the extent permitted by the Committee, nonqualified stock
options may be transferred to members of a participant's immediate family, to
certain other entities which are owned or controlled by members of a
participant's immediate family, or to any persons or entities approved of in
advance by the Committee.
STOCK APPRECIATION RIGHTS. The 1998 Plan authorizes the Committee to grant
awards of stock appreciation rights. A stock appreciation right may be granted
either in tandem with an option or without relationship to an option. A stock
appreciation right entitles the holder, upon exercise, to receive a payment
based on the difference between the base price of the stock appreciation right
and the fair market value of a share of Common Stock on the date of exercise,
multiplied by the number of shares as to which such stock appreciation right
will have been exercised. A stock appreciation right granted in tandem with an
option will have a base price per share equal to the per share exercise price of
the option, will be exercisable only at such time or times as the related option
is exercisable and will expire no later than the time when the related option
expires. Exercise of the option or the stock appreciation right as to a number
of shares results in the cancellation of the same number of shares under the
tandem right. A stock appreciation right granted without relationship to an
option will be exercisable as determined by the Committee, but in no event after
ten years from the date of grant. The base price assigned to a stock
appreciation right granted without relationship to an option shall not be less
than 100% of the fair market value of a share of Common Stock on the date of
grant. The maximum number of shares of Common Stock that may be subject to stock
appreciation rights granted to any one participant during any calendar year
shall be limited to 1,000,000 shares. Stock appreciation rights are payable in
cash, in shares of Common Stock, or in a combination of cash and shares of
Common Stock, in the discretion of the Committee. Stock appreciation rights
granted under the 1998 Plan are intended to qualify for exemption under section
162(m) of the Internal Revenue Code.
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<PAGE>
PERFORMANCE AWARDS. The 1998 Plan authorizes the Committee to grant
performance awards, which are units denominated on the date of grant either in
shares of Common Stock ("performance shares") or in specified dollar amounts
("performance units"). Performance awards are payable upon the achievement of
performance criteria established by the Committee at the beginning of the
performance period, which may not exceed ten years from the date of grant. At
the time of grant, the Committee establishes the number of units, the duration
of the performance period or periods, the applicable performance criteria, and,
in the case of performance units, the target unit value or range of unit values
for the performance awards. At the end of the performance period, the Committee
determines the payment to be made based on the extent to which the performance
goals have been achieved. Performance awards are payable in cash, in shares of
Common Stock, or in a combination of cash and shares of Common Stock, in the
discretion of the Committee.
The Committee may grant performance awards that are intended to qualify for
exemption under section 162(m) of the Internal Revenue Code, as well as
performance awards that are not intended to so qualify. The performance criteria
for a section 162(m) qualified award, which may relate to the Corporation, any
subsidiary or any business unit, and may be measured on an absolute or relative
to peer group basis, shall be limited to (i) total shareholder return, (ii)
stock price increase, (iii) return on equity, (iv) return on capital, (v)
earnings per share, (vi) earnings before interest and taxes, (vii) cash flow
(including operating cash flow, free cash flow, discounted cash flow return on
investment, and cash flow in excess of costs of capital) and (viii) cost per
kWh. The maximum amount of compensation that may be payable in any one calendar
year to any one participant designated to receive a performance unit award
intended to qualify under section 162(m) is $2.5 million. The maximum number of
stock units that may be subject to performance share awards intended to qualify
under section 162(m) granted to any one participant in any one calendar year is
200,000 units.
RESTRICTED STOCK AWARDS. The 1998 Plan authorizes the Committee to make
awards of restricted stock. An award of restricted stock represents shares of
Common Stock that are issued subject to such restrictions on transfer and on
incidents of ownership and such forfeiture conditions as the Committee deems
appropriate. The restrictions imposed upon an award of restricted stock will
lapse in accordance with the vesting requirements specified by the Committee in
the award agreement. Such vesting requirements may be based on the continued
employment of the participant for a specified time period or on the attainment
of specified business goals or performance criteria established by the
Committee. The Committee may, in connection with an award of restricted stock,
require the payment of a specified purchase price. Subject to the transfer
restrictions and forfeiture restrictions relating to the restricted stock award,
the participant will otherwise have the rights of a shareholder of the
Corporation, including all voting and dividend rights, during the period of
restriction unless the Committee determines otherwise at the time of the grant.
The Committee may grant awards of restricted stock that are intended to
qualify for exemption under section 162(m) of the Internal Revenue Code, as well
as awards that are not intended to so qualify. An award of restricted stock that
is intended to qualify for exemption under section 162(m) shall have its vesting
requirements limited to the performance criteria described above under the
heading "PERFORMANCE AWARDS." The maximum number of shares of Common Stock that
may be subject to awards of restricted stock intended to qualify under section
162(m) granted to any one participant during any calendar year shall be limited
to 200,000 shares.
PHANTOM STOCK. The 1998 Plan authorizes the Committee to grant awards of
phantom stock. An award of phantom stock gives the participant the right to
receive payment at the end of a fixed vesting period based on the value of a
share of Common Stock at the time of vesting. No vesting period shall exceed ten
years from the date of grant. Phantom stock units are subject to such
restrictions and conditions to payment as the Committee determines are
appropriate. An award of phantom stock may be granted, at the discretion of the
Committee, together with an award of dividend equivalent rights for the same
number of shares covered thereby. Phantom stock awards are payable in cash or in
shares of Common Stock having an equivalent fair market value on the applicable
vesting dates, or in a combination thereof, in the discretion of the Committee.
DIVIDEND EQUIVALENTS. The 1998 Plan authorizes the Committee to grant
awards of dividend equivalents. Dividend equivalent awards entitle the holder to
a right to receive cash payments determined by reference to dividends declared
on the Common Stock during the term of the award, which shall not exceed ten
years from the date of grant. Dividend equivalent awards may be granted on a
stand-alone basis or in tandem with other awards under the 1998 Plan. Dividend
equivalent awards granted on a tandem basis with other awards shall expire at
the time the underlying award is exercised, otherwise becomes payable, or
expires. Dividend equivalent awards are payable in cash or in shares of Common
Stock, as determined by the Committee.
CHANGE IN CONTROL. The Committee may provide for the effect of a "change in
control" (as defined in the 1998 Plan) upon an award granted under the 1998
Plan. Such provisions may include (i) the acceleration or extension of time
periods for purposes of exercising, vesting in, or realizing gain from an award,
(ii) the waiver or modification of performance or other
22
<PAGE>
conditions related to payment or other rights under an award, (iii) providing
for the cash settlement of an award, or (iv) such other modification or
adjustment to an award as the Committee deems appropriate.
TERM AND AMENDMENT. The 1998 Plan has a term of ten years, subject to
earlier termination or amendment by the Board of Directors. The Board of
Directors may amend the 1998 Plan at any time, except that shareholder approval
is required for amendments that would change the persons eligible to participate
in the 1998 Plan, increase the number of shares of Common Stock reserved for
issuance under the 1998 Plan, allow the grant of options at an exercise price
below fair market value, or allow the repricing of options without shareholder
approval.
FEDERAL INCOME TAX CONSEQUENCES. The following is a general description of
the federal income tax consequences to participants and the Corporation relating
to options and other awards that may be granted under the 1998 Plan. This
discussion does not purport to cover all tax consequences relating to options
and other awards.
A participant will not recognize income upon the grant of a nonqualified
stock option to purchase shares of Common Stock. Upon exercise of the option,
the participant will recognize ordinary compensation income equal to the excess
of the fair market value of the shares of Common Stock on the date the option is
exercised over the exercise price for such shares. The Corporation will be
entitled to a deduction equal to the amount of ordinary compensation income
recognized by the participant. The deduction will be allowed at the same time
the participant recognizes the income.
A participant will not recognize income upon the grant of an incentive
stock option to purchase shares of Common Stock and will not recognize income
upon exercise of the option, provided the participant was an employee of the
Corporation or a subsidiary at all times from the date of grant until three
months prior to exercise. Where a participant who has exercised an incentive
stock option sells the shares of Common Stock acquired upon exercise more than
two years after the grant date and more than one year after exercise, capital
gain or loss will be recognized equal to the difference between the sales price
and the exercise price. A participant who sells such shares of Common Stock
within two years after the grant date or within one year after exercise will
recognize ordinary compensation income in an amount equal to the lesser of the
difference between (a) the exercise price and the fair market value of such
shares on the date of exercise, or (b) the exercise price and the sales
proceeds. Any remaining gain or loss will be treated as a capital gain or loss.
The Corporation will be entitled to a deduction equal to the amount of ordinary
compensation income recognized by the optionee in this case. The deduction will
be allowable at the same time the participant recognizes the income.
The current federal income tax consequences of other awards authorized
under the 1998 Plan are generally in accordance with the following: stock
appreciation rights are subject to taxation in substantially the same manner as
nonqualified stock options; restricted stock subject to a substantial risk of
forfeiture results in income recognition to the excess of the fair market value
of the shares of Common Stock over the purchase price (if any) only at the time
the restrictions lapse (unless the recipient elects to accelerate recognition as
of the date of grant); performance awards, phantom stock and dividend
equivalents are generally subject to tax at the time of payment. In each of the
foregoing cases, the Corporation will generally have a corresponding deduction
at the same time the participant recognizes income.
The closing price of the Corporation's Common Stock on the New York Stock
Exchange on March 9, 1998 was $56.75 per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPROVAL OF THE DUKE ENERGY CORPORATION
POLICY COMMITTEE SHORT-TERM INCENTIVE PLAN
(PROPOSAL 4)
The Duke Energy Corporation Policy Committee Short-Term Incentive Plan (the
"Policy Committee Plan") is designed to advance the interests of the Corporation
by rewarding members of the Policy Committee (currently numbering eight) when
performance-based financial objectives are achieved. The Policy Committee Plan
will be administered by the Compensation Committee of the Board of Directors of
the Corporation. Awards may be granted only to members of the Policy Committee.
The full text of the Policy Committee Plan was filed electronically with
the SEC with this proxy statement. A brief description of the material features
of the Policy Committee Plan is set forth below, but is qualified by reference
to the full text thereof.
DESCRIPTION OF POLICY COMMITTEE PLAN. Prior to the commencement of each
fiscal year, the Compensation Committee will establish performance targets for
the Corporation and corresponding target awards for each participant for such
fiscal
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year. The performance targets will be expressed as specified levels of earnings
per share of the Corporation's Common Stock for such fiscal year. The earnings
per share of the Corporation's Common Stock is the sole performance criterion
under the Policy Committee Plan. Awards will be payable in cash, and the
aggregate amount of all payments to any participant will not exceed $1,500,000
for any annual performance period.
As soon as practicable after the close of a performance period, the
Compensation Committee will certify in writing the extent to which the
performance targets have been achieved. If any targets have been achieved, the
Compensation Committee will determine for each participant the amount of the
award that has been earned, based on a pre-determined formula. The Compensation
Committee may reduce the amount of any such award based upon the Compensation
Committee's assessment of individual performance. The Compensation Committee may
permit participants to elect to defer payment of all or part of any awards.
The Policy Committee Plan is intended to satisfy the requirements of
section 162(m) of the Internal Revenue Code, which allows a federal income tax
deduction for performance-based incentive compensation.
The Policy Committee Plan will continue in effect until terminated by the
Board of Directors. The Compensation Committee, however, retains the right to
amend or modify the Policy Committee Plan as it deems advisable. No such
amendment or modification will be effective without Board of Director or
shareholder approval if such approval is required to comply with the
requirements for performance-based compensation under section 162(m) of the
Internal Revenue Code.
POLICY COMMITTEE PLAN BENEFITS. The Compensation Committee has granted
target awards under the Policy Committee Plan in the following target amounts,
subject to shareholder approval of the Policy Committee Plan:
<TABLE>
<CAPTION>
NAME OR IDENTITY OF GROUP DOLLAR VALUE ($)
- -------------------------------------------------------------- ----------------
<S> <C>
Richard B. Priory 810,000
Paul M. Anderson 630,000
William A. Coley 228,000
James T. Hackett 280,000
Richard J. Osborne 194,400
All Eligible Executive Officers as a Group (8) 2,758,000
</TABLE>
The actual amounts of the awards may be more or less than the amounts of
such target awards, depending upon the extent to which earnings per share of the
Corporation's Common Stock differ from the earnings per share performance
target.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER MATTERS
On the date this proxy statement went to press, management did not know of
any other matters to be brought before the meeting other than those described in
this proxy statement. If any matters come before the meeting that are not
specifically set forth on the proxy card and in this proxy statement, it is the
intention of the persons named in the proxy card to vote thereon in accordance
with their best judgment.
PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders who intend to present proposals at the annual meeting in 1999,
and who wish to have such proposals included in the Corporation's proxy
statement for that meeting, must be certain that such proposals are received by
the Secretary of the Corporation by November 16, 1998. Such proposals must meet
the requirements set forth in the rules and regulations of the SEC in order to
be eligible for inclusion in the proxy statement for the 1999 annual meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Corporation's knowledge, based on information furnished to it and
contained in the reports filed pursuant to Rule 16a-3 of the Exchange Act, as
well as any written representations that no other reports were required, all
applicable Section 16(a) filing requirements were complied with during the year
ended December 31, 1997, except that George Dean Johnson, Jr., a director of the
Corporation, failed to timely report a transfer of shares of Common Stock to a
trust of which he was the beneficiary.
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ANNUAL REPORT ON FORM 10-K
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, WHICH IS REQUIRED TO BE FILED WITH THE SEC, WILL BE MADE
AVAILABLE TO HOLDERS OF COMMON STOCK TO WHOM THIS PROXY STATEMENT IS MAILED,
WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT, DUKE
ENERGY CORPORATION, P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201-1005.
Whether or not you plan to attend the meeting, please mark, sign, date and
promptly return the enclosed proxy in the enclosed envelope. No postage is
required for mailing in the United States.
By Order of the Board of Directors
W. EDWARD POE, JR.
Charlotte, North Carolina SECRETARY
March 16, 1998
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(Duke Energy Logo)
<PAGE>
EXHIBIT A
DUKE ENERGY CORPORATION
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the Duke Energy Corporation 1998 Long-Term Incentive
Plan is to promote the interests of the Corporation and its shareholders by
strengthening the Corporation's ability to attract, motivate and retain
employees and directors of the Corporation upon whose judgment, initiative and
efforts the financial success and growth of the business of the Corporation
largely depend, and to provide an additional incentive for employees and
directors through stock ownership and other rights that promote and recognize
the financial success and growth of the Corporation.
2. DEFINITIONS
Wherever the following capitalized terms are used in this Plan they
shall have the meanings specified below:
(a) "Award" means an award of an Option, Restricted Stock, Stock
Appreciation Right, Performance Award, Phantom Stock or Dividend Equivalent
granted under the Plan.
(b) "Award Agreement" means an agreement entered into between the
Corporation and a Participant setting forth the terms and conditions of an Award
granted to a Participant.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" shall have the meaning specified in Section 12
hereof.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Compensation Committee of the Board, or such
other committee or subcommittee of the Board appointed by the Board to
administer the Plan from time to time.
(g) "Common Stock" means the common stock of the Corporation, without
par value.
(h) "Corporation" means Duke Energy Corporation, a North Carolina
corporation.
(i) "Date of Grant" means the date on which an Award under the Plan is
made by the Committee, or such later date as the Committee may specify that the
Award becomes effective.
<PAGE>
(j) "Effective Date" means the Effective Date of this Plan, as defined
in Section 15.1 hereof.
(k) "Dividend Equivalent" means an Award under Section 11 hereof
entitling the Participant to receive payments with respect to dividends declared
on the Common Stock.
(l) "Eligible Person" means any person who is an Employee or an
Independent Director.
(m) "Employee" means any person who is an employee of the Corporation
or any Subsidiary; provided, however, that with respect to Incentive Stock
Options, "Employee" means any person who is considered an employee of the
Corporation or any Subsidiary for purposes of Treasury Regulation ss.
1.421-7(h).
(n) "Fair Market Value" of a share of Common Stock as of a given date
means the closing sales price of the Common Stock on the New York Stock Exchange
as reflected on the composite index on the trading day immediately preceding the
date as of which Fair Market Value is to be determined or, in the absence of any
reported sales of Common Stock on such date, on the first preceding date on
which any such sale shall have been reported. If Common Stock is not listed on
the New York Stock Exchange on the date as of which Fair Market Value is to be
determined, the Committee shall determine in good faith the Fair Market Value in
whatever manner it considers appropriate.
(o) "Independent Director" means a member of the Board who is not an
employee of the Corporation or any Subsidiary.
(p) "Incentive Stock Option" means an option to purchase Common Stock
that is intended to qualify as an incentive stock option under section 422 of
the Code and the Treasury Regulations thereunder.
(q) "Nonqualified Stock Option" means an option to purchase Common
Stock that is not an Incentive Stock Option.
(r) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted under Section 6 hereof.
(s) "Participant" means any Eligible Person who holds an outstanding
Award under the Plan.
(t) "Phantom Stock" means an Award under Section 10 hereof entitling a
Participant to a payment at the end of a vesting period of a unit value based on
the Fair Market Value of a share of Common Stock.
(u) "Plan" means the Duke Energy Corporation 1998 Long-Term Incentive
Plan as set forth herein, as it may be amended from time to time.
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(v) "Performance Award" means an Award made under Section 9 hereof
entitling a Participant to a payment based on the Fair Market Value of Common
Stock (a "Performance Share") or based on specified dollar units (a "Performance
Unit") at the end of a performance period if certain conditions established by
the Committee are satisfied.
(w) "Restricted Stock" means an Award under Section 8 hereof entitling
a Participant to shares of Common Stock that are nontransferable and subject to
forfeiture until specific conditions established by the Committee are satisfied.
(x) "Section 162(m)" means section 162(m) of the Code and the Treasury
Regulations thereunder.
(y) "Section 162(m) Participant" means any Participant who, in the sole
judgment of the Committee, could be treated as a "covered employee" under
Section 162(m) at the time income may be recognized by such Participant in
connection with an Award that is intended to qualify for exemption under Section
162(m).
(z) "Stock Appreciation Right" or "SAR" means an Award under Section 7
hereof entitling a Participant to receive an amount, representing the difference
between the base price per share of the right and the Fair Market Value of a
share of Common Stock on the date of exercise.
(aa) "Subsidiary" means an entity that is wholly owned, directly or
indirectly, by the Corporation, or any other affiliate of the Corporation that
is so designated, from time to time, by the Committee, provided, however, that
with respect to Incentive Stock Options, the term "Subsidiary" shall not include
any entity that does not qualify within the meaning of Section 424(f) of the
Code as a "subsidiary corporation" with respect to the Corporation.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1. Number of Shares. Subject to the following provisions of this
Section 3, the aggregate number of shares of Common Stock that may be issued
pursuant to all Awards under the Plan is 15,000,000 shares of Common Stock;
provided, however, that no more than 1,5000,000 shares of Common Stock may be
issued pursuant to all Awards of Restricted Stock, Performance Awards or Phantom
Stock under the Plan. The shares of Common Stock to be delivered under the Plan
will be made available from authorized but unissued shares of Common Stock. If
any share of Common Stock that is the subject of an Award is not issued and
ceases to be issuable for any reason, or is forfeited, cancelled or returned to
the Corporation for failure to satisfy vesting requirements or upon the
occurrence of other forfeiture events, such share of Common Stock will no longer
be charged against the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such limitations.
3.2. Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to the
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<PAGE>
shares of Common Stock, or any similar corporate transaction or event in respect
of the Common Stock, then the Committee shall, in the manner and to the extent
that it deems appropriate and equitable to the Participants and consistent with
the terms of this Plan, cause a proportionate adjustment to be made in (i) the
maximum numbers and kind of shares provided in Section 3.1 hereof, (ii) the
maximum numbers and kind of shares set forth in Sections 6.1, 7.1, 8.2 and 9.4
hereof, (iii) the number and kind of shares of Common Stock, share units, or
other rights subject to the then-outstanding Awards, (iv) the price for each
share or unit or other right subject to then outstanding Awards without change
in the aggregate purchase price or value as to which such Awards remain
exercisable or subject to restrictions, (v) the performance targets or goals
appropriate to any outstanding Performance Awards (subject to such limitations
as appropriate for Awards intended to qualify for exemption under Section
162(m)) or (vi) any other terms of an Award that are affected by the event.
Notwithstanding the foregoing, in the case of Incentive Stock Options, any such
adjustments shall be made in a manner consistent with the requirements of
section 424(a) of the Code.
4. ADMINISTRATION OF THE PLAN
4.1. Committee Members. Except as provided in Section 4.4 hereof, the
Plan will be administered by the Committee which, to the extent deemed necessary
or appropriate by the Board, will consist of two or more persons who satisfy the
requirements for a "nonemployee director" under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 and/or the requirements for an "outside
director" under Section 162(m). The Committee may exercise such powers and
authority as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. No member of the Committee will be liable
for any action or determination made in good faith by the Committee with respect
to the Plan or any Award under it.
4.2. Discretionary Authority. Subject to the express limitations of the
Plan, the Committee has authority in its discretion to determine the Eligible
Persons to whom, and the time or times at which, Awards may be granted, the
number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, and the duration of the
Award. The Committee also has discretionary authority to interpret the Plan, to
make all factual determinations under the Plan, and to determine the terms and
provisions of the respective Award Agreements and to make all other
determinations necessary or advisable for Plan administration. The Committee has
authority to prescribe, amend, and rescind rules and regulations relating to the
Plan. All interpretations, determinations, and actions by the Committee will be
final, conclusive, and binding upon all parties.
4.3. Changes to Awards. The Committee shall have the authority to
effect, at any time and from time to time, with the consent of the affected
Participants, (i) the cancellation of any or all outstanding Awards and the
grant in substitution therefor of new Awards covering the same or different
numbers of shares of Common Stock and having an
4
<PAGE>
exercise or base price which may be the same as or different than the exercise
or base price of the cancelled Awards or (ii) the amendment of the terms of any
and all outstanding Awards; provided, however, that the Committee shall not have
the authority to reduce the exercise or base price of an Award by amendment or
cancellation and substitution of an existing Award without the approval of the
Corporation's shareholders. The Committee may in its discretion accelerate the
vesting or exercisability of an Award at any time or on the basis of any
specified event.
4.4. Delegation of Authority. The Committee shall have the right, from
time to time, to delegate to one or more officers of the Corporation the
authority of the Committee to grant and determine the terms and conditions of
Awards under the Plan, subject to such limitations as the Committee shall
determine; provided, however, that no such authority may be delegated with
respect to Awards made to any member of the Board or any Section 162 (m)
Participant.
4.5. Awards to Independent Directors. An Award to an Independent
Director under the Plan shall be approved by the Board. With respect to Awards
to Independent Directors, all rights, powers and authorities vested in the
Committee under the Plan shall instead be exercised by the Board, and all
provisions of the Plan relating to the Committee shall be interpreted in a
manner consistent with the foregoing by treating any such reference as a
reference to the Board for such purpose.
5. ELIGIBILITY AND AWARDS
All Eligible Persons are eligible to be designated by the Committee to
receive an Award under the Plan. The Committee has authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are granted under the Plan. Each
Award will be evidenced by an Award Agreement as described in Section 13 hereof
between the Corporation and the Participant that shall include the terms and
conditions consistent with the Plan as the Committee may determine.
6. STOCK OPTIONS
6.1. Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee; provided, however, that only Employees shall be
eligible for Awards of Incentive Stock Options. Each Option shall be designated,
at the discretion of the Committee, as an Incentive Stock Option or a
Nonqualified Stock Option. The maximum number of shares of Common Stock that may
be granted under Options to any one Participant during any calendar year shall
be limited to 1,000,000 shares (subject to adjustment as provided in Section 3.2
hereof).
5
<PAGE>
6.2. Exercise Price. The exercise price of the Option shall be
determined by the Committee; provided, however, that the exercise price per
share of an Option shall not be less than 100 percent of the Fair Market Value
per share of the Common Stock on the Date of Grant.
6.3. Vesting; Term of Option. The Committee, in its sole discretion,
shall prescribe in the Award Agreement the time or times at which, or the
conditions upon which, an Option or portion thereof shall become vested and
exercisable, and may accelerate the exercisability of any Option at any time. An
Option may become vested and exercisable upon a Participant's retirement, death,
disability, Change in Control or other event, to the extent provided in an Award
Agreement. The period during which a vested Option may be exercised shall be ten
years from the Date of Grant, unless a shorter exercise period is specified by
the Committee in an Award Agreement, and subject to such limitations as may
apply under an Award Agreement relating to the termination of a Participant's
employment or other service with the Corporation or any Subsidiary.
6.4. Option Exercise; Withholding. Subject to such terms and conditions
as shall be specified in an Award Agreement, an Option may be exercised in whole
or in part at any time during the term thereof by written notice to the
Corporation together with payment of the aggregate exercise price therefor.
Payment of the exercise price shall be made (i) in cash or by cash equivalent,
(ii) at the discretion of the Committee, in shares of Common Stock acceptable to
the Committee, valued at the Fair Market Value of such shares on the date of
exercise, (iii) at the discretion of the Committee, by a delivery of a notice
that the Participant has placed a market sell order (or similar instruction)
with a broker with respect to shares of Common Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Corporation in satisfaction of the Option
exercise price (conditioned upon the payment of such net proceeds), (iv) at the
discretion of the Committee, by a combination of the methods described above or
(v) by such other method as may be approved by the Committee and set forth in
the Award Agreement. In addition to and at the time of payment of the exercise
price, the Participant shall pay to the Corporation the full amount of any and
all applicable income tax and employment tax amounts required to be withheld in
connection with such exercise, payable under one or more of the methods
described above for the payment of the exercise price of the Options as may be
approved by the Committee.
6.5. Limited Transferability. Solely to the extent permitted by the
Committee in an Award Agreement and subject to such terms and conditions as the
Committee shall specify, a Nonqualified Stock Option (but not an Incentive Stock
Option) may be transferred to members of the Participant's immediate family (as
determined by the Committee) or to trusts, partnerships or corporations whose
beneficiaries, members or owners are members of the Participant's immediate
family, and/or to such other persons or entities as may be approved by the
Committee in advance and set forth in an Award Agreement, in each case subject
to the condition that the Committee be satisfied that such transfer is being
made for estate or tax planning purposes or for gratuitous or donative purposes,
without consideration (other than nominal consideration) being received
6
<PAGE>
therefor. Except to the extent permitted by the Committee in accordance with the
foregoing, an Option shall be nontransferable otherwise than by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of a Participant only by such Participant.
6.6. Additional Rules for Incentive Stock Options.
(a) Annual Limits. No Incentive Stock Option shall be granted to a
Participant as a result of which the aggregate fair market value (determined as
of the Date of Grant) of the stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year under the Plan, and any
other stock option plans of the Corporation, any Subsidiary or any parent
corporation, would exceed $100,000, determined in accordance with section 422(d)
of the Code. This limitation shall be applied by taking options into account in
the order in which granted.
(b) Termination of Employment. An Award Agreement for an Incentive
Stock Option may provide that such Option may be exercised not later than 3
months following termination of employment of the Participant with the
Corporation and all Subsidiaries, subject to special rules relating to death and
disability, as and to the extent determined by the Committee to be appropriate
with regard to the requirements of section 422 of the Code and Treasury
Regulations thereunder.
(c) Other Terms and Conditions; Nontransferability. Any Incentive Stock
Option granted hereunder shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as are deemed necessary or desirable
by the Committee, which terms, together with the terms of this Plan, shall be
intended and interpreted to cause such Incentive Stock Option to qualify as an
"incentive stock option" under section 422 of the Code. Such terms shall
include, if applicable, limitations on Incentive Stock Options granted to
ten-percent owners of the Corporation. An Award Agreement for an Incentive Stock
Option may provide that such Option shall be treated as a Nonqualified Stock
Option to the extent that certain requirements applicable to "incentive stock
options" under the Code shall not be satisfied. An Incentive Stock Option shall
by its terms be nontransferable otherwise than by will or by the laws of descent
and distribution, and shall be exercisable during the lifetime of a Participant
only by such Participant.
(d) Disqualifying Dispositions. If shares of Common Stock acquired by
exercise of an Incentive Stock Option are disposed of within two years following
the Date of Grant or one year following the transfer of such shares to the
Participant upon exercise, the Participant shall, promptly following such
disposition, notify the Corporation in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the
Committee may reasonably require.
7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. A Stock Appreciation Right granted to a Participant
is an Award in the form of a right to receive, upon surrender of the right, but
without other
7
<PAGE>
payment, an amount based on appreciation in the Fair Market Value of the Common
Stock over a base price established for the Award, exercisable at such time or
times and upon conditions as may be approved by the Committee. The maximum
number of shares of Common Stock that may be subject to SARs granted to any one
Participant during any calendar year shall be limited to 1,000,000 shares
(subject to adjustment as provided in Section 3.2 hereof).
7.2. Tandem SARs. A Stock Appreciation Right may be granted in
connection with an Option, either at the time of grant or at any time thereafter
during the term of the Option. An SAR granted in connection with an Option will
entitle the holder, upon exercise, to surrender such Option or any portion
thereof to the extent unexercised, with respect to the number of shares as to
which such SAR is exercised, and to receive payment of an amount computed as
described in Section 7.4 hereof. Such Option will, to the extent and when
surrendered, cease to be exercisable. An SAR granted in connection with an
Option hereunder will have a base price per share equal to the per share
exercise price of the Option, will be exercisable at such time or times, and
only to the extent, that a related Option is exercisable, and will expire no
later than the related Option expires.
7.3. Freestanding SARs. A Stock Appreciation Right may be granted
without relationship to an Option and, in such case, will be exercisable as
determined by the Committee, but in no event after 10 years from the Date of
Grant. The base price of an SAR granted without relationship to an Option shall
be determined by the Committee in its sole discretion; provided, however, that
the base price per share of a freestanding SAR shall not be less than 100
percent of the Fair Market Value of the Common Stock on the Date of Grant.
7.4. Payment of SARs. An SAR will entitle the holder, upon exercise of
the SAR, to receive payment of an amount determined by multiplying: (i) the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the SAR over the base price of such SAR, by (ii) the number of
shares as to which such SAR will have been exercised. Payment of the amount
determined under the foregoing may be made, in the discretion of the Committee,
in cash, in shares of Common Stock valued at their Fair Market Value on the date
of exercise, or in a combination of cash and shares of Common Stock.
8. RESTRICTED STOCK
8.1. Grants of Restricted Stock. An Award of Restricted Stock to a
Participant represents shares of Common Stock that are issued subject to such
restrictions on transfer and other incidents of ownership and such forfeiture
conditions as the Committee may determine. The Committee may, in connection with
an Award of Restricted Stock, require the payment of a specified purchase price.
The Committee may grant Awards of Restricted Stock that are intended to qualify
for exemption under Section 162(m), as well as Awards of Restricted Stock that
are not intended to so qualify.
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8.2. Vesting Requirements. The restrictions imposed on an Award of
Restricted Stock shall lapse in accordance with the vesting requirements
specified by the Committee in the Award Agreement. Such vesting requirements may
be based on the continued employment of the Participant with the Corporation or
its Subsidiaries for a specified time period or periods, provided that any such
restriction shall not be scheduled to lapse in its entirety earlier than the
first anniversary of the Date of Grant. Such vesting requirements may also be
based on the attainment of specified business goals or measures established by
the Committee in its sole discretion. In the case of any Award of Restricted
Stock that is intended to qualify for exemption under Section 162(m), the
vesting requirements shall be limited to the performance criteria identified in
Section 9.3 below, and the terms of the Award shall otherwise comply with the
Section 162(m) requirements described in Section 9.4 hereof; provided, however,
that the maximum number of shares of Common Stock that may be subject to an
Award of Restricted Stock granted to a Section 162(m) Participant during any one
calendar year shall be separately limited to 200,000 shares (subject to
adjustment as provided in Section 3.2 hereof).
8.3. Restrictions. Shares of Restricted Stock may not be transferred,
assigned or subject to any encumbrance, pledge or charge until all applicable
restrictions are removed or expire or unless otherwise allowed by the Committee.
The Committee may require the Participant to enter into an escrow agreement
providing that the certificates representing Restricted Stock granted or sold
pursuant to the Plan will remain in the physical custody of an escrow holder
until all restrictions are removed or expire. Failure to satisfy any applicable
restrictions shall result in the subject shares of Restricted Stock being
forfeited and returned to the Corporation, with any purchase price paid by the
Participant to be refunded, unless otherwise provided by the Committee. The
Committee may require that certificates representing Restricted Stock granted
under the Plan bear a legend making appropriate reference to the restrictions
imposed.
8.4. Rights as Shareholder. Subject to the foregoing provisions of this
Section 8 and the applicable Award Agreement, the Participant will have all
rights of a shareholder with respect to shares of Restricted Stock granted to
him, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto, unless the Committee determines
otherwise at the time the Restricted Stock is granted, as set forth in the Award
Agreement.
8.5. Section 83(b) Election. The Committee may provide in an Award
Agreement that the Award of Restricted Stock is conditioned upon the Participant
refraining from making an election with respect to the Award under section 83(b)
of the Code. Irrespective of whether an Award is so conditioned, if a
Participant makes an election pursuant to section 83(b) of the Code with respect
to an Award of Restricted Stock, the Participant shall be required to promptly
file a copy of such election with the Corporation.
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9. PERFORMANCE AWARDS
9.1. Grant of Performance Awards. The Committee may grant Performance
Awards under the Plan, which shall be represented by units denominated on the
Date of Grant either in shares of Common Stock (Performance Shares) or in
specified dollar amounts (Performance Units). The Committee may grant
Performance Awards that are intended to qualify for exemption under Section
162(m), as well as Performance Awards that are not intended to so qualify. At
the time a Performance Award is granted, the Committee shall determine, in its
sole discretion, one or more performance periods and performance goals to be
achieved during the applicable performance periods, as well as such other
restrictions and conditions as the Committee deems appropriate. In the case of
Performance Units, the Committee shall also determine a target unit value or a
range of unit values for each Award. No performance period shall exceed ten
years from the Date of Grant. The performance goals applicable to a Performance
Award grant may be subject to such later revisions as the Committee shall deem
appropriate to reflect significant unforeseen events such as changes in law,
accounting practices or unusual or nonrecurring items or occurrences. Any such
adjustments shall be subject to such limitations as the Committee deems
appropriate in the case of a Performance Award granted to a Section 162(m)
Participant that is intended to qualify for exemption under Section 162(m).
9.2. Payment of Performance Awards. At the end of the performance
period, the Committee shall determine the extent to which performance goals have
been attained or a degree of achievement between minimum and maximum levels in
order to establish the level of payment to be made, if any, and shall determine
if payment is to be made in the form of cash or shares of Common Stock (valued
at their Fair Market Value at the time of payment) or a combination of cash and
shares of Common Stock. Payments of Performance Awards shall generally be made
as soon as practicable following the end of the performance period.
9.3. Performance Criteria. The performance criteria upon which the
payment or vesting of a Performance Award intended to qualify for exemption
under Section 162(m) may be based shall be limited to the following business
measures, which may be applied with respect to the Corporation, any Subsidiary
or any business unit, and which may be measured on an absolute or relative to
peer-group basis: (i) total shareholder return, (ii) stock price increase, (iii)
return on equity, (iv) return on capital, (v) earnings per share, (vi) EBIT
(earnings before interest and taxes) (vii) cash flow (including operating cash
flow, free cash flow, discounted cash flow return on investment, and cash flow
in excess of costs of capital) and (viii) cost per kWh. In the case of
Performance Awards that are not intended to qualify for exemption under Section
162(m), the Committee shall designate performance criteria from among the
foregoing or such other business criteria as it shall determine it its sole
discretion.
9.4. Section 162(m) Requirements. In the case of a Performance Award
granted to a Section 162(m) Participant that is intended to comply with the
requirements for exemption under Section 162(m), the Committee shall make all
determinations necessary to establish a Performance Award within 90 days of the
beginning of the
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performance period (or such other time period required under Section 162(m)),
including, without limitation, the designation of the Section 162(m)
Participants to whom Performance Awards are made, the performance criteria or
criterion applicable to the Award and the performance goals that relate to such
criteria, and the dollar amounts or number of shares of Common Stock payable
upon achieving the applicable performance goals. As and to the extent required
by Section 162(m), the terms of a Performance Award granted to a Section 162(m)
Participant must state, in terms of an objective formula or standard, the method
of computing the amount of compensation payable to the Section 162(m)
Participant, and must preclude discretion to increase the amount of compensation
payable that would otherwise be due under the terms of the Award. The maximum
amount of compensation that may be payable to a Section 162(m) Participant
during any one calendar year under a Performance Unit Award shall be $2.5
million. The maximum number of Common Stock units that may be subject to a
Performance Share Award granted to a Section 162(m) Participant during any one
calendar year shall be 200,000 share units (subject to adjustment as provided in
Section 3.2 hereof).
10. PHANTOM STOCK
10.1. Grant of Phantom Stock. Phantom Stock is an Award to a
Participant of a number of hypothetical share units with respect to shares of
Common Stock, with an initial value based on the Fair Market Value of the Common
Stock on the Date of Grant. Phantom Stock shall be subject to such restrictions
and conditions as the Committee shall determine. On the Date of Grant, the
Committee shall determine, in its sole discretion, the installment or other
vesting period of the Phantom Stock and the maximum value of the Phantom Stock,
if any. No vesting period shall exceed 10 years from the Date of Grant. An Award
of Phantom Stock may be granted, at the discretion of the Committee, together
with an Award of Dividend Equivalent rights for the same number of shares
covered thereby.
10.2. Payment of Phantom Stock. Upon the vesting date or dates
applicable to Phantom Stock granted to a Participant, an amount equal to the
Fair Market Value of one share of Common Stock upon such vesting dates (subject
to any applicable maximum value) shall be paid with respect to such Phantom
Stock unit granted to the Participant. Payment may be made, at the discretion of
the Committee, in cash or in shares of Common Stock valued at their Fair Market
Value on the applicable vesting dates, or in a combination thereof.
11. DIVIDEND EQUIVALENTS
11.1. Grant of Dividend Equivalents. A Dividend Equivalent granted to a
Participant is an Award in the form of a right to receive cash payments
determined by reference to dividends declared on the Common Stock from time to
time during the term of the Award, which shall not exceed 10 years from the Date
of Grant. Dividend Equivalents may be granted on a stand-alone basis or in
tandem with other Awards. Dividend Equivalents granted on a tandem basis shall
expire at the time the underlying Award is exercised or otherwise becomes
payable to the Participant, or expires.
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11.2. Payment of Dividend Equivalents. Dividend Equivalent Awards shall
be payable in cash or in shares of Common Stock, valued at their Fair Market
Value on either the date the related dividends are declared or the Dividend
Equivalents are paid to a Participant, as determined by the Committee. Dividend
Equivalents shall be payable to a Participant as soon as practicable following
the time dividends are declared and paid with respect to the Common Stock, or at
such later date as the Committee shall specify in the Award Agreement. Dividend
Equivalents granted with respect to Options intended to qualify for exemption
under Section 162(m) shall be payable regardless of whether the Option is
exercised.
12. CHANGE IN CONTROL
12.1. Effect of Change in Control. The Committee may, in an Award
Agreement, provide for the effect of a Change in Control on an Award. Such
provisions may include any one or more of the following: (i) the acceleration or
extension of time periods for purposes of exercising, vesting in, or realizing
gain from any Award, (ii) the waiver or modification of performance or other
conditions related to the payment or other rights under an Award; (iii)
provision for the cash settlement of an Award for an equivalent cash value, as
determined by the Committee, or (iv) such other modification or adjustment to an
Award as the Committee deems appropriate to maintain and protect the rights and
interests of Participants upon or following a Change in Control.
12.2. Definition of Change in Control. For purposes hereof, a "Change
in Control" shall be deemed to have occurred upon:
(i) an acquisition subsequent to the Effective Date hereof by
any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of either (A) the then outstanding shares of
Common Stock or (B) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Corporation, other than an acquisition by virtue of
the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2) any
acquisition by the Corporation and (3) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any Subsidiary;
(ii) during any period of two (2) consecutive years (not
including any period prior to the Effective Date), individuals who at
the beginning of such period constitute the Board (and any new
directors whose election by the Board or nomination for
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election by the Corporation's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
so approved) cease for any reason (except for death, disability or voluntary
retirement) to constitute a majority thereof;
(iii) the approval by the shareholders of the Corporation of a
merger, consolidation, reorganization or similar corporate transaction,
whether or not the Corporation is the surviving corporation in such
transaction, other than a merger, consolidation, or reorganization that
would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting
power of the voting securities of the Corporation (or such surviving
entity) outstanding immediately after such merger, consolidation, or
reorganization;
(iv) the approval by the shareholders of the Corporation of
(A) the sale or other disposition of all or substantially all of the
assets of the Corporation or (B) a complete liquidation or dissolution
of the Corporation; or
(v) adoption by the Board of a resolution to the effect that
any person has acquired effective control of the business and affairs
of the Corporation.
13. AWARD AGREEMENTS
13.1. Form of Agreement. Each Award under this Plan shall be evidenced
by an Award Agreement in a form approved by the Committee setting forth the
number of shares of Common Stock, units or other rights (as applicable) subject
to the Award, the exercise, base or purchase price (if any) of the Award, the
time or times at which an Award will become vested, exercisable or payable, the
duration of the Award and, in the case of Performance Awards, the applicable
performance criteria and goals. The Award Agreement shall also set forth other
material terms and conditions applicable to the Award as determined by the
Committee consistent with the limitations of this Plan. Award Agreements
evidencing Awards intended to qualify for exemption under Section 162(m) shall
contain such terms and conditions as may be necessary to meet the applicable
requirements of Section 162(m). Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of section 422 of the Code.
13.2. Termination of Service. The Award Agreements may include
provisions describing the treatment of an Award in the event of the retirement,
disability, death or other termination of a Participant's employment with or
other services to the Corporation and all Subsidiaries, such as provisions
relating to the vesting, exercisability, acceleration, forfeiture or
cancellation of the Award in these circumstances, including any such provisions
as may be appropriate for Incentive Stock Options as described in Section 6.6(b)
hereof.
13.3. Forfeiture Events. The Committee may specify in an Award
Agreement that the Participant's rights, payments and benefits with respect to
an Award shall be subject to
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reduction, cancellation, forfeiture or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events shall include, but shall not be limited to,
termination of employment for cause, violation of material Corporation or
Subsidiary policies, breach of noncompetition, confidentiality or other
restrictive covenants that may apply to the Participant, or other conduct by the
Participant that is detrimental to the business or reputation of the Corporation
or any Subsidiary.
13.4. Contract Rights; Amendment. Any obligation of the Corporation to
any Participant with respect to an Award shall be based solely upon contractual
obligations created by an Award Agreement. No Award shall be enforceable until
the Award Agreement has been signed on behalf of the Corporation by its
authorized representative and signed by the Participant and returned to the
Corporation. By executing the Award Agreement, a Participant shall be deemed to
have accepted and consented to the terms of this Plan and any action taken in
good faith under this Plan by and within the discretion of the Committee, the
Board or their delegates. Award Agreements covering outstanding Awards may be
amended or modified by the Committee in any manner that may be permitted for the
grant of Awards under the Plan, subject to the consent of the Participant to the
extent provided in the Award Agreement.
14. GENERAL PROVISIONS
14.1. No Assignment or Transfer; Beneficiaries. Except as provided in
Section 6.5 hereof, Awards under the Plan shall not be assignable or
transferable, except by will or by the laws of descent and distribution, and
during the lifetime of a Participant the Award shall be exercised only by such
Participant or by his guardian or legal representative. Notwithstanding the
foregoing, the Committee may provide in the terms of an Award Agreement that the
Participant shall have the right to designate a beneficiary or beneficiaries who
shall be entitled to any rights, payments or other specified under an Award
following the Participant's death.
14.2. Deferrals of Payment. The Committee may permit a Participant to
defer the receipt of payment of cash or delivery of shares of Common Stock that
would otherwise be due to the Participant by virtue of the exercise of a right
or the satisfaction of vesting or other conditions with respect to an Award. If
any such deferral is to be permitted by the Committee, the Committee shall
establish the rules and procedures relating to such deferral, including, without
limitation, the period of time in advance of payment when an election to defer
may be made, the time period of the deferral and the events that would result in
payment of the deferred amount, the interest or other earnings attributable to
the deferral and the method of funding, if any, attributable to the deferred
amount.
14.3. Rights as Shareholder. A Participant shall have no rights as a
holder of Common Stock with respect to any unissued securities covered by an
Award until the date the Participant becomes the holder of record of these
securities. Except as provided in Section 3.2 hereof, no adjustment or other
provision shall be made for dividends or other
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shareholder rights, except to the extent that the Award Agreement provides for
Dividend Equivalents, dividend payments or similar economic benefits.
14.4. Employment or Service. Nothing in the Plan, in the grant of any
Award or in any Award Agreement shall confer upon any Eligible Person the right
to continue in the capacity in which he is employed by or otherwise serves the
Corporation or any Subsidiary.
14.5. Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed, have been fully met. As a
condition precedent to the issuance of shares pursuant to the grant or exercise
of an Award, the Corporation may require the Participant to take any reasonable
action to meet such requirements. The Committee may impose such conditions on
any shares of Common Stock issuable under the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities Act of 1933, as
amended, under the requirements of any stock exchange upon which such shares of
the same class are then listed, and under any blue sky or other securities laws
applicable to such shares.
14.6. Tax Withholding. The Participant shall be responsible for payment
of any taxes or similar charges required by law to be withheld from an Award or
an amount paid in satisfaction of an Award, which shall be paid by the
Participant on or prior to the payment or other event that results in taxable
income in respect of an Award. The Award Agreement shall specify the manner in
which the withholding obligation shall be satisfied with respect to the
particular type of Award.
14.7. Unfunded Plan. The adoption of this Plan and any setting aside of
cash amounts or shares of Common Stock by the Corporation with which to
discharge its obligations hereunder shall not be deemed to create a trust or
other funded arrangement. The benefits provided under this Plan shall be a
general, unsecured obligation of the Corporation payable solely from the general
assets of the Corporation, and neither a Participant nor the Participant's
permitted transferees or estate shall have any interest in any assets of the
Corporation by virtue of this Plan, except as a general unsecured creditor of
the Corporation. Notwithstanding the foregoing, the Corporation shall have the
right to implement or set aside funds in a grantor trust subject to the claims
of the Corporation's creditors to discharge its obligations under the Plan.
14.8. Other Compensation and Benefit Plans. The adoption of the Plan
shall not affect any other stock incentive or other compensation plans in effect
for the Corporation or any Subsidiary, nor shall the Plan preclude the
Corporation from establishing any other forms of stock incentive or other
compensation for employees of the Corporation or any Subsidiary. The amount of
any compensation deemed to be received by Participant pursuant to an Award shall
not constitute compensation with respect to which any other employee benefits of
such Participant are determined, including, without limitation,
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benefits under any bonus, pension, profit sharing, life insurance or salary
continuation plan, except as otherwise specifically provided by the terms of
such plan.
14.9. Plan Binding on Successors. The Plan shall be binding upon the
Corporation, its successors and assigns, and the Participant, his executor,
administrator and permitted transferees and beneficiaries.
14.10. Construction and Interpretation. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun shall include
the feminine gender. Headings of Articles and Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.
14.11. Severability. If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of law
in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
14.12. Governing Law. The validity and construction of this Plan and of
the Award Agreements shall be governed by the laws of the State of North
Carolina.
15. EFFECTIVE DATE, TERMINATION AND AMENDMENT
15.1. Effective Date; Shareholder Approval. The Effective Date of the
Plan shall be the date following adoption of the Plan by the Board on which the
Plan is approved by the shareholders of the Corporation. At the sole discretion
of the Board, in order to comply with the requirements of Section 162(m) for
certain types of Awards under the Plan, the performance criteria set forth in
Section 9.3 shall be reapproved by the shareholders of the Corporation no later
than the first shareholder meeting that occurs in the fifth calendar year
following the calendar year of the initial shareholder approval of such
performance criteria.
15.2. Termination. The Plan shall terminate on the date immediately
preceding the tenth anniversary of the date the Plan is adopted by the Board.
The Board may, in its sole discretion and at any earlier date, terminate the
Plan. Notwithstanding the foregoing, no termination of the Plan shall in any
manner affect any Award theretofore granted without the consent of the
Participant or the permitted transferee of the Award.
15.3. Amendment. The Board may at any time and from time to time and in
any respect, amend or modify the Plan; provided, however, that no amendment or
modification of the Plan shall be effective without the consent of the
Corporation's shareholders that would (i) change the class of Eligible Persons
under the Plan, (ii) increase the number of shares of Common Stock reserved for
issuance under the Plan or for certain types of Awards under Section 3.1 hereof,
or (iii) allow the grant of Options at an exercise price below Fair Market
Value, or allow the repricing of Options without shareholder approval. In
addition, the Board may seek the approval of any amendment or modification by
the Corporation's shareholders to the extent it deems necessary or advisable in
its sole
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discretion for purposes of compliance with Section 162(m) or section 422 of the
Code, the listing requirements of the New York Stock Exchange or for any other
purpose. No amendment or modification of the Plan shall in any manner affect any
Award theretofore granted without the consent of the Participant or the
permitted transferee of the Award.
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EXHIBIT B
DUKE ENERGY CORPORATION
POLICY COMMITTEE
SHORT-TERM INCENTIVE PLAN
ARTICLE I
General
SECTION 1.1 PURPOSE. The purpose of the Duke Energy Corporation Policy
Committee Short-Term Incentive Plan (the "Plan") is to benefit and advance the
interests of Duke Energy Corporation, a North Carolina corporation (the
"Corporation"), by rewarding selected senior executives of the Corporation and
its subsidiaries for their contributions to the Corporation's financial success
and thereby motivate them to continue to make such contributions in the future
by granting annual performance-based awards (individually, "Award").
SECTION 1.2 ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a committee ("Committee") which shall adopt such rules as it may deem
appropriate in order to carry out the purpose of the Plan. The Committee shall
be the Compensation Committee of the Corporation's Board of Directors ("Board")
(or such subcommittee as may be appointed by the Board) except that (i) the
number of directors on the Committee shall not be less than three (3) and (ii)
each member of the Committee shall be an "outside director" within the meaning
of Section 162(m)(4) of the Internal Revenue Code of 1986, as amended (the
"Code"). All questions of interpretation, administration and application of the
Plan shall be determined by a majority of the members of the Committee then in
office, except that the Committee may authorize any one or more of its members,
or any officer of the Corporation, to execute and deliver documents on behalf of
the Committee. The determination of such majority shall be final and binding in
all matters relating to the Plan. The Committee shall have authority to
determine the terms and conditions of the Awards granted to eligible persons
specified in Section 1.3 below ("Participants").
SECTION 1.3 ELIGIBLE PERSONS. Awards may be granted only to employees
of the Corporation or one of its subsidiaries who serve on the Policy Committee
of the Corporation. An individual shall not be deemed an employee for purposes
of the Plan unless such individual receives compensation from either the
Corporation or one of its subsidiaries for services performed as an employee of
the Corporation or any of its subsidiaries.
ARTICLE II
Awards
SECTION 2.1 AWARDS. The Committee may grant Awards to eligible
employees with respect to each fiscal year of the Corporation, subject to the
terms and condition set forth in the Plan.
<PAGE>
SECTION 2.2 TERMS OF AWARDS. Prior to the commencement of each fiscal
year of the Corporation (or by March 31, 1998, in the case of the fiscal year
ending December 31, 1998), the Committee shall establish (i) performance targets
("Performance Targets") for the Corporation for such fiscal year ("Performance
Period") and (ii) target awards ("Target Awards") that correspond to the
Performance Targets, for each eligible employee to whom an Award for the
Performance Period is granted ("Participant"). Such Performance Targets shall be
expressed as specified levels of Earnings Per Share. For purposes of the Plan,
"Earnings Per Share" for any Performance Period means earnings per share of the
Corporation's common stock, as reported by the Corporation in its consolidated
financial statements for the fiscal year of the Corporation in question.
SECTION 2.3 LIMITATION ON AWARDS. The aggregate amount of all Awards to
any Participant for any Performance Period shall not exceed one and one-half
million dollars ($1,500,000.00).
SECTION 2.4 DETERMINATION OF AWARD. The Committee shall, promptly after
the date on which the necessary financial or other information for a particular
Performance Period becomes available, certify in writing whether any Performance
Target has been achieved, and, if so, the highest Performance Target that has
been achieved, all in the manner required by Section 162(m) of the Code. If any
Performance Target has been achieved, the Awards, determined for each
Participant with reference to the Target Award that corresponds to the highest
Performance Target achieved, for such Performance Period shall have been earned
except that the Committee may, in its sole discretion, reduce the amount of any
Award to reflect the Committee's assessment of the Participant's individual
performance, to reflect the failure of the Participant to remain in the
continuous employ of the Corporation or its subsidiaries throughout the
applicable Performance Period, or for any other reason. Such Awards shall become
payable in cash as promptly as practicable thereafter. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit a Participant to
elect to defer payment of all or any portion of the Award the Participant might
earn for a Performance Period, by filing such written form as the Corporation
may prescribe with the Corporation at least 15 days prior to the commencement of
the Performance Period (or by March 31, 1998, in the case of the Performance
Period ending December 31, 1998), all on such terms and conditions as the
Committee may establish from time to time.
ARTICLE III
Miscellaneous
SECTION 3.1 NO RIGHTS TO AWARDS OR CONTINUED EMPLOYMENT. No employee
shall have any claim or right to receive Awards under the Plan. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained by the Corporation or any of its subsidiaries.
SECTION 3.2 RESTRICTION ON TRANSFER, BENEFICIARY. Awards (or interests
therein) to a
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Participant or amounts payable with respect to a Participant under the Plan are
not subject to assignment or alienation, whether voluntary or involuntary.
Notwithstanding the foregoing, a Participant may designate a beneficiary or
beneficiaries to receive, in the event of the Participant's death, any amounts
remaining to be paid with respect to the Participant under the Plan. The
Participant shall have the right to revoke any such designation and to
redesignate a beneficiary or beneficiaries. To be effective, any such
designation, revocation or redesignation must be in such written form as the
Corporation may prescribe and must be received by the Corporation prior to the
Participant's death. If a Participant dies without effectively designating a
beneficiary or if all designated beneficiaries predecease the Participant, any
amounts remaining to the be paid with respect to the Participant under the Plan,
shall be paid to the Participant's estate.
SECTION 3.3 TAX WITHHOLDING. The Corporation or a subsidiary thereof,
as appropriate, shall have the right to deduct from all payments made under the
Plan to a Participant or to a Participant's beneficiary or beneficiaries any
Federal, state or local taxes required by law to be withheld with respect to
such payments
SECTION 3.4 NO RESTRICTION ON RIGHT OF CORPORATION TO EFFECT CHANGES.
The Plan shall not affect in any way the right or power of the CORPORATION or
its shareholders to make or authorize any recapitalization, reorganization,
merger, acquisition, divestiture, consolidation, spin off, combination,
liquidation, dissolution, sale of assets, or other similar corporate transaction
or event involving the CORPORATION or a subsidiary or division thereof of any
other event or series of events, whether of a similar character or otherwise.
SECTION 3.5 SOURCE OF PAYMENTS. The CORPORATION shall not have any
obligation to establish any separate fund or trust or other segregation of
assets to provide for payments under the Plan. To the extent any person acquires
any rights to receive payments hereunder from the CORPORATION, such rights shall
be no greater than those of an unsecured creditor.
SECTION 3.6 TERMINATION AND AMENDMENT. The Plan shall continue in
effect until terminated by the Board. The Committee may at any time amend or
otherwise modify the Plan in such respects as it deems advisable; provided,
however, no such amendment or modification may be effective without Board
approval or CORPORATION shareholder approval if such approval is necessary to
comply with the requirements for qualified performance-based compensation under
Section 162(m) of the Code.
SECTION 3.7 GOVERNMENTAL REGULATIONS. The Plan, and all Awards
hereunder, shall be subject to all applicable rules and regulations of
governmental or other authorities.
SECTION 3.8 HEADINGS. The headings of sections and subsections herein
are include solely for convenience of reference and shall not affect the meaning
of any of the provisions of the Plan.
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SECTION 3.9 GOVERNING LAW. The Plan and all rights and Awards hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina.
SECTION 3.10 EFFECTIVE DATE. The Plan shall be effective as of January
1, 1998; provided, however, that it shall be a condition to the effectiveness of
the Plan, and any Awards hereunder, that the shareholders of the CORPORATION
approve the adoption of the Plan at the 1998 Annual Meeting of Shareholders.
Such approval shall meet the requirements of Section 162(m) of the Code and the
regulations thereunder. If such approval is not obtained, then the Plan and any
Award hereunder shall be void AB INITIO.
4
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============================================================================
APPENDIX
TO PARTICIPANTS IN THE PANENERGY EMPLOYEES' SAVINGS PLAN (ESP), EMPLOYEES' STOCK
OWNERSHIP PLAN (ESOP) AND/OR TAX CREDIT EMPLOYEE STOCK OWNERSHIP PLAN (TRASOP):
As a participant in the ESP, ESOP, and/or TRASOP, you have the right with
respect to the shares credited to your plan account to direct voting of those
shares on the issues presented at Duke Energy's 1998 Annual Shareholder Meeting,
to be held April 16 in Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account or accounts. Any unvoted shares will be voted by the respective plan
trustee in the same proportion as the voted shares for each respective plan.
Even though you may have returned a proxy for shares owned outside the plan or
plans, you are encouraged to exercise your rights by completing and returning
the enclosed proxy. Participants who wish to vote their ESP, ESOP and/or TRASOP
shares separately may contact Duke Energy Investor Relations at (800)488-3853.
Sincerely,
R.B. Priory
Chairman of the Board
and Chief Executive Office
Directors recommend a vote "For" Items 1, 2, 3, and 4
1. Election of five directors who will constitute Class I of the Board of
Directors, two directors to continue in Class II and one director to continue in
Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
name(s) of the exceptions in the space provided.
Withhold
For For* Authority
[ ] [ ] [ ]
- ---------------------------------- ----------------------
- --------------------------------- ------------------------
- --------------------------------- -----------------------
2. Ratification of appointment of auditors.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998:
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for this
account, please mark: [ ]
Sign here as name(s) ________________________
appears above X _____________________ Date ,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
<PAGE>
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B.Priory, R.J. Osborne and W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Energy Corporation of the undersigned at the annual meeting
of shareholders to be held in the Energy Center, 526 South Church Street,
Charlotte, North Carolina, on April 16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of directors may be indicated on the reverse.
Nominees are Paul M. Anderson, William T. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Russell M. Robinson, II.
Please sign on reverse and return promptly in the enclosed
return envelope.
<PAGE>
DEAR SHAREHOLDER:
I hope you will plan to join me and your fellow shareholders at Duke Energy's
annual meeting, which begins at 10:00 a.m., Thursday, April 16, in the O.J.
Miller Auditorium. located in the Energy Center, 526 South Church St.,
Charlotte, North Carolina.
Shareholders will be asked to vote on the election of eight directors, the
ratification of appointment of auditors and the approval of corporate and
executive incentive plans. I encourage you to read your Proxy Statement and then
mark, sign, date and return your completed form of proxy as soon as possible.
This will be our first annual meeting of shareholders as Duke Energy
Corporation. I hope to see you personally on April 16 in Charlotte.
Sincerely,
R.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items 1, 2, 3, and 4
1. Election of five directors who will constitute Class I of the Board of
Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
name(s) of the exceptions in the space provided.
Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of appointment of auditors.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998: ______________
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) __________________________
appears above X ________________________ Date ,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
<PAGE>
Duke Energy Corporation
Annual Meeting of Shareholders
April 16, 1998 at 10:00 a.m.
Energy Center - O.J. Miller Auditorium
526 South Church Street
Charlotte, N.C.
(map of Energy Center location appears here)
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B.Priory, R.J. Osborne and W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Energy Corporation of the undersigned at the annual meeting
of shareholders to be held in the Energy Center, 526 South Church Street,
Charlotte, North Carolina, on April 16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of directors may be indicated on the reverse.
Nominees are Paul M. Anderson, William T. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Russell M. Robinson, II.
Please sign on reverse and return promptly in the enclosed
return envelope.
<PAGE>
TO PARTICIPANTS IN THE DUKE ENERGY CORPORATION RETIREMENT SAVINGS PLAN:
As a participant in the Duke Energy Corporation Retirement Savings Plan, you
have the right with respect to the shares credited to your plan account to
direct voting of those shares on any issues presented at Duke Energy's 1998
Annual Shareholder Meeting, to be held April 16 in Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account. If you elect not to return a completed proxy, shares held in your plan
account will be voted by the plan trustee acting in its discretion. Even though
you may have returned a proxy for shares owned outside the plan, you are
encouraged to exercise your rights by completing and returning the enclosed
proxy.
Sincerely,
R.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items 1, 2, 3, and 4
1. Election of five directors who will constitute Class I of the Board of
Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
name(s) of the exceptions in the space provided.
Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of appointment of auditors.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998: ______________
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) _____________________________
appears above X __________________________ Date ,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
<PAGE>
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B.Priory, R.J. Osborne and W. Edward
Poe, Jr., and each of them, proxies, with the powers the undersigned would
possess if personally present, and with full power of substitution, to vote all
shares of Common Stock of Duke Energy Corporation of the undersigned at the
annual meeting of shareholders to be held in the Energy Center, 526 South Church
Street, Charlotte, North Carolina, on April 16, 1998, and at any adjournment
thereof, upon all subjects that may come before the meeting, including the
matters described in the proxy statement furnished herewith, subject to any
directions indicated on the reverse side of this card. IF NO DIRECTIONS ARE
GIVEN, THE INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL
DIRECTOR NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER
SUBJECTS LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY COME BEFORE THE MEETING.
Your vote for the election of directors may be indicated on the
reverse. Nominees are Paul M. Anderson, William T. Esrey, Ann M. Gray, Dennis R.
Hendrix, Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Russell M.
Robinson, II.
Please sign on reverse and return promptly in the enclosed
return envelope.
<PAGE>
TO PARTICIPANTS IN THE EMPLOYEES' STOCK OWNERSHIP PLAN:
As a participant in the Duke Energy Corporation Employees' Stock Ownership Plan,
you have the right with respect to the shares credited to your plan account to
direct voting of those shares on any issues presented at Duke Energy's 1998
Annual Shareholder Meeting, to be held April 16 in Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account. If you elect not to return a completed proxy, shares held in your plan
account will be voted by the plan trustee acting in its discretion. Even though
you may have returned a proxy for shares owned outside the plan, you are
encouraged to exercise your rights by completing and returning the enclosed
proxy.
Sincerely,
R.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items 1, 2, 3, and 4
1. Election of five directors who will constitute Class I of the Board of
Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
name(s) of the exceptions in the space provided.
Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of appointment of auditors.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998:
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) __________________________
appears above X ________________________ Date ,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
<PAGE>
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B.Priory, R.J. Osborne and W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Energy Corporation of the undersigned at the annual meeting
of shareholders to be held in the Energy Center, 526 South Church Street,
Charlotte, North Carolina, on April 16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of directors may be indicated on the reverse.
Nominees are Paul M. Anderson, William T. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Russell M. Robinson, II.
Please sign on reverse and return promptly in the enclosed
return envelope.
