SCHEDULE 14A INFORMATION
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DUKE ENERGY CORPORATION
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[DUKE ENERGY LOGO]
Proxy
Statement
and notice of
2000 Annual Meeting
<PAGE>
[DUKE ENERGY LOGO]
526 SOUTH CHURCH STREET
CHARLOTTE, NC 28202-1802
March 13, 2000
Dear Shareholder:
I am pleased to invite you to our annual meeting to be held on April 20, 2000.
We are holding the meeting again this year at the O.J. Miller Auditorium in our
Charlotte headquarters building. You will hear about our 1999 performance and
our goals for 2000 and will have the opportunity to ask questions. Enclosed with
this proxy statement are your proxy card and voting instructions and the 1999
annual report.
You will notice that we have used a more "plain English" style and format in
this year's proxy statement. We hope you will like the new format and find the
materials easier to read.
For your convenience, we are now offering you the chance to cast your vote by
telephone or online via the Internet. Whether you choose to vote by proxy card,
telephone or computer, it would help if you would vote as soon as possible.
I look forward to seeing you at the annual meeting.
Sincerely,
R.B. PRIORY
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
[DUKE ENERGY LOGO]
526 South Church Street
Charlotte, NC 28202-1802
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 2000
March 13, 2000
We will hold the annual meeting of shareholders of Duke Energy Corporation on
Thursday, April 20, 2000, at 10:00 a.m. at the O.J. Miller Auditorium in the
Energy Center at 526 South Church Street in Charlotte, North Carolina.
The purpose of the annual meeting is to consider and take action on the
following:
1. Election of five nominees as Class III directors.
2. Ratification of Deloitte & Touche LLP as Duke Energy's independent
auditors for 2000.
3. Approval of the Duke Energy 2000 Policy Committee Short-Term
Incentive Plan.
4. A shareholder proposal relating to the use of mixed oxide fuel in
nuclear reactors, if properly presented at the annual meeting.
5. A shareholder proposal relating to limits on outside board positions
for directors, if properly presented at the annual meeting.
6. Any other business that properly comes before the annual meeting.
Shareholders of record as of February 29, 2000, can vote at the annual meeting.
This proxy statement, proxy card and voting instructions, along with our 1999
annual report to shareholders, are being distributed on or about March 13, 2000.
YOUR VOTE IS VERY IMPORTANT. IF VOTING BY MAIL, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE, AND ALLOW SUFFICIENT TIME
FOR THE POSTAL SERVICE TO DELIVER YOUR PROXY BEFORE THE MEETING. IF VOTING BY
TELEPHONE OR ON THE INTERNET, PLEASE FOLLOW THE INSTRUCTIONS ON YOUR PROXY CARD.
By order of the Board of Directors
Richard W. Blackburn
Executive Vice President,
General Counsel and Secretary
<PAGE>
TABLE OF CONTENTS
Commonly Asked Questions and Answers About the Annual Meeting
Proposals to be Voted Upon
Proposal 1: Election of Directors
Proposal 2: Ratification of Deloitte & Touche LLP as
Duke Energy's Independent Auditors for 2000
Proposal 3: Approval of the Duke Energy 2000 Policy Committee
Short-Term Incentive Plan
Proposal 4: Use of Mixed Oxide Fuel in Nuclear Reactors
Proposal 5: Limits on Outside Board Positions for Directors
The Board of Directors
Beneficial Ownership
Information on the Board of Directors
Report of the Compensation Committee
Performance Graphs
Compensation
Summary Compensation Table
Long-Term Incentive Plan - Awards in 1999
Option Grants in 1999
Option Exercises and Year-End Values
Employment Contracts and Termination of
Employment and Change-in-Control Arrangements
Retirement Plan Information
Other Information
<PAGE>
COMMONLY ASKED
QUESTIONS AND ANSWERS
ABOUT THE ANNUAL MEETING
Q: WHAT AM I VOTING ON?
A: o Election of five directors: the nominees are Robert J. Brown, William T.
Esrey, George Dean Johnson, Jr., James G. Martin and Richard B. Priory;
o Ratification of Deloitte & Touche LLP as Duke Energy's independent
auditors for 2000;
o Approval of the Duke Energy 2000 Policy Committee Short-Term Incentive
Plan;
o A shareholder proposal relating to the use of mixed oxide fuel in nuclear
reactors, if properly presented at the annual meeting;
o A shareholder proposal relating to limits on outside board positions for
directors, if properly presented at the annual meeting.
Q: WHO CAN VOTE?
A: Common shareholders of Duke Energy as of the close of business on the
record date, February 29, 2000, can vote at the annual meeting, either in
person or by proxy. Each share of Duke Energy Common Stock gets one vote.
Q: HOW DO I VOTE?
A: Sign and date each proxy card that you receive and return it in the prepaid
envelope, or vote by telephone or on the Internet. If we receive your
signed proxy card (or properly transmitted telephone or Internet proxy)
before the annual meeting, we will vote your shares as you direct. You can
specify when submitting your proxy whether your shares should be voted for
all, some or none of the nominees for director. You can also specify
whether you approve, disapprove or abstain from voting on the other four
proposals.
If you use the proxy card and simply sign, date and return it without
making any selections, your proxy will be voted:
o in FAVOR of the election of the nominees for directors named in
Proposal 1;
o in FAVOR of Proposals 2 and 3; and
o AGAINST Proposals 4 and 5.
Q: MAY I CHANGE MY VOTE?
A: You may change your vote at any time by:
o casting another vote either in person at the meeting, or by one of the
other methods discussed above; or
o notifying the Corporate Secretary, in care of the Investor Relations
Department, at Post Office Box 1005, Charlotte, NC 28201-1005.
<PAGE>
Q: CAN I VOTE MY SHARES BY TELEPHONE OR ON THE INTERNET?
A: If you hold your shares in your own name, you may vote by telephone or on
the Internet, by following the instructions included on your proxy card.
If your shares are held in "street name," you will need to contact your
broker or other nominee holder to find out whether you will be able to vote
by telephone or on the Internet.
Q: WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
A: No, if you hold your shares directly in your own name, they will not be
voted if you do not provide a proxy unless you vote in person at the
meeting. Brokerage firms generally have the authority to vote customers'
unvoted shares on certain "routine" matters. If your shares are held in the
name of a brokerage firm, the brokerage firm can vote your shares for the
election of directors and for Proposals 2 and 3 if you do not timely
provide your proxy because these matters are considered "routine" under the
applicable rules.
Q: AS A DUKE ENERGY EMPLOYEE, HOW DO I VOTE SHARES HELD IN MY ACCOUNT IN THE
DUKE ENERGY RETIREMENT SAVINGS PLAN?
A. If you are a participant in the Duke Energy Retirement Savings Plan, you
have the right to direct the Plan trustee in the voting of those shares of
Duke Energy Common Stock that are held by the Plan and allocated to your
Plan account on any issues presented at the annual meeting. Plan
participant proxies will be treated confidentially.
If you elect not to vote by proxy, shares allocated to your Plan account
will be voted by the Plan trustee in the same proportion as those shares
held by the Plan for which the Plan trustee has received direction from
Plan participants.
Q: WHAT CONSTITUTES A QUORUM?
A: As of the record date, February 29, 2000, 366,689,508 shares of Duke Energy
Common Stock were issued and outstanding and entitled to vote at the
meeting. In order to conduct the annual meeting, a majority of the shares
entitled to vote must be present in person or by proxy. This is referred to
as a "quorum." If you submit a properly executed proxy card or vote by
telephone or on the Internet, you will be considered part of the quorum.
Abstentions and broker "non-votes" will be counted as present and entitled
to vote for purposes of determining a quorum. A broker "non-vote" occurs
when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
Q: WHAT VOTE IS NEEDED FOR THESE PROPOSALS TO BE ADOPTED?
A: Directors are elected by a plurality of the votes cast at the meeting.
"Plurality" means that the nominees receiving the largest number of votes
cast are elected as directors up to the maximum number of directors to be
chosen at the meeting. A majority of the votes cast at the meeting is
required to approve the other proposals. For the election of directors,
<PAGE>
abstentions and broker "non-votes" will not be counted. For the other
proposals, abstentions and broker "non-votes" will not be counted as votes
cast.
Q: WHO CONDUCTS THE PROXY SOLICITATION AND HOW MUCH WILL IT COST?
A: Duke Energy is asking for your proxy for the annual meeting and will pay
all the costs of asking for shareholder proxies. We have hired Georgeson
Shareholder Communications, Inc. to help us send out the proxy materials
and ask for proxies. Georgeson's fee for these services is $17,500, plus
out-of-pocket expenses. We can ask for proxies through the mail or
personally by telephone, telegram, fax or other means. We can use
directors, officers and regular employees of Duke Energy to ask for
proxies. These people do not receive additional compensation for these
services. We will reimburse brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses for forwarding
solicitation material to the beneficial owners of Duke Energy Common Stock.
Q: HOW DOES A SHAREHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF DUKE ENERGY OR
BRING BUSINESS BEFORE THE ANNUAL MEETING?
A: Nominations for director may be made only by the Board of Directors or by a
shareholder who has given the proper notice, as provided in the By-Laws,
between 90 and 120 days prior to the first anniversary of the previous
year's annual meeting. For the 2001 annual meeting, we must receive this
notice on or after December 21, 2000, and on or before January 20, 2001.
Other business may be brought before an annual meeting by a shareholder who
has delivered notice (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
through the SEC's shareholder proposal procedures. If you intend to use the
SEC procedures and wish to have your proposal included in next year's proxy
statement, you must deliver the proposal in writing to our Secretary by
November 13, 2000.
A copy of the full text of the By-Law advance notice provisions discussed
above may be obtained by writing to the Office of the Corporate Secretary,
Post Office Box 1006, Charlotte, North Carolina 28201-1006.
<PAGE>
PROPOSALS TO BE VOTED UPON
PROPOSAL 1:
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE.
The Board of Directors of Duke Energy consists of 13 members, divided into three
classes. The three-year terms of the classes are staggered so that the term of
one class expires at each annual meeting. The terms of the five Class III
directors will expire at the 2000 annual meeting.
The Board of Directors has nominated the following Class III directors for
re-election: Robert J. Brown, William T. Esrey, George Dean Johnson, Jr., James
G. Martin and Richard B. Priory.
If any director is unable to stand for re-election, the Board of Directors may
reduce the number of directors, or designate a substitute. In that case, shares
represented by proxies may be voted for a substitute director. We do not expect
that any nominee will be unavailable or unable to serve.
PROPOSAL 2:
RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY'S INDEPENDENT AUDITORS FOR
2000
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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 examine Duke
Energy's accounts for the year 2000. If the shareholders do not ratify this
appointment, the Board of Directors will consider other certified public
accountants upon recommendation of the Audit Committee.
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.
PROPOSAL 3:
APPROVAL OF THE DUKE ENERGY 2000 POLICY COMMITTEE SHORT-TERM INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
The Duke Energy 2000 Policy Committee Short-Term Incentive Plan is designed to
advance Duke Energy's interests by rewarding the members of the Policy Committee
when corporate performance reaches certain predetermined levels. The Plan will
be administered by the Compensation Committee of the Board of Directors. Awards
may be granted only to members
<PAGE>
of the Policy Committee (currently numbering seven). The Policy Committee
consists of senior executive officers involved in corporate strategic planning
and in determining policies and management principles for the entire Duke Energy
enterprise.
The full text of the Plan was filed electronically with the SEC with this proxy
statement. A brief description of the material features of the Plan is presented
here, but you are encouraged to read the full Plan if you need more information.
MATERIAL FEATURES OF DUKE ENERGY 2000 POLICY COMMITTEE SHORT-TERM INCENTIVE
PLAN. Before the end of the first quarter of each year, the Compensation
Committee will establish performance targets and corresponding target awards for
each Policy Committee member for that year. The Compensation Committee may
establish a performance target as a specified level of a business measure and
provide that the performance target will be determined by eliminating the
financial effects of specified transactions or occurrences. If the Compensation
Committee intends that awards qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code (described below), the performance
targets may track any of the following business measures, for Duke Energy or any
of its subsidiaries or business units:
* earnings per share
* total shareholder return
* stock price increase
* return on equity
* return on capital
* EBIT (earnings before interest and taxes)
* cash flow
* EVA (economic value added)
* SVA (shareholder value added)
* revenues
Achievement of the business measures listed above may be determined on a
stand-alone basis or as compared to a peer group. Section 162(m) limits the
deductibility of annual compensation over $1 million paid to certain employees.
However, this limit does not apply to qualifying performance-based
compensation. Alternatively, the Compensation Committee may establish strategic
objectives, instead of business measures, as performance targets for awards
that it does not intend to qualify as performance-based compensation under
Section 162(m). Awards will be payable in cash, and the total amount of all
award payments to any Policy Committee member will not exceed $4,000,000 for
any given year.
Soon after the close of each year, the Compensation Committee will certify in
writing the extent to which the performance targets have been achieved. If any
targets have been achieved, the Compensation Committee will determine for each
Policy Committee member the amount of the award that has been earned, based on a
predetermined formula. The Compensation Committee may reduce the amount of any
of these awards based upon its assessment of individual performance, the failure
of the Policy Committee member to remain employed by Duke Energy or its
subsidiaries throughout the year, or for any other reason. The Compensation
Committee may allow members of the Policy Committee to defer payment of all or
part of any awards.
<PAGE>
If the shareholders approve the Plan, the Plan will replace the current Duke
Energy Policy Committee Short-Term Incentive Plan, and the Plan will continue in
effect until the Board of Directors terminates it. The Compensation Committee
may amend or modify the Plan as it sees fit. No amendment or modification will
be effective without Board of Director or shareholder approval, however, if that
approval is required to comply with the requirements for performance-based
compensation under Section 162(m).
2000 POLICY COMMITTEE PLAN BENEFITS. Subject to shareholder approval of the
Plan, the Compensation Committee has granted the following target awards for the
year 2000 under the Plan, with performance targets based on Duke Energy's
earnings per share for that year:
Name or Identity of Group Dollar Value ($)
------------------------- ----------------
R.B. PRIORY 950,000
Chairman of the Board, President
and Chief Executive Officer
H.J. PADEWER 375,000
Group President, Energy Services
W.A. COLEY 292,500
Group President, Duke Power
F.J. FOWLER 292,500
Group President, Energy Transmission
R.J. OSBORNE 260,000
Executive Vice President
and Chief Financial Officer
All eligible executive officers
as a group (7) 2,690,000
The actual awards may be more or less than these target awards, depending upon
differences between actual earnings per share and the earnings per share
performance target.
<PAGE>
SHAREHOLDER PROPOSALS
The following two proposals have been submitted by shareholders for inclusion in
this proxy statement. Upon oral or written request, we will promptly furnish the
names and addresses of the shareholders submitting the proposals, as well as the
number of shares they held at the time the proposals were submitted, along with
other contact information they have provided to us.
PROPOSAL 4:
USE OF MIXED OXIDE FUEL IN NUCLEAR REACTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL.
Refuse Plutonium Fuel For Duke Reactors
Whereas: Duke Energy is under contract with the Department of Energy (DOE) to
use plutonium fuel (MOX) in the McGuire and Catawba nuclear reactors.
Whereas: Duke shareholders are concerned about the impact of plutonium fuel on
the safe, efficient and economic operation of the company for the following
reasons:
1. Economic dividends from this program are small, speculative, far in the
future and not worth the risks to reactor safety or company reputation.
2. Growing public and legislative opposition creates a bad public relations
image for our company during a time of utility deregulation and growing
competition.
3. Weapons grade plutonium has never been used in commercial nuclear reactors
posing unanticipated risks. European experience with reactor grade plutonium
fuel has produced inadequate information of unknown relevance to the U.S.
weapons grade plutonium fuel program.
4. Uranium fuel is plentiful and inexpensive, with predictable impacts on
reactor operations. Plutonium fuel introduces differences in reactor physics
which increase accident risks and increases cancer deaths from serious accidents
by as much as 25%.
5. Duke Energy participation in this plutonium fuel program would make the
company dependent on the Department of Energy and the French government owned
firm Cogema. The difficulties and red tape involved in doing business with these
two government agencies make the business dynamics of this venture risky.
6. The plutonium fuel program depends on the Russian government doing a parallel
program. Duke Energy should not involve itself in a program that depends on
political events in Russia.
7. Use of plutonium fuel sends the message that plutonium is acceptable for use
in other countries, thus increasing the risk of nuclear weapons material
proliferation.
8. Plutonium fuel use would require amending the operating licenses of the
nuclear reactors in a process that could be expensive, time consuming and
possibly unsuccessful.
9. The Department of Energy is also planning to immobilize some of the plutonium
by mixing it with nuclear waste and encasing it in glass or ceramics. The
immobilization option is faster, safer, cheaper and does not promote nuclear
materials proliferation. Duke shareholders should promote this better option for
plutonium disposal. There is no need for Duke Energy to use the unproven weapons
plutonium fuel.
<PAGE>
THEREFORE BE IT RESOLVED THAT the shareholders of Duke Energy require the Board
of Directors to establish a firm policy against the use of plutonium (MOX) fuel.
We urge all shareholders to please vote FOR this resolution.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
This proposal was submitted for consideration at our 1999 annual meeting and was
defeated, with 92.4% voting against and 7.6% voting in favor.
With this overwhelming shareholder support and the Board of Directors'
confidence that it is in the best interests of Duke Energy, we began working in
1999 with a team of companies on the Mixed Oxide (MOX) Fuel Project, a
government initiative to dispose of plutonium from United States nuclear weapons
that are surplus to defense needs. The project involves fabricating the
plutonium into MOX fuel and using the fuel in existing commercial nuclear
reactors. Using the plutonium as MOX fuel destroys much of the material and
renders the remainder unattractive for re-use in nuclear weapons, while
producing electricity as a useful by-product. Duke Energy is scheduled to begin
using MOX fuel in the McGuire and Catawba Nuclear Stations in 2007.
In parallel with the U.S. project, Russia will also be fabricating MOX fuel and
using it in Russian reactors to dispose of its surplus plutonium. The
fundamental goal of the overall program is to reduce the amount of
weapons-usable plutonium in Russia, where it is particularly vulnerable to theft
or diversion. Since Russia has clearly indicated that it will not dispose of its
surplus plutonium unless the U.S. does likewise, the U.S. project and Duke
Energy's participation in it are crucial to achievement of that goal. This
program has received widespread bipartisan support in the U.S., as well as
international endorsement.
The government is paying Duke Energy and its subsidiary, Duke Engineering &
Services, for the ongoing preparatory work. Once McGuire and Catawba begin using
MOX fuel, Duke Energy will receive the fuel at a lower cost than would be
incurred for the equivalent energy content of uranium fuel. Accordingly, by
participating in the MOX Fuel Project, Duke Energy will realize direct economic
benefits through lower nuclear fuel costs. Specific details on the price of the
MOX fuel and the resulting fuel cost savings, like all nuclear fuel contract
information, are sensitive and confidential.
MOX fuel use is a proven technology, the feasibility of which has been
recognized by the National Academy of Sciences, among others. European reactors
have been using MOX fuel safely and efficiently for decades. Before using MOX
fuel at McGuire and Catawba, Duke Energy is required to demonstrate to the
satisfaction of the U.S. Nuclear Regulatory Commission that using the fuel poses
no undue risk to the health and safety of the public.
In summary, MOX fuel is a technology that has been proven through many years of
French, German, Belgian and Swiss experience in reactors very similar to McGuire
and Catawba. Participation in the MOX Fuel Project does not impose undue
financial risk on Duke Energy, and will enable Duke Energy to save money on
long-term nuclear fuel costs. In addition, the project supports a key U.S.
government nonproliferation initiative, and thereby holds the potential of
making the world safer and more secure.
<PAGE>
The shareholder proposal seeks to prevent Duke Energy from pursuing these
benefits and achieving these important goals. The Board of Directors therefore
recommends a vote AGAINST this shareholder proposal.
PROPOSAL 5:
LIMITS ON OUTSIDE BOARD POSITIONS FOR DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL.
Improve Operations of Duke Energy Board
It is noted that nominees for the Board are almost exclusively "professional"
directors of one category or another (educational, professional, and religious
affiliations inclusive). Furthermore, Board members normally serve actively as
full-time executives of Duke Energy or other entities. A key purpose of the
Board is to provide management guidance and a degree of independent oversight of
company operations. While there is clearly a connection between "experience" and
"bringing something" to service on the Board, there is also a concern with
"overload" regarding Board members. Overload is possible for busy people,
running companies, and serving on the boards of 5 or 6 or more organizations or
entities. For example, for the Class II Directors (Expire 2002), Mr. William
Coley works full-time for Duke and serves on the boards of 9 other organizations
or entities. Mr. Leo Linbeck heads his own company full-time and is on the board
of effectively 34 other companies. This raises serious questions concerning
whether or not these individuals are "stretching it," or being overextended,
from the standpoint of being able to give adequate attention and oversight to
Duke Energy business and management decisions and actions, including important
nuclear and environmental regulatory matters. For these reasons it is proposed
that shareholders ask that the Directors, as a matter of company policy, with
only rare and fully justified exception, limit future Board nominations to those
persons meeting other, existing, requirements but serving on no more than 4
other boards of other companies, organizations, or entities.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
The Board of Directors recognizes that each person serving as a director must
devote the time and attention necessary to fulfill the obligations of a
director. In evaluating this proposal, however, the Board of Directors believes
that it is important for shareholders not to be misled. First, the references to
the board memberships of William Coley and Leo Linbeck are as of March 1999.
Please refer to the current information on board membership included under
"Board of Directors" in this proxy statement. Second, Messrs. Coley and Linbeck
attended ALL regular meetings of the Board of Directors since the merger with
PanEnergy Corp in June 1997 and missed only one special meeting during this
entire period. Finally, what is being proposed goes far beyond corporate
governance guidelines that have been adopted by some corporations which limit
memberships on boards of non-affiliated for-profit companies. The job
responsibilities of many executives, including Mr. Coley, for example, require
an active role in community affairs, and those executives are often encouraged
to serve on the boards of various
<PAGE>
nonprofit organizations. This proposal, if adopted, would restrict membership by
directors of Duke Energy on boards of ANY philanthropic, community, religious,
educational, professional or cultural organization-regardless of time demands-as
well as membership on the boards of Duke Energy's subsidiaries and affiliated
companies.
In formulating and reviewing corporate governance guidelines during the past two
years, the Corporate Governance Committee specifically considered limiting other
board memberships of directors. In its deliberations, the Committee recognized
that, while service on boards of other public companies often broadens and
deepens the knowledge and experience of directors, service on too many boards
can interfere with an individual's ability to perform his or her
responsibilities. The Committee, however, decided not to endorse a specific
limitation on the number of directorships an individual may hold, for a number
of reasons. Over the years, multiple board memberships have not impaired the
effectiveness of any member of the Board of Directors of Duke Energy. Moreover,
time demands from board to board and capacities of individual directors vary,
and imposing hard and fast rules seemed inappropriate. Instead, the Committee
decided to ensure through periodic assessments that other existing and planned
future commitments of each current director did not materially interfere with
his or her service, and to see to it that future nominees were willing to make
the necessary personal dedication of time and energy. The Committee also took
into account in arriving at its decision that recent surveys indicate that
imposing limitations on board memberships was a diminishing concern in setting
governance standards-the surveys show that approximately 97% of corporate boards
had no limit on the number of boards directors may serve on.
The Board of Directors believes that adoption of this shareholder proposal is
not in the best interests of Duke Energy and its shareholders and recommends
against its adoption.
<PAGE>
THE BOARD OF DIRECTORS
Nominees for election at the annual meeting are marked with an asterisk (*).
(PHOTO) G. ALEX BERNHARDT, SR.
Director since 1991
Chairman and CEO, Bernhardt Furniture Company,
furniture manufacturer
Age 56
Mr. Bernhardt 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 CEO in 1996. Mr. Bernhardt is
a director of First Union Corporation. He is a Class
II director with a term expiring in 2002.
(PHOTO) ROBERT J. BROWN *
Director since 1994
Chairman and CEO, B&C Associates, Inc.,
marketing research and public relations firm
Age 65
Mr. Brown 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 CEO
since 1973. He is a director of First Union
Corporation, Sonoco Products Company and AutoNation,
Inc.
(PHOTO) WILLIAM A. COLEY
Director since 1990
Group President, Duke Power, electric operations of Duke Energy
Age 56
Mr. Coley joined Duke Energy in 1966. He was named
President of Duke Energy's Associated Enterprises
Group in 1994 and was appointed to his present
position in June 1997. He is a director of CT
Communications, Carolina Pad and Paper Company and
SouthTrust Corporation. Mr. Coley is a Class II
director with a term expiring in 2002.
<PAGE>
(PHOTO) WILLIAM T. ESREY *
Director since 1985
Chairman and CEO, Sprint Corporation,
a diversified telecommunications holding company
Age 60
Mr. Esrey has served as Chairman of Sprint
Corporation since 1990 and as its CEO since 1985. He
was President of Sprint Corporation from 1985 to
1996. Mr. Esrey is a director of Sprint Corporation,
General Mills, Inc., Exxon Mobil Corporation and
EarthLink Network, Inc. and had been a director of
PanEnergy Corp since 1985.
(PHOTO) ANN MAYNARD GRAY
Director since 1994
Former Vice President, ABC, Inc. and Former President, Diversified
Publishing Group of ABC, Inc., television, radio and publishing
Age 54
Ms. Gray was President, Diversified Publishing Group
of ABC, Inc. from 1991 until 1997, and was a
Corporate Vice President of ABC, Inc. and its
predecessors from 1979 to 1998. She had been a
director of PanEnergy Corp since 1994. Ms. Gray is a
Class I director with a term expiring in 2001.
(PHOTO) DENNIS R. HENDRIX
Director since 1990
Retired Chairman of the Board, PanEnergy Corp
Age 60
Mr. Hendrix was Chairman of the Board of PanEnergy
Corp from 1990 to 1997; CEO from 1990 to 1995; and
President from 1990 to 1993. He served as a director
of Texas Eastern Transmission Corporation from 1990
to 1997 and as President and CEO from 1990 to 1994.
Mr. Hendrix is a director of Allied Waste Industries,
Inc., National Power, PLC and Newfield Exploration
Company. He is a Class I director with a term
expiring in 2001.
<PAGE>
(PHOTO) HAROLD S. HOOK
Director since 1978
Consultant, Retired Chairman and CEO, American General Corporation,
diversified financial services
Age 68
Mr. Hook retired from American General Corporation in
1997 after more than 18 years as Chairman and CEO. He
serves as a director of Chase Manhattan Corporation,
The Chase Manhattan Bank and Sprint Corporation and
had been a director of PanEnergy Corp since 1978. Mr.
Hook is a Class I director with a term expiring in
2001.
(PHOTO) GEORGE DEAN JOHNSON, JR. *
Director since 1986
President and CEO, Extended Stay America, development, ownership and
management of extended-stay lodging facilities
Age 57
Mr. Johnson 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 CEO since 1995. Mr. Johnson is a
director of Extended Stay America, Boca Resorts,
Inc., and AutoNation, Inc.
(PHOTO) MAX LENNON
Director since 1988
President, Mars Hill College, Mars Hill, NC
Age 59
Dr. Lennon assumed his present position 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. Dr. Lennon is a director
of Delta Woodside Industries, Inc. He is a Class II
director with a term expiring in 2002.
<PAGE>
(PHOTO) LEO E. LINBECK, JR.
Director since 1986
Chairman, President and CEO, Linbeck Corporation,
holding company of four construction-related firms
Age 65
Mr. Linbeck assumed his present position in 1990
after serving as Chairman, President and CEO of
Linbeck Construction Corporation from 1975 to 1990.
He served as a director of PanEnergy Corp from 1986.
Mr. Linbeck is a Class II director with a term
expiring in 2002.
(PHOTO) JAMES G. MARTIN, PH.D. *
Director since 1994
Vice President, Research, Carolinas HealthCare System
Age 64
Dr. Martin 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 1973 to 1984.
Dr. Martin is a director of Palomar Medical
Technologies, Inc., Applied Analytical Industries,
Inc. and Family Dollar Stores, Inc.
(PHOTO) RICHARD B. PRIORY *
Director since 1990
Chairman of the Board, President and CEO, Duke Energy Corporation
Age 53
Mr. Priory became Chairman of the Board and CEO in
June 1997 upon the merger of Duke Energy and
PanEnergy Corp, and became President in November
1998. He had served as President and Chief Operating
Officer of Duke Energy from 1994 until June 1997. He
is a director of Dana Corporation and US Airways
Group, Inc. and serves on the boards of the Edison
Electric Institute and the Institute of Nuclear Power
Operations. Mr. Priory is also a member of the
National Academy of Engineering.
<PAGE>
(PHOTO) RUSSELL M. ROBINSON, II
Director since 1995
Attorney, Robinson, Bradshaw & Hinson, P.A.
Age 68
Mr. Robinson 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
Caraustar Industries, Inc. and Cadmus Communications
Corporation and is a trustee of The Duke Endowment.
He also serves as a member of the American Law
Institute and a Fellow of the American Bar
Foundation. Mr. Robinson is a Class I director with a
term expiring in 2001.
<PAGE>
BENEFICIAL OWNERSHIP
This table indicates how much Duke Energy Common Stock was beneficially owned by
the directors, the executive officers listed under "Summary Compensation Table"
in "Compensation" below ("Named Executive Officers") and by all directors and
executive officers as a group as of December 31, 1999.
o The shares listed as "Beneficially Owned" include shares held in our
employee benefit plans and in trust for the directors under their
compensation plan.
o The shares listed as "May Be Acquired" are all shares of Duke Energy
Common Stock that can be acquired upon the exercise of stock options
granted under the Duke Energy 1998 Long-Term Incentive Plan.
o Beneficial ownership of directors and executive officers as a group,
not including shares held by the trusts referred to in footnote 2 to
the table, represents beneficial ownership of less than 1% of the
outstanding shares of Duke Energy Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES
-----------------------
TOTAL
NAME OR IDENTITY OF GROUP BENEFICIALLY BENEFICIALLY MAY BE
OWNED OWNED(3) ACQUIRED
- ------------------------------------------------ ------------------- ----------------- -------------
<S> <C> <C> <C>
G.A. Bernhardt, Sr. 7,857 7,857 3,800
R.J. Brown 3,562 3,562 3,800
W.A. Coley(1) 21,321 61,321 278,500
W.T. Esrey 20,572 20,572 3,800
F.J. Fowler 38,603 132,815 332,712
A.M. Gray 5,583 13,937 12,154
D.R. Hendrix 236,637 236,637 3,800
H.S. Hook 18,186 23,406 9,020
G.D. Johnson, Jr. 10,367 10,367 3,800
M. Lennon 7,729 7,729 3,800
L.E. Linbeck, Jr. 20,519 20,519 3,800
J.G. Martin 4,229 4,229 3,800
R.J. Osborne(1) 8,206 28,206 162,000
H.J. Padewer 7,794 57,794 346,900
R.B. Priory(1) 13,091 113,091 500,000
R.M. Robinson, II 8,910,584(2) 8,910,584(2) 3,800
Directors and executive officers as a
group (19) 9,334,125(2) 9,726,429(2)
</TABLE>
(1) Also own Common Stock equivalents under the Duke Energy Executive Savings
Plan in the following amounts: R.B. Priory, 25,226; W.A. Coley, 43,998; R.J.
Osborne, 733.
(2) Includes 7,604,721 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
these trusts, with shared voting and investment power, disclaims beneficial
ownership of these shares.
(3) Includes shares that may be acquired within 60 days after December 31, 1999.
----------------------
<PAGE>
This table shows how many units of limited-partnership interests in TEPPCO
Partners, L.P. were beneficially owned on December 31, 1999 by directors of Duke
Energy, Named Executive Officers, and by directors and executive officers of
Duke Energy as a group. TEPPCO Partners, L.P. is a publicly traded master
limited partnership, and Texas Eastern Products Pipeline Company, an indirect
wholly owned subsidiary of Duke Energy, is its general partner. As of December
31, 1999, the number of units beneficially owned by directors and executive
officers of Duke Energy as a group was less than 1% of the outstanding units.
None of these persons had the right to acquire units within 60 days after
December 31, 1999.
Number of Units
Name or Identity of Group Beneficially Owned
- ------------------------- ------------------
F.J. Fowler 3,100
D.R. Hendrix 29,000
H.S. Hook 4,000
R.J. Osborne 1,000
Directors and executive officers as a group 38,000
<PAGE>
INFORMATION ON THE BOARD OF DIRECTORS
BOARD MEETINGS AND ATTENDANCE
The Board of Directors had eight meetings during 1999. During 1999, no director
attended less than 75% of the total of the board meetings and the meetings of
the committees upon which he or she served, except that, due to unavoidable
circumstances, William T. Esrey was only able to attend approximately 70% of
such meetings.
BOARD COMMITTEES
The Board of Directors has the six standing committees described below:
o The AUDIT COMMITTEE recommends to the Board of Directors the
engagement of Duke Energy's independent auditors, determines the
scope of the auditing of the books and accounts of Duke Energy,
reviews reports submitted by the auditors, examines procedures used
in Duke Energy's internal audit program and makes recommendations on
audit matters to the Board of Directors.
o The COMPENSATION COMMITTEE sets the salaries and other compensation
of all executive officers of Duke Energy except the Chairman of the
Board. This Committee makes recommendations to the Board of Directors
regarding the salary and other compensation of the Chairman of the
Board for consideration and action by the Board of Directors, without
the presence or participation of the Chairman of the Board. The
Committee also makes recommendations to the Board of Directors on
compensation for outside directors.
o The CORPORATE GOVERNANCE COMMITTEE considers matters related to
corporate governance and formulates and periodically revises
principles for board governance, recommends to the Board of Directors
the size and composition of the Board of Directors within the limits
set forth in the Articles of Incorporation and By-Laws and recommends
potential successors to the Chief Executive Officer. This Committee
considers nominees for the Board of Directors recommended by
shareholders.
o The CORPORATE PERFORMANCE REVIEW COMMITTEE monitors and makes
recommendations for improving Duke Energy's overall performance. It
also determines whether current policies provide sufficient support
for Duke Energy's emphasis on continuous improvement.
o The FINANCE COMMITTEE reviews Duke Energy's financial and fiscal
affairs and makes recommendations to the Board of Directors regarding
dividend, financing and fiscal policies.
o The MANAGEMENT COMMITTEE exercises all of the authority of the Board
of Directors during the intervals between board meetings, except with
respect to certain actions specified in the By-Laws.
<PAGE>
<TABLE>
<CAPTION>
BOARD COMMITTEE MEMBERSHIP ROSTER
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
CORPORATE
CORPORATE PERFORMANCE
NAME AUDIT COMPENSATION GOVERNANCE REVIEW FINANCE MANAGEMENT
============================= ======== =================== ============== ================= ========== ================
<S> <C> <C> <C> <C> <C> <C>
G.A. Bernhardt, Sr. X *
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
R.J. Brown X
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
W.A. Coley X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
W.T. Esrey X X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
A.M. Gray X
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
D.R. Hendrix X X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
H.S. Hook X
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
G.D. Johnson, Jr. X
X *
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
M. Lennon X
X *
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
L.E. Linbeck, Jr. X *
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
J.G. Martin X X *
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
R.B. Priory X X *
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
R.M. Robinson X
X
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
Number of
meetings in 1999 7 7 5 6 6 23
- ----------------------------- -------- ------------------- -------------- ----------------- ---------- ----------------
* Chair
</TABLE>
RESIGNATION POLICY
We have a policy stating that members of the Board of Directors are to submit
their resignations when they change employment or have another significant
change in their professional roles and responsibilities. The normal retirement
of those individuals who were members of the Board of Directors when the policy
was adopted in 1998 is not considered a change for this purpose. The Corporate
Governance Committee will determine whether any such resignation will be
accepted. Any resignation that is accepted will likely be effective as of the
end of the term of the director tendering the resignation.
CERTAIN RELATIONSHIPS
We have had business relationships and engaged in certain transactions with
affiliated parties. It is our policy to engage in transactions with related
parties only on terms that are no less favorable to us than could be obtained in
transactions with unrelated parties.
During 1999, certain of our subsidiaries retained the law firm of Robinson,
Bradshaw & Hinson, P.A., of which Russell M. Robinson, II is a shareholder. The
fees our subsidiaries paid for legal services to the law firm in 1999
represented less than 5% of the firm's gross revenues for the year.
<PAGE>
COMPENSATION OF DIRECTORS
We pay outside directors an annual retainer of $40,000. We also pay an outside
director serving as Chairman of the Audit, Compensation, Corporate Governance,
Corporate Performance Review or Finance Committee an additional $4,000 per year.
Outside directors also receive a fee of $1,000 for attendance at each meeting of
the Board of Directors, each committee meeting and other functions requiring
their presence, together with expenses of attendance.
A director may elect to receive 50% of his or her retainer and attendance fees
in the form of Duke Energy Common Stock or may defer that portion by having it
held in trust for the director's benefit and invested in Duke Energy 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 his or her
service on the Board of Directors, that portion in trust as shares of Duke
Energy Common Stock or in an investment account that is credited with a market
rate of interest.
In January and July of each year, each outside director is credited with 100
shares of Duke Energy Common Stock to be held in trust. Dividends paid on this
stock will be reinvested in Duke Energy Common Stock. When a director's service
on the Board of Directors terminates, he or she will receive the shares held in
trust for his or her account on the basis of the distribution schedule that he
or she has chosen.
In 1999, outside directors began receiving annual grants of non-qualified stock
options under the Duke Energy 1998 Long-Term Incentive Plan. The first grant,
for a total of 1,800 options, was made on April 1, 1999, with subsequent annual
grants, each for a total of 2,000 options, to be made at the same time executive
officers receive awards. The grant for year 2000 was made on December 20, 1999,
consistent with the grant date for year 2000 awards to executive officers.
After ten years on the Board of Directors, eligible directors participate in the
Directors' Charitable Giving Program. Under this program, Duke Energy 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 Duke Energy
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. We maintain
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 this benefit.
Directors are subject to stock ownership guidelines which, as originally
adopted, required them to build and maintain holdings of Duke Energy Common
Stock (or Common Stock equivalents) equal in market value to three times the
annual retainer ($120,000). In October 1999, the Compensation Committee amended
the guidelines to establish the target level of ownership as a fixed number of
shares. The target level for outside directors under the amended guidelines is
2,000 shares. Each outside director is expected to attain this ownership level
within five years from January 1, 1997, the implementation date of the
guidelines, or from the beginning of his or her service on the Board of
Directors, if after that date.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
THE COMMITTEE'S RESPONSIBILITIES
The Compensation Committee of the Board of Directors is composed entirely of
nonemployee directors. The Compensation Committee is responsible for setting and
administering policies which govern Duke Energy's executive compensation
programs. The purpose of this report is to summarize the compensation philosophy
and policies that the Compensation Committee applied in making executive
compensation decisions in 1999.
COMPENSATION PHILOSOPHY
The Compensation Committee has approved compensation programs intended to:
o Attract and retain talented executive officers and key employees by
providing total compensation competitive with that of other
executives employed by companies of similar size, complexity and
lines of business;
o Motivate executives and key employees to achieve strong financial and
operational performance;
o Emphasize performance-based compensation, which balances rewards for
short-term and long-term results;
o Reward individual performance;
o Link the interests of executives with shareholders by providing a
significant portion of total pay in the form of stock incentives and
requiring shareholdings;
o Encourage long-term commitment to Duke Energy.
STOCK OWNERSHIP GUIDELINES
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. As initially adopted, the target level
of ownership of Duke Energy Common Stock (or Common Stock equivalents) was
established as a multiple of base salary. In October 1999, the Compensation
Committee amended the guidelines to establish the target level of ownership as a
fixed number of shares. The target level under the amended guidelines for the
Chairman of the Board, President and Chief Executive Officer is 50,000 shares.
The target level for the remaining members of the Policy Committee, including
Messrs. Padewer, Coley, Fowler and Osborne, is 14,000 shares. Each employee
subject to the guidelines is expected to achieve the ownership target by January
1, 2002, or within five years from the date on which the employee became subject
to the guidelines, whichever is later. Common Stock beneficially held for an
executive's Duke Energy Retirement Savings Plan account, Common Stock
equivalents earned through non-qualified deferred compensation programs and any
other beneficially owned Common Stock are included in determining compliance
with the guidelines. Shares that
<PAGE>
executives have the right to acquire through the exercise of stock options are
not included in the calculation of stock ownership for guideline purposes.
COMPENSATION METHODOLOGY
Each year the Compensation Committee reviews data from market surveys, proxy
statements and independent consultants to assess Duke Energy's competitive
position with respect to the following three components of executive
compensation:
o base salary;
o annual incentives; and
o long-term incentives.
The Compensation Committee also considers individual performance, level of
responsibility, and skills and experience in making compensation decisions for
each executive. In 1999, the Compensation Committee retained the consulting firm
of Frederick W. Cook and Co. to conduct an overall review of Duke Energy's
existing and proposed executive compensation programs, in addition to a review
of the compensation of the Chief Executive Officer.
COMPONENTS OF COMPENSATION
o BASE SALARY: Base salaries for executives are determined based upon
job responsibilities, level of experience, individual performance,
comparisons to the salaries of executives in similar positions
obtained from market surveys, and competitive data obtained from
consultants and staff research. The goal for the base pay component
is to compensate executives at a level which approximates the median
salaries of individuals in comparable positions and markets. The
Compensation Committee approves all salary increases for executive
officers. Base pay increases were approved, effective March 1, 1999,
for certain executive officers, including Messrs. Priory, Coley,
Fowler and Osborne. Mr. Padewer's base salary was set when his
employment began in January 1999.
o ANNUAL INCENTIVES: Annual cash incentives are provided to executives
to promote the achievement of performance objectives of Duke Energy
and the executive's particular business unit. In 1999, the
Compensation Committee administered two annual incentive plans that
permitted the granting of annual cash incentives. Policy Committee
members, including the Named Executive Officers, earned incentive
compensation under the Duke Energy Policy Committee Short-Term
Incentive Plan, while executive officers not on the Policy Committee
earned incentive compensation under the Duke Energy Short-Term
Incentive Plan. Incentive opportunities for executives under both
Plans are established as a percentage of base salary, using survey
data for individuals in comparable positions and markets. Incentive
amounts are intended to equal the median incentive amounts for
individuals in comparable positions and markets when target
performance is achieved. Incentive amounts may equal up to 150% of
target when outstanding results are achieved.
Awards under the Policy Committee Short-Term Incentive Plan were
calculated based upon Duke Energy's earnings per share (EPS) results.
The Compensation Committee established
<PAGE>
minimum, target and maximum performance levels prior to the beginning
of 1999, and participants could receive up to 150% of their short-term
incentive targets. EPS performance for 1999 resulted in payments of
111% of bonus targets to the Policy Committee members, including the
Named Executive Officers.
Awards under the Duke Energy Short-Term Incentive Plan, in which
executive officers other than members of the Policy Committee
participated, were determined on the basis of a combination of: (1) EPS
measures, (2) earnings before interest and income taxes (EBIT) measures
and, in some instances, other measures unique to individual business
groups, and (3) individual objectives. EPS measures, EBIT measures (and
individual business group measures, if applicable) and individual
objectives determined 40%, 30% and 30%, respectively, of each executive
officer's bonus.
Annual incentive compensation for the Named Executive Officers
beginning in 2000 will be awarded under the terms of the Duke Energy
2000 Policy Committee Short-Term Incentive Plan, subject to shareholder
approval of the Plan at the annual meeting. Please refer to the
benefits table included in Proposal 3.
o LONG-TERM INCENTIVE COMPENSATION: The Compensation Committee has
structured long-term incentive compensation to provide for an
appropriate balance between rewarding performance and encouraging
employee retention. Long-term incentives are granted primarily in the
form of stock options. The purpose of stock options is to align
compensation directly with increases in shareholder value. The number
of options granted is determined by reviewing survey data to determine
the annualized value of long-term incentive compensation made to other
executives and management employees in comparable positions and markets
(target value) and then dividing the target value by an expected
present value of the option, as determined by using the Black-Scholes
option pricing model. In determining the number of options to be
awarded, the Compensation Committee, or, in some cases, its designee,
also considers the grant recipient's qualitative and quantitative
performance, the size of stock option awards in the past, and
expectations of the grant recipient's future performance.
In late 1999, as a component of year 2000 compensation, the
Compensation Committee approved an award of non-qualified stock options
(as described under "Option Grants in 1999" below) to members of the
Policy Committee except Mr. Priory. In early 1999 and, as a component
of year 2000 compensation, again in late 1999, the Compensation
Committee approved the award of non-qualified stock options to
executive officers who were not members of the Policy Committee. All
1999 stock option awards were granted under the Duke Energy 1998
Long-Term Incentive Plan.
In providing long-term incentive compensation, Duke Energy also seeks
to ensure the retention of key executives. Towards this objective, the
Compensation Committee approved in August 1999 the award of performance
shares (as described under "Long-Term Incentive Plan - Awards in 1999"
below) to certain executives under the Duke Energy 1998 Long-Term
Incentive Plan, including awards to Messrs. Priory, Coley, Fowler and
Osborne. These awards have an accelerated vesting feature which allows
one third of the performance shares to vest upon achievement of each of
three predetermined target increases in total shareholder return.
<PAGE>
However, to encourage the recipients to remain employed with Duke
Energy, these awards cannot vest prior to August 2002 by reason of such
accelerated vesting. If vesting does not occur earlier, the awards,
with the exception of a 75,000 performance share award to Mr. Priory,
will vest in August 2006. Performance shares will be forfeited upon
termination of the executive's employment to the extent not then
vested.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Under Section 162(m) of the Internal Revenue Code, Duke Energy may not deduct
annual compensation in excess of $1 million paid to certain employees, generally
its Chief Executive Officer and its four other most highly compensated executive
officers, unless that compensation qualifies as performance-based compensation.
While the Compensation Committee intends to structure performance-related awards
in a way that will preserve the maximum deductibility of compensation awards,
the Compensation Committee may from time to time approve awards which would vest
upon the passage of time or other compensation which would not result in
qualification of those awards as performance-based compensation. It is not
anticipated that compensation realized by any executive officer under Duke
Energy plans and programs now in effect will result in a material loss of tax
deductions.
Please refer to the discussion in Proposal 3 for information on the
deductibility of certain compensation payable under the Duke Energy 2000 Policy
Committee Short-Term Incentive Plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews annually the compensation of the Chief
Executive Officer and recommends any adjustments to the Board of Directors for
approval. The Chief Executive Officer participates in the same programs and
receives compensation based upon the same criteria as Duke Energy's other
executive officers. However, the Chief Executive Officer's compensation reflects
the greater policy- and decision-making authority that the Chief Executive
Officer holds and the higher level of responsibility he has with respect to the
strategic direction of Duke Energy and its financial and operating results. For
1999, the components of Mr. Priory's compensation were:
o BASE SALARY: After considering Duke Energy's overall performance and
competitive practices, the Compensation Committee recommended, and the
Board of Directors approved, an 11% increase in Mr. Priory's base
salary, to $900,000, effective March 1, 1999.
o ANNUAL INCENTIVES: Annual incentive compensation for Mr. Priory is
based solely upon EPS results. Based on 1999 EPS performance, Mr.
Priory received a payment of $997,140, representing 111% of his target
incentive opportunity.
o LONG-TERM INCENTIVES: In August 1999, Mr. Priory received two
performance share awards granted under the Duke Energy 1998 Long-Term
Incentive Plan. One award, for 75,000 performance shares, permits one
third of the performance shares to vest upon the achievement of each of
three predetermined target increases in total shareholder return, but
not prior to August 19, 2002, on this basis. Mr. Priory will forfeit
any unvested portion of the award on August 19, 2006. A second award,
for 50,000 performance shares, has the same accelerated vesting
features. The second award will vest on August 19, 2006, to the extent
not then vested or forfeited.
<PAGE>
In July 1999, the Compensation Committee elected to schedule its annual review
of Chief Executive Officer performance and compensation for February of each
year, to assure thorough consideration of year-end results. Actions taken by the
Board of Directors in February 2000 with respect to Mr. Priory's 2000
compensation will be reflected in the proxy statement for the 2001 annual
meeting, and will include, among other things, an award to Mr. Priory of
non-qualified stock options with respect to 200,000 shares.
It is the Compensation Committee's intention that, when taken together, the
components of Mr. Priory's pay, including base salary, annual incentives,
short-term incentive opportunity and long-term incentives, will result in
compensation which approximates the 50th percentile of the market when incentive
plan performance expectations are met and in compensation as high as the 75th
percentile of the market when incentive plan performance expectations are
exceeded.
This report has been provided by the Compensation Committee.
Leo E. Linbeck, Jr., Chairman
William T. Esrey
George Dean Johnson, Jr.
Max Lennon
James G. Martin
PERFORMANCE GRAPHS
Comparison of Five-Year Cumulative Total Return Among Duke Energy,
S&P 500 Index, S&P Utilities Index, and Dow Jones Utilities
[COMPARISON LINE GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS]
Assumes $100 invested on Dec. 31, 1994 in Duke Common Stock, S&P 500 Index, S&P
Utilities Index, and DJ Utilities. Assumes reinvestment of dividends.
1995
Duke: $130
S&P 500: $137
S&P Utilities: $141
DJ Utilities: $131
1996
Duke: $132
S&P 500: $168
S&P Utilities: $145
DJ Utilities: $143
1997
Duke: $164
S&P 500: $224
S&P Utilities: $179
DJ Utilities: $174
1998
Duke: $197
S&P 500: $287
S&P Utilities: $205
DJ Utilities: $206
1999
Duke: $161
S&P 500: $347
S&P Utilities: $187
DJ Utilities: $195
Comparison of Ten-Year Cumulative Total Return Among Duke Energy,
S&P 500 Index, S&P Utilities Index, and Dow Jones Utilities
Assumes $100 invested on Dec. 31, 1989 in Duke Common Stock, S&P 500 Index, S&P
Utilities Index, and DJ Utilities. Assumes reinvestment of dividends.
[COMPARISON LINE GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Duke 115 138 149 182 172 223 228 283 339 277
S&P 500 Index 97 126 135 149 151 207 253 337 433 523
S&P Utilities 97 111 119 136 125 175 180 223 255 233
DJ Utilities 95 109 113 124 105 138 150 183 216 205
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------------------
Other Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)
- --------------------------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
R.B. Priory 1999 895,420 997,140 109,708
Chairman of the Board, President 1998 810,000 891,000 34,011
and Chief Executive Officer 1997 671,933 297,339 59,652
H.J. Padewer(1) 1999 400,008 311,814 7,921
Group President
Energy Services
W.A. Coley 1999 392,616 262,330 16,353
Group President 1998 380,676 159,884 16,941
Duke Power 1997 387,392 190,407 14,302
F.J. Fowler(2) 1999 385,830 257,796 32,495
Group President 1998 360,000 237,600 2,131
Energy Transmission 1997 190,227 185,040
R.J. Osborne 1999 366,250 244,714 19,827
Executive Vice President 1998 324,000 213,840 9,987
and Chief Financial Officer 1997 299,322 72,085 36,284
<CAPTION>
Long-Term Compensation
---------------------------------------------------------
Awards Payouts
------------------- ------------------
Restricted Securities
Stock Underlying LTIP All Other
Name and Principal Position Year Award(s) ($) Options/SARS (#) Payouts ($) Compensation ($) (4)
- --------------------------- ---- ------------ ---------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
R.B. Priory 1999 148,501
Chairman of the Board, President 1998 500,000 1,034,203
and Chief Executive Officer 1997 397,013 99,165
H.J. Padewer (1) 1999 375,938(3) 346,900 94,112
Group President
Energy Services
W.A. Coley 1999 78,500 58,430
Group President 1998 200,000 221,245
Duke Power 1997 281,959 95,180
F.J. Fowler (2) 1999 78,500 89,941
Group President 1998 200,000 47,056
Energy Transmission 1997 27,665
R.J. Osborne 1999 62,000 42,751
Executive Vice President 1998 100,000 168,907
and Chief Financial Officer 1997 171,774 32,516
</TABLE>
(1) Mr. Padewer joined Duke Energy on January 1, 1999.
(2) Compensation amounts shown for Mr. Fowler for 1997 relate to the period from
June 18, 1997, to December 31, 1997.
(3) Mr. Padewer's aggregate restricted stock holdings at December 31, 1999, were
7,500 shares, with a value on that date of $375,938. Dividends are paid on
such shares. One fourth of the restricted stock award to Mr. Padewer (1,875
shares) vested
<PAGE>
on January 3, 2000. The remainder is to vest in three additional installments of
1,875 shares each on January 2, 2001, January 2, 2002, and January 2, 2003.
(4) All Other Compensation column includes the following for 1999:
a. Matching contributions under the Duke Energy Retirement Savings Plan
as follows: R.B. Priory, $9,600; H.J. Padewer, $7,900;W.A. Coley,
$9,600; F.J. Fowler, $9,600; R.J. Osborne, $9,514.
b. Make-whole matching contribution credits under the Duke Energy
Executive Savings Plan as follows: R.B. Priory, $97,585; H.J.
Padewer, $16,100; W.A. Coley, $23,550; F.J. Fowler, $27,806; R.J.
Osborne, $25,291.
c. Above-market interest earned on account balances in the Duke Energy
Executive Savings Plan, Supplemental Account as follows: R.B.
Priory, $11,587; H.J. Padewer, $0; W.A. Coley, $15,395; F.J. Fowler,
$0; R.J. Osborne, $5,991.
d. Economic value of life insurance coverage provided under life
insurance plans as follows: R.B. Priory, $17,838; H.J. Padewer,
$3,195; W.A. Coley, $4,918; F.J. Fowler, $3,059; R.J. Osborne,
$1,955.
e. The cost to Duke Energy of supplemental life insurance coverage
under the Duke Energy Supplemental Insurance Plan as follows: R.B.
Priory, $11,252; H.J. Padewer, $0; W.A. Coley, $4,527; F.J. Fowler,
$0; R.J. Osborne, $0.
f. The economic benefit of split-dollar life insurance coverage
pursuant to the Duke Energy Estate Conservation Plan as follows:
R.B. Priory, $639; H.J. Padewer, $0; W.A. Coley, $440; F.J. Fowler,
$0; R.J. Osborne, $0.
g. Early payment of banked time benefit earned under benefits program
at PanEnergy Corp as follows: F.J. Fowler, $49,476.
h. Supplemental relocation payments made under Duke Energy's relocation
policy as follows: H.J. Padewer, $66,917.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN - AWARDS IN 1999
Number of Shares, Performance or Other Period
Name Units or Other Rights (#)(1) Until Maturation or Payout
- ---- ---------------------------------------- -------------------------------------
<S> <C> <C> <C>
R.B. Priory 75,000 August 2002 - August 2006
50,000 August 2002 - August 2006
W.A. Coley 15,000 August 2002 - August 2006
F.J. Fowler 30,000 August 2002 - August 2006
R.J. Osborne 29,000 August 2002 - August 2006
</TABLE>
(1) Awards are performance awards granted under the Duke Energy 1998 Long-Term
Incentive Plan and are represented by units denominated in shares of Duke
Energy Common Stock (performance shares). Each performance share represents
the right to receive, upon vesting, one share of Duke Energy Common Stock.
These awards, with the exception of a 75,000 performance share award to Mr.
Priory, fully vest on the seventh anniversary of the date of the award. The
awards also
<PAGE>
vest in the event of the death or disability of the recipient or a change in
control of Duke Energy as specified in the Plan. The awards have an
accelerated vesting feature allowing one third to vest upon achievement of
an increase in total shareholder return averaging 50% or more for twenty
consecutive business days; one third to vest upon achievement of an increase
in total shareholder return averaging 90% or more for twenty consecutive
business days; and one third to vest upon achievement of an increase in
total shareholder return averaging 130% or more for twenty consecutive
business days, all calculated from a base amount specified in each award and
assuming dividends are reinvested. If any of such targets are achieved
before the third anniversary of the date of the award, the relevant part of
the award will vest on the third anniversary. Vesting under the awards is
generally subject to the continued employment of the grantee with Duke
Energy to the time of vesting. With respect to Mr. Priory's award of 75,000
performance shares, any unvested performance shares held by Mr. Priory on
the seventh anniversary of the date of the award will be forfeited. If Mr.
Priory dies or becomes disabled prior to the seventh anniversary of the date
of the award, a portion of the unvested performance shares remaining at that
time will vest based upon the length of his employment from the date of the
award. The performance share awards also grant an equal number of dividend
equivalents, which represent the right to receive cash payments equivalent
to the cash dividends paid on the number of shares of Duke Energy Common
Stock represented by the performance shares awarded, until the related
performance shares vest or are forfeited.
OPTION GRANTS IN 1999
This table shows options granted to the Named Executive Officers during
1999, along with the present value of the options on the date they were granted,
calculated as described in footnote 2 in the table. Grants shown in the table
with an expiration date of December 20, 2009, were awarded on December 20, 1999,
and related to compensation for the year 2000. The grant shown with an
expiration date of January 1, 2009, was awarded to H.J. Padewer on January 1,
1999, the effective date of his employment with Duke Energy. R.B. Priory's
option grant with respect to year 2000 compensation was awarded on February 23,
2000, and, accordingly, will be reported in the proxy statement for the 2001
annual meeting.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Grant Date
Individual Grants Value
--------------------------------------------------------------- -----
Number
of Shares % of Total Exercise
Underlying Options/SARS or Base Grant Date
Options/SARS Granted to Price Expiration Present
Name Granted(1)(#) Employees ($/Sh) Date Value(2)($)
- ---- ------------ --------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
H.J. Padewer 250,000 3.2 64.5625 01/01/2009 2,760,000
96,900 1.2 49.7500 12/20/2009 996,500
W.A. Coley 78,500 1.0 49.7500 12/20/2009 807,200
F.J. Fowler 78,500 1.0 49.7500 12/20/2009 807,200
R.J. Osborne 62,000 0.8 49.7500 12/20/2009 637,600
(1) Duke Energy has not granted any SARs to the Named Executive Officers or any
other persons.
(2) Based on the Black-Scholes option valuation model. The following table lists
key input variables used in valuing the options:
<CAPTION>
250,000 Share Option
Input Variable Grant to H.J. Padewer All Other Option Grants
-------------- --------------------- -----------------------
<S> <C> <C>
Risk-free Interest Rate 5.13% 6.37%
Dividend Yield 3.84% 3.95%
Stock Price Volatility 17.54% 18.91%
Option Term 10 years 10 years
</TABLE>
With respect to Mr. Padewer's 250,000 share option grant, the volatility
variable reflected weekly historical stock price trading data with respect to
Duke Energy Common Stock from June 18, 1997 (the effective date of the merger
with PanEnergy Corp) through December 31, 1998. With respect to all other option
grants listed in the table, the volatility variable reflected historical monthly
stock price trading data from June 18, 1997 through December 31, 1999. An
adjustment was made with respect to each valuation for risk of forfeiture during
the vesting period. The actual value, if any, that a grantee may realize will
depend on the excess of the stock price over the exercise price on the date the
option is exercised, so that there is no assurance the value realized will be at
or near the value estimated based upon the Black-Scholes model.
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
This table shows aggregate exercises of options during 1999 by the Named
Executive Officers, and the aggregate 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 the stock option
and the fair market value of Duke Energy Common Stock on December 31, 1999,
which was $50.16. The fair market value is the average of the high and low
prices of a share of Duke Energy Common Stock on that date as reported on the
New York Stock Exchange Composite Transactions Tape. The ultimate value of a
stock option will depend on the market value of the underlying shares on a
future date.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARS at Options/SARS at
FY-End * (#) FY-End ($)
------------ ----------
Shares
Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
R.B. Priory -- -- 100,000/400,000 0/0
H.J. Padewer -- -- 0/346,900 0/39,729
W.A. Coley -- -- 40,000/238,500 0/32,185
F.J. Fowler 3,574 145,859 90,730/241,982 1,276,690/53,063
R.J. Osborne -- -- 20,000/142,000 0/25,420
</TABLE>
* Duke Energy has not granted any SARs to the Named Executive Officers or any
other persons.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Duke Energy entered into arrangements with Messrs. Coley, Fowler and Osborne
which became effective on August 18, 1999, and with Mr. Priory which became
effective on August 19, 1999 (the "Effective Time"), upon expiration of
employment agreements with each of these executives. The arrangements consist of
severance agreements and change-in-control agreements. The severance agreements
and change-in-control agreements remain in effect for a two-year period from the
Effective Time or for such longer period as may be mutually agreed upon by the
parties (the "Employment Period"). The principal terms and conditions of the
severance agreements and change-in-control agreements are described below.
The severance agreements for Messrs. Priory, Coley, Fowler and Osborne provide
for severance payments and benefits to the executive in the event of termination
of employment other than upon death or disability or for "cause" (as defined in
the severance agreements) by Duke Energy as follows: (1) a lump-sum payment
equal to two times the sum of the executive's then-current base salary and
target bonus, plus a pro rata amount of the executive's target bonus for the
year in which the termination occurs; (2) a lump sum payment equal to the
present value of the amount Duke Energy would have contributed or credited to
the executive's pension and savings accounts during the two years following the
termination date; (3) continued medical, dental and basic life insurance
coverage for a two-year period following the termination date or retiree medical
benefits, if the executive would have become eligible for such benefits within
two years following the termination date, from the date of eligibility;
<PAGE>
and (4) continued vesting of long-term incentive awards, including stock options
or restricted stock but excluding performance share awards (as described under
"Long-Term Incentive Plan - Awards in 1999" above), held but not vested or
exercisable on the termination date, in accordance with their terms for two
years following the termination date, with any options or similar rights
thereafter remaining exercisable for 90 days, if their term has not expired. If
Messrs. Priory, Coley, Fowler and Osborne receive a payment under their
severance agreements, no payment will be made under the performance share award.
The severance agreements contain restrictive covenants which prohibit Messrs.
Priory, Coley, Fowler and Osborne from competing with Duke Energy or soliciting
Duke Energy's employees or customers for one year following termination, and
from disclosing certain confidential information.
The change-in-control agreements for Messrs. Priory, Coley, Fowler and Osborne
provide for payments and benefits to the executive in the event of termination
of employment for "good reason" by the executive or other than for "cause" by
Duke Energy within a two-year period following a "change-in-control" (each such
term as defined in the change-in-control agreements) as follows: (1) a lump-sum
payment equal to the sum of the executive's then-current base salary and target
bonus, for each year of the three-year period after termination, including a pro
rata amount for any partial years in such period, plus a pro rata amount of the
executive's target bonus for the year in which the termination occurs; (2) a
lump sum payment equal to the present value of the amount Duke Energy would have
contributed or credited to the executive's pension and savings accounts during
the three years following the termination date; (3) continued medical, dental
and basic life insurance coverage for a three-year period following the
termination, or retiree medical benefits, if the executive would have become
eligible for such benefits within two years following the termination date, from
the date of eligibility; and (4) continued vesting of long-term incentive
awards, including stock options or restricted stock but excluding performance
share awards (as described under "Long-Term Incentive Plan - Awards in 1999"
above), held but not vested or exercisable on the termination date, in
accordance with their terms for three years following the termination date, with
any options or similar rights thereafter remaining exercisable for 90 days, if
their term has not expired. If Messrs. Priory, Coley, Fowler and Osborne become
eligible for normal retirement at age sixty-five within the three-year period
following termination, the three-year period mentioned above will be reduced to
the period from the termination date to the eligible executive's normal
retirement date. In the event that any of the payments or benefits provided for
in the change-in-control agreement would constitute a "parachute payment" (as
defined in section 280G(b)(2) of the Internal Revenue Code), Messrs. Priory,
Coley, Fowler and Osborne are entitled to receive an additional payment such
that, after the payment of all income and excise taxes, they will be in the same
after-tax position as if no excise tax under section 4999 of the Internal
Revenue Code had been imposed.
Duke Energy entered into an employment agreement with Mr. Padewer, dated January
3, 1999, in connection with his employment as Group President, Energy Services,
and a member of the Policy Committee. The term of the employment agreement
extended through December 31, 2001, unless earlier terminated. The agreement
established an initial annual base salary of $400,000 and an initial target
bonus of 70% of annual base salary payable when certain goals were met, with a
maximum bonus of 105% of annual base salary. The agreement also provided for an
award of 250,000 stock options on January 1, 1999, to vest at a rate of 62,500
options on each of the first four anniversaries of the date of the award. The
agreement further provided for the award of 7,500 shares of restricted stock on
January 1, 1999, to vest at the rate of 1,875 shares each on January 1, 2000,
January 1, 2001, January 1, 2002, and January 1, 2003. It was also agreed that
Mr. Padewer would be eligible to participate in the executive benefits plans
that are available to other members of the Policy Committee and that Duke
<PAGE>
Energy would contribute $315,000 to Mr. Padewer's opening balance in the Duke
Energy Executive Cash Balance Retirement Plan vesting on the third anniversary
of Mr. Padewer's employment or upon disability, death, or termination of
employment for reasons other than for cause if any of such events occurred
before the third anniversary of his employment. In the event of termination due
to death, disability, or by Duke Energy for reasons other than for cause during
the term of his employment under the agreement, termination payments in an
amount equal to 200% of the total of Mr. Padewer's annual base salary and target
bonus in effect at the time of such termination would be made to Mr. Padewer.
Mr. Padewer's employment agreement also contained a confidentiality provision.
Mr. Padewer's employment agreement, with the exception of certain terms, was
replaced with severance and change-in-control agreements similar to those
described above for Messrs. Priory, Coley, Fowler and Osborne, effective
January 1, 2000.
RETIREMENT PLAN INFORMATION
From January 1, 1999, executive officers and other eligible employees of Duke
Energy participated in either of two noncontributory, qualified, defined benefit
retirement plans: the Retirement Cash Balance Plan and the Retirement Income
Plan. The Retirement Income Plan ceased admitting new participants after
December 31, 1998, and merged into the Duke Energy Retirement Cash Balance Plan
on April 30, 1999. In addition, selected managers are eligible to participate in
the Duke Energy Executive Cash Balance Plan, which is a noncontributory,
nonqualified, defined benefit retirement plan. A portion of the benefits earned
in the Executive Cash Balance Plan is attributable to compensation in excess of
the Internal Revenue Service annual compensation limit ($160,000 for 1999) and
deferred compensation, as well as reductions caused by maximum benefit
limitations that apply to qualified plans from the benefits that would otherwise
be provided under the Retirement Cash Balance Plan and the Retirement Income
Plan. Effective January 1, 1999, the Retirement Benefit Equalization Plan was
established to restore benefit reductions caused by the maximum benefit
limitations that apply to qualified plans from benefits that would otherwise be
provided under the Retirement Cash Balance Plan and the Retirement Income Plan
for eligible employees of Duke Energy who do not participate in the Executive
Cash Balance Plan. Benefits under the Retirement Cash Balance Plan, the
Retirement Income Plan, the Executive Cash Balance Plan and the Retirement
Benefit Equalization Plan are based on eligible pay, generally consisting of
base pay, short-term incentives and lump-sum merit increases. The Retirement
Cash Balance Plan, the Retirement Income Plan and the Retirement Benefit
Equalization Plan exclude deferred compensation, other than deferrals pursuant
to Sections 401(k) and 125 of the Internal Revenue Code.
Under a benefit accrual formula that applies in determining benefits under the
Retirement Cash Balance Plan on and after January 1, 1997, and under the
Retirement Income Plan on and after January 1, 1999, but before May 1, 1999, an
eligible employee's plan account receives a pay credit at the end of each month
in which the employee remains eligible and receives eligible pay for services.
The monthly pay credit is equal to a percentage of the employee's monthly
eligible pay. For most eligible employees, the percentage depends on age and
completed years of service at the beginning of the year, as shown below:
<PAGE>
MONTHLY PAY CREDIT
AGE AND SERVICE PERCENTAGE
34 or less 4%
35 to 49 5%
50 to 64 6%
65 or more 7%
In addition, the employee receives an additional 4% for any portion of eligible
pay above the Social Security taxable wage base ($72,600 for 1999). However, for
certain eligible employees, the total percentage is a flat 3% of eligible pay.
Employee accounts also receive monthly interest credits on their balances. The
rate 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.
Prior to application of the new benefit accrual formula, benefits for eligible
employees were determined under other formulas. To transition from a prior
formula to the new formula, an eligible employee's accrued benefit earned under
the prior formula is preserved as a minimum, and the employee's account under
the new benefit accrual formula receives an opening balance derived from a
variety of factors.
Assuming that the Named Executive 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 applicable plans attributable
to such salaries would be: R.B. Priory, $821,147; H.J. Padewer, $138,646; W.A.
Coley, $381,825; F.J. Fowler, $286,828; R.J. Osborne, $337,285. These estimates
are calculated assuming interest credits at an annual rate of 7% and using a
future Social Security taxable wage base equal to $72,600.
<PAGE>
OTHER INFORMATION
DISCRETIONARY VOTING AUTHORITY
At the date this proxy statement went to press, we did not anticipate that any
other matters would be raised at the meeting. If any other matters are properly
presented at the annual meeting for consideration, the persons named as proxies
will have discretion to vote on those matters according to their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on information furnished to us and contained in reports filed with
the SEC, as well as any written representations that no other reports were
required, we believe that during 1999 all SEC filings of our directors and
executive officers complied with the requirements of Section 16 of the
Securities Exchange Act, except that Sandra P. Meyer, who became an executive
officer of Duke Energy in September 1999, failed to timely report a sale of Duke
Energy Common Stock through our dividend reinvestment plan in November 1999.
ONLINE ACCESS TO ANNUAL REPORTS AND PROXY STATEMENTS
Save Duke Energy future postage and printing expense by consenting to view
future annual reports and proxy statements online on the Internet.
Most shareholders can elect to view future proxy statements and annual reports
over the Internet instead of receiving paper copies in the mail. Those
shareholders will be given the opportunity to consent to future Internet
delivery when they vote their proxy. For some shareholders, this option is only
available if you vote on the Internet.
If you are not given an opportunity to consent to Internet delivery when you
vote your proxy, contact the bank, broker or other holder of record through
which you hold your shares and inquire about the availability of such an option
for you.
If you consent, your account will be so noted and, when Duke Energy's annual
report for 2000 and proxy statement for the 2001 annual meeting become
available, you will be notified on how to access them on the Internet.
Shareholders of record may indicate their consent on this year's proxy card, and
will receive a paper proxy card for next year's annual meeting in the mail.
If you elect to receive your Duke Energy materials via the Internet, you can
still request paper copies by contacting Investor Relations at (800) 488-3853 or
by e-mail at [email protected].
<PAGE>
EXHIBIT A
DUKE ENERGY CORPORATION
2000 POLICY COMMITTEE
SHORT-TERM INCENTIVE PLAN
ARTICLE I
General
SECTION 1.1 PURPOSE. The purpose of the Duke Energy Corporation 2000
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 two (2) 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 conditions set forth in the Plan.
<PAGE>
SECTION 2.2 TERMS OF AWARDS. No later than 90 days after the
commencement of each fiscal year of the Corporation, the Committee shall
establish (i) performance targets ("Performance Targets") for the Corporation
for such fiscal year ("Performance Periods") 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"). The
Committee may establish Performance Targets for Awards that are intended to
qualify as performance-based compensation under Section 162(m) of the Code in
terms of specified levels of any of the following business measures, which may
be applied with respect to the Corporation, or any of its subsidiaries or
business units, and which may be measured on an absolute or relative to
peer-group basis: (i) earnings per share, (ii) total shareholder return, (iii)
stock price increase, (iv) return on equity, (v) return on capital, (vi) EBIT
(earnings before interest and taxes), (vii) cash flow, (viii) EVA (economic
value added), (ix) SVA (shareholder value added), and (x) revenues.
Alternatively, the Committee may establish Performance Targets in terms of such
strategic objectives as it may from time to time specify for Awards that are not
intended to qualify as performance-based compensation under Section 162(m) of
the Code.
SECTION 2.3 LIMITATION ON AWARDS. The aggregate amount of all Awards to
any Participant for any Performance Period shall not exceed Four Million Dollars
($4,000,000.00).
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, 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 an employee any
right to be retained by the Corporation or any of its subsidiaries.
2
<PAGE>
SECTION 3.2 RESTRICTION ON TRANSFER, BENEFICIARY. Awards (or interests
therein) to a 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 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 or 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 included solely for convenience of reference and shall not affect the
meaning of any of the provisions of the Plan.
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.
3
<PAGE>
SECTION 3.10 EFFECTIVE DATE. Upon its adoption by the Board, the Plan
shall be effective as of January 1, 2000; provided, however, that no Award shall
be payable under the Plan unless the shareholders of the Corporation approve the
adoption of the Plan at the 2000 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 obtained, the Plan shall supercede the Duke
Energy Corporation Policy Committee Short-Term Incentive Plan, as approved by
the shareholders at the 1998 Annual Meeting of Shareholders (the "1998 Plan").
If such approval is not obtained, then the Plan and any Award hereunder shall be
void ab initio, and the 1998 Plan shall be and remain in full force and effect.
At the sole discretion of the Board, in order to comply with the requirements of
Section 162(m) of the Code, the business measures set forth in Section 2.2 above
that may be used for Performance Targets for Awards that are intended to qualify
as performance-based compensation under Section 162(m) of the Code shall be
reapproved by the shareholders of the Corporation no later than the first
meeting of such shareholders that occurs in the fifth calendar year following
the calendar year in which such shareholders previously approved such business
measures for such purpose.
4
<PAGE>
Duke Energy will conduct its annual shareholders meeting on April 20, 2000
at 10:00 a.m. in the O.J. Miller Auditorium, located in the Energy Center at
526 South Church Street in Charlotte, North Carolina.
______________________________________________________________________________
+ +
+ +
+ SEE REVERSE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS. +
+ +
+______________________________________________________________________________+
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The Board of Directors recommends a vote "FOR" each of the nominees
listed below, "FOR" Proposals 2 and 3 and "AGAINST" Proposals 4 and 5. Directors
Recommend
DIRECTORS
1. Class III Directors: 01- Robert J. Brown For ALL =>
02- William T. Esrey
03- George Dean Johnson, Jr.
04- James G. Martin
05- Richard B. Priory
PROPOSALS Directors
Recommend
2. Ratification of appointment of auditors. For =>
3. Approval of the 2000 Policy Committee Short-Term Incentive Plan. For =>
4. Shareholder proposal relating to use of mixed oxide fuel. Against =>
5. Shareholder proposal relating to limits on outside board positions. Against =>
</TABLE>
DETACH DETACH
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Investor Relations Department
526 South Church Street
PO Box 1005
Charlotte, NC 28201-1005
(704) 382-3853 Charlotte
(800) 488-3853 Toll-Free Account
(704) 382-3814 Fax
Shares as of
February 29, 2000
To vote, mark an "X" in
the appropriate box.
1. For ALL Nominees Mark this box if, in the
future, you would prefer
to view the annual report
Withhold Authority and proxy statement via
the Duke Energy Website
(www.duke-energy.com).
For ALL EXCEPT the following: You will still receive this
(Write number(s) of voting form by first class
nominee(s) below) mail if you mark the box.
2. For Against Abstain
3. For Against Abstain
4. For Against Abstain
5. For Against Abstain
If you are voting by mail, sign here as name(s) appear(s) above.
Date ,2000
If you are voting by mail, please sign and date 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 20, 2000 at 10:00 a.m.
Energy Center - O.J. Miller Auditorium
526 South Church Street
Charlotte, NC
PROXY SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned hereby appoints R.B. Priory, R.J.
Osborne and R.W. Blackburn, 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 20, 2000, 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 Robert J.
Brown, William T. Esrey, George Dean Johnson, Jr.,
James G. Martin and Richard B. Priory.
If you are voting by mail, please sign on the
reverse and return promptly in the enclosed return
envelope. To vote by telephone or Internet, see
instructions to the right.
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
q u i c k o e a s y o i m m e d i a t e
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE:
You will be asked to enter a control number located in the box in the
lower right of this form.
Option A: To vote as the Board of Directors recommends for all
nominees and on all proposals: Press 1
Option B: If you choose to vote on each item separately, press 0. You
will hear these instructions:
Directors: To vote FOR ALL nominees, press 1;
To WITHHOLD FOR ALL nominees, press 9;
To WITHHOLD FOR AN INDIVIDUAL nominee, Press
0 and listen to the instructions.
Proposals: To vote FOR, press 1;
To vote AGAINST, press 9;
To ABSTAIN, press 0.
The instructions are the same for all proposals to be voted.
When asked, you must confirm your vote by pressing 1.
VOTE BY INTERNET:
The Website address is www.proxyvoting.com/dukeenergy.
You will be asked to enter the control number located in the box in the
lower right of this form. Then follow the instructions on the screen.
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_____________________________________________
TO VOTE BY PHONE + +
Call - Toll Free - On a Touch Tone Telephone + +
1-888-457-2966 Anytime + +
There is NO CHARGE to you for this call. + +
+_____________________________________________+
Control Number - For Telephone/Internet Voting
</TABLE>
If you vote by phone or Internet, DO NOT mail the proxy card. Thank you for
voting.
